Focus Media, the nation’s largest digital media company, has reported its first-ever quarterly loss due to the shutdown of its mobile advertising business. It also lowered its revenue guideline this year by US$40 million, due to a combination of the Sichuan earthquake and the loss of the advertising business.
The news sent its share price down more than 10 per cent to US$33 in after-hours trading on the Nasdaq yesterday.
The Shanghai-based company made a loss of US$53.8 million in the first quarter, compared with a profit of US$16.2 million a year earlier and US$43.8 million three months earlier. Revenue reached US$161.5 million, from US$51.3 million a year earlier and US$168.7 million three months earlier.
Targeted as the country’s No1 source of mobile spamming in a programme broadcast by CCTV, the mainland’s top television station, Focus Media had to restructure its mobile advertising business.
It has disposed of 10 subsidiaries and recorded a one-off impairment charge of US$79.3 million.
“Excluding the mobile advertising business, Focus Media is still a very profitable business,” said Jason Brueschke, head of Asia internet and media research at Citigroup. He estimated that excluding the write-off of the mobile business, Focus Media would have made US$44.8 million in profit in the first quarter.
Nevertheless, the company is facing a tough environment after the Sichuan earthquake. It shut down its liquid crystal display advertising network during the three days of national mourning, which cost it about a week in revenue or US$6 million, said Mr Brueschke.
Two of the top 10 cities for its liquid crystal display advertising network are in the quake-affected regions of Chengdu and Chongqing.
Clients are also cutting back on advertising after they made huge donations to the disaster relief effort. Private firms have made donations of US$2 billion to US$3 billion, many of which are clients of Focus Media.