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AirMedia reports Q2 loss of $7m

By Shen Jingting (China Daily)
Updated: 2009-08-19 08:04

The advertising network operator still remains upbeat on full year prospects. [CFP]

Herman Guo, chairman and CEO of advertising network operator AirMedia Group Inc, who once wanted to expand business with a strategy called "buying gold but at bricks' price", has now been incurring net profit loss for two consecutive quarters, while total revenue still surges.

Listed on NASDAQ AirMedia Group reported a second-quarter loss of $7 million on Monday, or 11 cents per share, compared with a year-ago profit of $7.3 million. That follows a first-quarter loss of $1.3 million.

"Although bottom-line loss increased as expected primarily due to new concession rights added, our market position had never been so strong," Guo said in a press release.

With plenty of cash in hand and the leading role in air travel advertising, AirMedia had quickened its pace to obtain out-of-home advertising resources in China since 2008.

The company bought traditional media platforms such as billboards and light boxes, from Beijing Capital International Airport and Shenzhen International Airport in a March deal, and achieved exclusive contractual concession rights until the end of 2014 to develop and operate outdoor advertising platforms at some 28,000 Sinopec service stations.

Concession fees as a percentage of net revenue rose to 77 percent from 40 percent a year ago and 60 percent in the first quarter. The raw figure more than doubled from a year ago to $28.1 million.

"AirMedia has taken risks to do so because advertising industry is still sluggish," Zhao Shuguang, a researcher from Tsinghua University, said.

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But some media experts agree with Guo's decisions. "There is no harm in buying as many platforms as possible when the price is suitable," Huang Shengmin, professor from Communication University of China said. "Advertising resources with high quality will produce profits in the long run when the Chinese economy fully recovers," he said.

According to a report from CTR Media Intelligence, China's advertising expenditure has seen a year-on-year increase of 9 percent in the first half of 2009.

Tian Tao, vice-president of CTR, expects the advertising market for digital media to remain strong due to low costs.

Guo remains optimistic on the future as in his view the worst of the economic slowdown is over. "Economic indicators for the first half of 2009 indicate that China is in the frontlines of global recovery. Advertisers have also been encouraged to convert their advertising budgets into orders."

"In the near term, we intend to shift our focus to increasing utilization rates of existing media resources in order to reap the benefits," Guo said.

Total revenues of AirMedia reached $36.8 million in the second quarter, representing a year-over-year increase of 23.7 percent.