Welcome!

Microsoft Cloud Authors: Nick Basinger, Kevin Benedict, Pat Romanski, Liz McMillan, Lori MacVittie

Blog Feed Post

Cautionary tale: generate piles of revenue and still run a loss

 

Chinese DOOH company AirMedia Group Inc., listed on NASDAQ, issued its quarterly report yesterday, detailing numbers that show there's real money to be made in digital place-based advertising, but also that securing the rights to those places can kill a company.

Total revenues for the second quarter of 2009 reached US$36.8 million, representing a year-over-year increase of 23.7% from US$29.8 million and a quarter-over-quarter increase of 12.3% from US$32.8 million. The year-over-year increase was due to increases in revenues from digital frames in airports, traditional media in airports and other displays. The quarter-over-quarter increase was due to increases in revenues from digital frames in airports, traditional media in airports and digital TV screens on airplanes.

Revenues from digital frames in airports

Revenues from digital frames in airports for the second quarter of 2009 increased by 50.3% year-over-year and by 36.7% quarter-over-quarter to US$16.5 million. The year-over-year and quarter-over-quarter increases were due to an increase in the number of time slots sold which were partially offset by a decrease in the average advertising revenue per time slot sold (or the "ASP"). Please refer to "Summary of Selected Operating Data" below for detailed definitions of the operating data cited in this press release.

The number of time slots sold for the second quarter of 2009 increased by 374.0% year-over-year and by 67.6% quarter-over-quarter to 5,683 time slots. The year-over-year and quarter-over-quarter increases were due to continued sales efforts and growing acceptance of AirMedia's digital frames. AirMedia's digital frames were operated in 28 airports in the second quarter of 2009, up from 16 airports at the end of the second quarter of 2008, and up from 25 airports at the end of the first quarter of 2009. The number of time slots available for sale for the second quarter of 2009 increased by 150.7% year-over-year and by 9.6% quarter-over-quarter to 26,277 time slots. The year-over-year increase was primarily due to an increase in the number of airports in AirMedia's digital frame network. The quarter-over-quarter increase was primarily due to the commencement of operations of digital frames in three additional airports during the second quarter of 2009 and the full-quarter operations of the digital frames in three airports, which AirMedia commenced to operate in the middle of the previous quarter. The utilization rate of digital frames for the second quarter of 2009 increased by 10.2 percentage points year-over-year and 7.5 percentage points quarter-over-quarter to 21.6%, primarily due to the increase in the number of time slots sold. 

While traditional media, ie backlit posters, is in there, MOST of the money comes from the digital side.

The operating expenses are well below the revenue numbers, so this looks like a pretty sweet business, right?

Well, there's the rights the company has to pay to be in the airports, and through some frightening, crazy arrangement, costs for those rights have gone through the roof. They went up 146.5% in a year.

Cost of revenues for the second quarter of 2009 was US$36.8 million, representing a year-over-year increase of 110.4% from US$17.5 million and a quarter-over-quarter increase of 42.1% from US$25.9 million. The year-over-year and quarter-over-quarter increases were primarily due to an increase in concession fees in connection with the expansion of AirMedia's business. Cost of revenues as a percentage of net revenues in the second quarter of 2009 was 101.3%, representing a year-over-year increase from 61.4% in the same period one year ago and a quarter-over-quarter increase from 81.7% in the previous quarter.

AirMedia incurs concession fees to airports for placing and operating digital TV screens, digital frames, traditional media in airports and other displays, and to airlines for placing programs on their digital TV screens. Most of the concession fees are fixed with an annual escalation. The total concession fee under each concession rights contract is charged to the consolidated statements of operations on a straight-line basis over the agreement periods, which are generally between three and five years. Concession fees for the second quarter of 2009 were US$28.1 million, representing a year-over-year increase of 146.5% from US$11.4 million and a quarter-over-quarter increase of 47.8% from US$19.0 million, primarily due to newly entered or renewed concession rights contracts during the respective period. Concession fees as a percentage of net revenues in the second quarter of 2009 was 77.3%, compared to 40.0% in the same period one year ago and 59.9% in the previous quarter. The year-over-year and quarter-over-quarter increases were primarily because incremental concession fees associated with new concession rights contracts were fixed once concession rights contracts were entered into while revenues generated from newly signed concession rights contracts would take time to ramp up. 

