In the past six months, Meituan has made frequent new moves, first with the official launch of its self-incubated B2C e-commerce business "Tuanhaohuo," followed by the renaming of "Meituan Maicai" to "Xiaoxiang Supermarket," making a strong entry into East China.

Recently, news of "Meituan shaking up the elevator media market" rapidly gained traction. This time, unlike before, Meituan is not "alone." According to China News Service, Meituan has reached an intent to cooperate with Focus Media and is accelerating the development and operation of elevator video media in lower-tier cities.

It is worth noting that the main market Meituan and Focus Media are targeting through this collaboration is not the first- and second-tier cities where they each hold advantages, but the sinking market. The saying goes, "Plan before you act." What deeper meanings lie behind this move by both parties?

The sinking market becomes a battleground for traffic acquisition

As we all know, Focus Media holds an absolute leading position in first- and second-tier cities, but its expansion into sinking markets has not been smooth, with rapid expansion followed by quick withdrawals. It was not until 2023 that its locations in third-tier and below cities broke free from negative growth. This may be a "heartache" for Focus Media.

As industries such as the internet and real estate enter cyclical changes, coupled with signs of decelerating growth in Focus Media's first-quarter performance this year, this may indicate that the golden era of making money quickly and violently is now in the past, and hidden worries are gradually emerging at this point in time. At this juncture, redeveloping the sinking market has become a necessary move.

Similar to Focus Media, Meituan also faces growth anxiety. In the first half of 2023, Meituan's core delivery service business lost 3.03 billion yuan, with a loss rate of 8.1%. In the first quarter of this year, Meituan's new business segment reported an operating loss of 2.8 billion yuan.

Not only that, but Meituan also faces traffic anxiety. This primarily stems from the booming content consumption sector. Due to Meituan's relative disadvantage in content output, Douyin, Kuaishou, and Xiaohongshu have capitalized on this trend, dividing up traffic in the local lifestyle market.

Therefore, Meituan's layout in elevator media is not just about hoping for profitability from elevator media itself but rather needing more traffic entry points. Especially today, when consumption in first- and second-tier cities tends to be saturated, both local lifestyle services and media are seeking incremental growth.

The latest urban hierarchy shows that China's urban system exhibits distinct hierarchical characteristics, with a limited number of first-tier and new first-tier cities, while third- to fifth-tier cities constitute a vast base, supporting a population of over one billion, demonstrating immense market potential.

Especially in third- and fourth-tier cities, they not only have relatively well-developed urban facilities and a reasonable industrial structure, but residents' quality of life and consumption power are also continuously rising, leaving infinite possibilities for deep market exploration and expansion.

From a macro perspective, China's economy has transitioned from an incremental era to a stock era. The core characteristic of the stock economy era is that consumers' pockets may not necessarily have less money, but their expectations for income growth have weakened to varying degrees, leading to a shift in consumption from the incremental economy to the stock economy.

Therefore, to become a national brand in China, the sinking market is the future main battleground. After determining the market direction, choosing the right partner is crucial, and this "alliance" between Meituan and Focus Media is also quite profound.

Meituan and Focus Media, mutually beneficial "bonuses"

According to the "Meituan Waimai Cooperation City" WeChat official account, while recruiting elevator media advertising franchisees in sinking cities, Meituan plans to provide equipment and business support, while franchisees will be responsible for installing equipment, sales, and advertising production.

From this cooperation model, it is evident why Meituan and Focus Media have formed an alliance.

1. Integration of customer resources

On Meituan's side, the active merchants on its platform, especially those small and medium-sized enterprises focused on serving the local market, are ideal advertisers for Focus Media's smart screen ads. Therefore, Meituan's existing vast local merchant customer base can provide ready-made advertiser resources for Focus Media.

Moreover, by cooperating with Meituan, Focus Media can not only directly access these potential customers but also leverage Meituan's business relationship network to simplify customer development processes and save substantial market development costs.

On Focus Media's side, according to Tianyancha data, Focus Media, founded in 1997, has consistently ranked first in market share.

