In-taxi media company reaches rich Chinese in captive environment

Shanghai debut goes nationwide

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SHANGHAI--A brash, tough-talking New Yorker, Micky Fung, hopes to revolutionize the way marketers reach Chinese consumers through outdoor media.

China is flooded with outdoor media, traditional posters as well as digital formats like LCD screens in elevators, office lobbies and shopping centers. But Touchmedia's CEO, Mr. Fung, 49, has entered the market with a twist, by placing high-tech screens on the back of headrests in taxis in China’s first and second tier cities.

Designed for back seat passengers, the screens have buttons that allow users to navigate the platform, choosing the content they want to see, and even allowing more interactive activity like playing games.

The company's touch-sensitive color LCD screens can play ads, video and static, just like ubiquitous monitors placed in elevators--but they also have icons that let consumers interact with the system and directly engage with brands like Heineken, Chivas, Virgin, Nokia and Johnson & Johnson.

Other marketers using the service for brand-building games, promotions, product demonstrations and market research include Procter & Gamble, Yum Brands' KFC, Volkswagen for Polo and Skoda and Standard Chartered Bank. Touchmedia charges 200,000 RMB ($26,700) to run a promotion for one month in 1,000 taxis.

HSBC, for instance, created a game to promote a sponsored golf tournament next month in Shanghai that allows users to “play” the 18th hole of the course on the screen and Estee Lauder is promoting its upscale products alongside beauty tips for Chinese women.

Since May, the company has installed screens in 3,000 taxis in Shanghai--1,000 in the Qiangsheng fleet and 2,000 Bashi-controlled cars. The company is testing the screens in Beijing, Guangzhou and Ningbo and in November will install another 1,000 screens in Shanghai, 500 in Ningbo and 1,000 in Beijing.

Negotiations are underway with taxi companies in dozens of other Chinese cities including Hangzhou, Kunming, Yingchan, Shenyang, Zhengzhou, Louyang, Shenzhen and Xi'An.

“The plan is to focus on Shanghai initially, so we will have 7,000 in Shanghai by Chinese New Year. We placed an order a few weeks ago for another 15,000 units for delivery next year, so we will have at least 25,000 units nationally by June 2008,” said Neil Ducray, Touchmedia’s general manager in Shanghai.

The main appeal of Touchmedia’s technology is the location of the screens. People riding in a taxi are a captive audience, but more importantly, they are almost certainly part of the sliver of China’s population that can afford high-end consumer products and services produced by multinationals, simply because they can afford to hire a taxi in the first place.

Ninety-six percent of China’s frequent taxi users are 21-to-49 year-olds, 98% are white-collar workers and 45% are manager-level employees. The average family income is 8,658 RMB ($1,155) per month and 22% earn over 12,000 RMB ($1,600), according to Sinomonitor International. Since the time for the average ride in Shanghai is 18 minutes, a figure that's similar in other Chinese cities, they become a captive audience for marketers of high-end brands.

“Touchmedia's in-taxi advertising is simply the most cost effective way to reach affluent white-collar residents of Shanghai and Beijing. Their results were simply spectacular,” said Jonathan Krane, CEO of a Shanghai-based event organizer Emma Entertainment.

More than four million people watched a video promoting a Christina Aguilera concert in Shanghai earlier this year on the taxi screens. Emma’s internal research indicated 49% of ticket buyers purchased their tickets on a hotline they learned about from a ticketing icon on Touchmedia screens.

“We can measure exactly how many people see the advertising in every taxi and what they do with our interactive screens. Advertisers are amazed to get this detail and be able to measure precisely their return on investment. That's what is driving the demand and our expansion,” said Mr. Fung.

“The sweetest part of the media pie is out-of-home, because if people are outside their home, they are more likely to actually make a purchase, and being taxi users automatically puts people looking at our screens in the top 10% of the Chinese population in terms of income,” said Mr. Fung.

According to electronic feedback from the units, 89% of passengers do play with the touch screen. Each icon attracts at least 200,000 viewers spending an average of 57 seconds in each site per month. The best icons get 350,00 viewers for more than three minutes interacting with the brand message. Marketers advertising on Touchmedia screens receive a report detailing exactly how many passengers saw their video and entered their icon site, followed by a second report analyzing exactly what they did in each icon site.

Mr. Fung, whose tough New York accent belies his Chinese heritage (he left Hong Kong when he was just six), hoped developing the proprietary hardware and software and getting the screens into taxis across China would take about six months. That was at the end of 2002--and five years later a national rollout is still months away.

In the initial product tests, "there were problems with humidity, vibration, dust, the poor condition of many of the vehicles and drivers didn't like them. The first units were also too expensive," recalled Mr. Fung.

He came up with the idea for Touchmedia after visiting his brother, who owns a taxi company in Fuzhou in southeastern China. It took three years to develop new, cheaper units, which essentially are PDA units, spending almost $4 million in research and development along the way.

"We needed to build new hardware, software, everything," said Mr. Fung, who reluctantly brought his wife and daughter to live with him in Shanghai to avoid constant traveling.

Despite his Chinese background and playful references to himself as a "Cantonese cheapskate," Mr. Fung is a devoted New Yorker who has never enjoyed living in the mainland and desperately misses the U.S., where his family has built its fortune in garment manufacturing and real estate over the past four decades.

In a classic immigrants tale, his parents started out working at a New York garment factory and ended up owning it, and Mr. Fung, who grew up speaking English, not Chinese, is the first member of his family to graduate from college.

While the new screens were in development, Touchmedia built up relationships with local taxi fleets by placing paper leaflets and poster ads in headrest frames starting in 2002. Touchmedia controls the in-taxi paper advertising in 22,500 taxis in Shanghai and another 35,000 taxis in Beijing.

But Mr. Fung is convinced his company's interactive screens are the bread-and-butter of Touchmedia's future growth: “Just being in media won’t cut it though. Success is about integration, such as playing games inside ads. Otherwise, consumers tune it out.”
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