Welcome to the Digital Marketing Inner Circle

The news coming out of Focus Media (Nasdaq: FMCN) has not been good over the past few months and just months after restructuring its in-store advertising network and selling its out-of-home digital networks to Sina.com, the Chinese digital media group Focus Media Holding Limited has produced some disappointing results.

In their unaudited financial results the company reported fourth quarter net revenue of USD192.1 million, declining 15% from USD224.8 million for the third quarter of 2008. Net loss was USD800.3 million or -USD6.22 per fully diluted ADS, compared to net income of USD51.3 million for the third quarter of 2008 or USD0.38 per fully diluted ADS. Continuing operations net revenue was USD87.2 million and net loss from continuing operations was USD422.2 million. Discontinued operations net revenue was USD104.9 million and net loss from discontinued operations was USD378.1 million.

For the full year of 2008, total company net revenue was USD790.2 million for the full year 2008, as compared to USD506.6 million for the full year 2007. Continuing operations net revenue was USD369.6 million, and net loss from continuing operations was USD414.9 million.

However, from the News wire release, the three things that struck me in the results were these stats:

1. Advertising revenue from LCD display network was $65.3 million for the fourth quarter of 2008, an 18% decline from $79.6 million for the third quarter of 2008.

2. Advertising revenue from our in-elevator poster frame network was $39.2 million for the fourth quarter of 2008, an 11% decline from $44.0 million for the third quarter of 2008.

3. Internet advertising service revenue was $62.4 million for the fourth quarter of 2008, a 12% decline from $70.8 million for the third quarter of 2008.

It appears that there is really some fundamental problems in core areas of the business. Although it is a challenging environment in the advertising sector it is the level of decline that was of surprise. That said, the company has good levels of  cash and cash equivalents (USD422.9 million as of December 31, 2008, a 13% increase from USD373.2 million as of September 30, 2008) and I expect Jason Jiang, Chairman and Chief Executive Officer of Focus Media to be able to rally the troops in the next quarter to try and turn this around.

Never has the next quarter been as important to Jason as this coming one… i suspect the market will either get back behind him or remain nervous watching this once mighty Chinese media company struggle.