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Lu Yongchao has struck gold in a napkin. The 29-year-old entrepreneur, who heads Guangzhou-based media firm EnjoyMedia that employs 20 people, supplies restaurants and coffee houses in the city with paper carrying advertisements of companies he signs up for this unique venture.

And, napkin advertising seems to be catching on. Unilever has placed ads on Lu's napkins to promote its ice creams, so has China Mobile, the country's dominant cellular operator. "I believe the tiny napkin will eventually grow into a powerful media. It's big business," says Lu.

The rise of start-ups like EnjoyMedia underscores how the stodgy ad market is being stirred up by a wave of novel ideas in China, where advertising was non-existent even a couple of decades ago. With advertisers increasingly drawn to new campaign media, innovation is the new name of the game in China's ad market, which Morgan Stanley has forecast will hit 200 billion yuan this year, up 15 percent over last year.

Ads on dining tables

Take Beijing-based Actual Media for example. It has partnered with some universities to print ads on the dining tables in their canteens. The students don't seem to mind, the advertisers find it an exciting promotion strategy, and Actual Media rakes in the cash.

Actual Media also installs battery recycling bins on university campuses and some residential areas of Beijing, and is luring companies to place ads on its bins. Shaped like batteries, these particular bins are eye-catching and neater compared with the ones in circulation.

No one ever thought that garbage bins can be used for beautification, but those from Actual Media can actually be, which partly explains their popularity. Besides, since there aren't too many bins around collecting used batteries, they are much in demand.

Bill Zhao, executive director of private equity firm Hina Group, says the runaway success of Focus Media, a pioneering ad company, has spawned a number of agencies that are constantly inventing new business models and refashioning existing ones. "There's a new surge of entrepreneurship and creativity in the ad market," he says.

Shanghai-based Focus Media, founded by old ad hand Jason Jiang in 2003, operates LCD screens displaying ads in elevator lobbies of office towers and upscale apartment blocks. In July 2005, the firm raised about $120 million with a NASDAQ listing, turning Jiang, now 34, into one of the richest men in China.

What Focus Media does is not ground-breaking but the business model is innovative and, luckily, it was the first mover, says EnjoyMedia's Lu, who sees Jiang as a role model.

Among the innovations by Jiang are the ones introduced to bring down the costs. Focus Media employees pedal their bikes to buildings to manually change flash memory cards containing ad videos, thus ensuring a very low-cost ad delivery that advertisers find appetizing.

Not taking into account the expenditure on LCD screens, "the costs (for Focus Media) are even cheaper than the napkin ads as we must work on ad production and printing," says Lu, pointing out that most ads on Focus Media's screens are the same as the ones already on TV.

Focus Media's success stems largely from the fact that people don't mind staring at the LCD screens to while away their time in the elevator. At home, with a remote in the vicinity, they tend to be less patient with the same ads.

"Agencies are now going after ad ubiquity, with start-ups trying every means to place ads wherever there's a possibility to grab eyeballs," says ad veteran Li Guangdou.

"In China, there's often no distinction between public and private spaces, (which has helped companies like Focus Media). Outside China, such business models might not be viable," says Li.

Usually there are less regulatory risks for outdoor ads compared to those placed on TV and newspapers. Unlike many Western countries, venues in China are often overcrowded, whether it's an elevator, office building, residential black, train or a supermarket, or even a hospital. "That has provided advertisers much room for imagination and innovation," says Li.

Novel advertising agencies seem to be popping up every other day and are also winning favor from venture capitalists.

Shanghai-based Digital Media Group, backed by Japan's NTT DoCoMo, now operates screens on subway trains while CGEN, with capital injection from Sumitomo Equity Partners, offers video ads in hypermarkets.

Beijing Broadcasting Media Corp has formed a joint venture with an Australian firm to install LCDs on buses and taxis.

China Health Media has installed more than 10,000 screens in hospitals. The Beijing-based firm, which secured venture capital from private equity firm SAIF Partners, now aims to install 80,000 screens in 6,000 hospitals across the country by 2008.

Venture capitalists have high hopes from such media firms. In November 2004, Hina and IDGVC bought a 43 percent stake for 15 million yuan in Framedia, a rival of Focus Media. In January 2006, Focus Media acquired Framedia for $39.6 million in cash and $55.4 million in stocks.

"The outdoor ad market is on a roll. There are huge opportunities for new entrants who are able to work out unique business models," says Hina's Zhao.

LCD screens

Advertisers seem already sold on the idea of trying out new forms of media. Mobile phone maker Motorola has partnered with Beijing-based Goodmedia for advertising its handset models on LCD screens installed in bars, coffee shops, karaoke parlors, public bathhouses and fitness centers.

"One advantage of these new media is that they are where consumers are. So consumers can get information about Motorola while doing the treadmill or hanging out with friends at karaoke parlors," says Ian Chapman-Banks, head of marketing at Motorola Asia-Pacific, Mobile Devices.

"Currently we are spending around 25 percent of our ad budget on new media and we expect this to increase. As a fashion and mobile entertainment brand, we are constantly looking for innovative media channels, especially if they include an interactive element."

Goodmedia provides interactive on-screen entertainment such as guessing games based on text messages for a specific product. Compared with dull commercials on TV, that's clearly a more targeted and exciting medium.

But replicating Focus Media's success story could be a tall order. "New media firms need to set up a unique threshold or business model even if it isn't something hi-tech," says Zhao.

Part of Focus Media's success is attributed to its exclusive long-term deals with office buildings which forbade entry of rivals in the company's early years. In China, where successful business models run the risk of being quickly copied, an established advertising firm can easily be overthrown by a new player building on the existing model.

Some have been pointing to a possible flaw in Focus Media's model. The firm usually signs deals with property management companies in upscale residential buildings, and in some cases, share the proceeds from ad sales. After the passing a new property law, questions have been raised whether homeowners should get a part of that revenue.

Actual Effect Media's model is different. It provides battery recycling bins free of charge, and does so in the name of environmental protection.

Actual Effect Media declined an interview with China Business Weekly. "We want to maintain a low profile. We don't want people to follow us," said a lady with the company's executive office who gave her surname as Li.

(China Daily 04/30/2007 page1)