How does a company end up in such an open-ended arrangement? 

We have a story of a company that appears to be shooting the lights out in terms of ad sales, but mired in a contract that got structured in a way seems to make profitability very, very tough.

Any start-up looking at digital out of home should be very wary of agreements that lock them into fixed payments for access rights (particularly in the first 18-24 months when revenues will be rare) and stay the hell away from deals that get set-up to escalate out of control las it appears to have happened for AirMedia.

Crazy stuff. 

Read the original blog entry...

More Stories By Dave Haynes

Dave Haynes is one of the most seasoned professionals in the still young digital signage industry, with deep experience in everything from business development and sales to technical operations, product development and start-up strategy and fundraising. These days he is extensively working on business development and consulting for an industry big on enthusiasm but still a lot short of experience and know-how.

IoT & Smart Cities Stories
Early Bird Registration Discount Expires on August 31, 2018 Conference Registration Link ▸ HERE. Pick from all 200 sessions in all 10 tracks, plus 22 Keynotes & General Sessions! Lunch is served two days. EXPIRES AUGUST 31, 2018. Ticket prices: ($1,295-Aug 31) ($1,495-Oct 31) ($1,995-Nov 12) ($2,500-Walk-in)
Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life settlement products to hedge funds and investment banks. After, he co-founded a revenue cycle management company where he learned about Bitcoin and eventually Ethereal. Andrew's role at ConsenSys Enterprise is a mul...
Nicolas Fierro is CEO of MIMIR Blockchain Solutions. He is a programmer, technologist, and operations dev who has worked with Ethereum and blockchain since 2014. His knowledge in blockchain dates to when he performed dev ops services to the Ethereum Foundation as one the privileged few developers to work with the original core team in Switzerland.
René Bostic is the Technical VP of the IBM Cloud Unit in North America. Enjoying her career with IBM during the modern millennial technological era, she is an expert in cloud computing, DevOps and emerging cloud technologies such as Blockchain. Her strengths and core competencies include a proven record of accomplishments in consensus building at all levels to assess, plan, and implement enterprise and cloud computing solutions. René is a member of the Society of Women Engineers (SWE) and a m...
Digital Transformation and Disruption, Amazon Style - What You Can Learn. Chris Kocher is a co-founder of Grey Heron, a management and strategic marketing consulting firm. He has 25+ years in both strategic and hands-on operating experience helping executives and investors build revenues and shareholder value. He has consulted with over 130 companies on innovating with new business models, product strategies and monetization. Chris has held management positions at HP and Symantec in addition to ...
The challenges of aggregating data from consumer-oriented devices, such as wearable technologies and smart thermostats, are fairly well-understood. However, there are a new set of challenges for IoT devices that generate megabytes or gigabytes of data per second. Certainly, the infrastructure will have to change, as those volumes of data will likely overwhelm the available bandwidth for aggregating the data into a central repository. Ochandarena discusses a whole new way to think about your next...
CloudEXPO | DevOpsSUMMIT | DXWorldEXPO are the world's most influential, independent events where Cloud Computing was coined and where technology buyers and vendors meet to experience and discuss the big picture of Digital Transformation and all of the strategies, tactics, and tools they need to realize their goals. Sponsors of DXWorldEXPO | CloudEXPO benefit from unmatched branding, profile building and lead generation opportunities.
Dynatrace is an application performance management software company with products for the information technology departments and digital business owners of medium and large businesses. Building the Future of Monitoring with Artificial Intelligence. Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more busine...
All in Mobile is a place where we continually maximize their impact by fostering understanding, empathy, insights, creativity and joy. They believe that a truly useful and desirable mobile app doesn't need the brightest idea or the most advanced technology. A great product begins with understanding people. It's easy to think that customers will love your app, but can you justify it? They make sure your final app is something that users truly want and need. The only way to do this is by ...
DXWorldEXPO LLC announced today that Big Data Federation to Exhibit at the 22nd International CloudEXPO, colocated with DevOpsSUMMIT and DXWorldEXPO, November 12-13, 2018 in New York City. Big Data Federation, Inc. develops and applies artificial intelligence to predict financial and economic events that matter. The company uncovers patterns and precise drivers of performance and outcomes with the aid of machine-learning algorithms, big data, and fundamental analysis. Their products are deployed...