Its advertising locations cover over 280 cities in China and even extend to multiple countries abroad. With years of experience in the elevator media market, Focus Media's expertise in location selection and urban layout can facilitate rapid expansion in the sinking market for both parties.

Furthermore, Focus Media's years of experience in maintaining, developing, and installing elevator media equipment can help Meituan save effort when providing equipment and maintenance to franchisees.

2. Complementary traffic conversion

At this stage, although Meituan has a vast pool of merchant users, its platform display is limited, and daily traffic allocated to individual merchants inevitably leads to situations where "not everything can be taken care of" and "results are random." However, if extensive elevator media is introduced to differentiate merchants and product natures, and different advertising methods are employed in different scenarios, the results may be better.

Meanwhile, Focus Media can fully leverage its powerful content amplification advantage, effectively boosting online store visit rates, turnover rates, and conversion rates, empowering small and medium-sized advertising customers represented by local lifestyle services with high quality, and continuously pushing up corporate competitive barriers amidst scale and structural advantages.

Focus Media can also leverage Meituan's existing low-tier customer traffic to complete its layout in third- and fourth-tier cities, thereby resisting competition from emerging players.

3. Closed-loop business

For Focus Media, expanding market locations at this stage, especially in sinking markets, focuses on balancing advertising costs and revenues. Customer development and market research during the initial placement phase are essential, and Meituan's support can fill this gap, helping Focus Media complete the closed loop at the business level more quickly.

On Meituan's side, with the support of elevator media, it can achieve a faster closed loop based on its existing systems. The combination of elevator media and mobile media provides more advertising coverage scenarios, increasing the probability of consumers seeing a particular ad and triggering purchase intent after seeing it in elevator media. Elevator media makes effects more visible and increases secondary revenue during consumption.

With complementary and optimized dimensions across three aspects, the collaboration between Focus Media and Meituan can be described as a powerful union.

A powerful union, or the start of a major battle?

In the short term, the cooperation between Meituan and Focus Media can be seen as a result of complementary resources and businesses, with the potential to jointly explore lower-tier city markets, provide more comprehensive and high-quality services to small and medium-sized enterprises in sinking markets, and bring performance increments to both parties.

However, in the long run, the cooperation between Focus Media and Meituan is more focused on third- and fourth-tier cities and has not yet expanded further cooperation in first- and second-tier cities. Therefore, it is difficult to determine whether the "blank" in first- and second-tier cities will lead to continued alliance or turn into rivalry.

Furthermore, since news of Meituan's strong entry into the elevator media market broke, Focus Media's share price plummeted instead of rising. Moreover, the subsequent downtrend has been stronger than the uptrend, and the share price has yet to recover to its pre-announcement level. Clearly, there are more bearish voices than bullish ones in the market.

Image source: Xueqiu

The reason for the market's bearish sentiment may be that the elevator media industry is highly concentrated, with Focus Media already holding an absolute advantage, especially in first- and second-tier cities, where Focus Media's ceiling is becoming increasingly apparent.

As cooperation deepens, whether Meituan will shift its focus to first- and second-tier cities, adopting a "rural surrounding the city" strategy, and how Focus Media will respond, are precisely what the market fears.

Moreover, Meituan overtook Ele.me by adopting a similar strategy. Meituan first focused on lower-tier cities before attacking higher-tier cities, gradually carving out a market share.

Furthermore, on June 24, just as the former "second-place" elevator media player, Huayu Media, officially announced its bankruptcy, Meituan formally announced its entry into the elevator media market, a very opportune timing.

It is clear that Huayu Media's exit provided Meituan with an opportunity to enter the sinking market. While the internet giant teaming up with the elevator media giant has temporarily eased competition between the two cross-border giants, it will inevitably intensify changes in the elevator media market and the possibility of reshuffling.

Conclusion

News of Meituan entering the elevator media market and joining forces with Focus Media inevitably led to "turmoil" in the elevator media market.

As China gradually enters the stock economy era, amidst the apparent turmoil in the elevator media market, how to seek incremental growth will kick off a new battle for supremacy.

Source: Songguo Finance