BOSTON: Reebok International and its corporate parent, Adidas Group, an Olympic sponsor, are dropping plans for a hospitality facility to host athletes, guests and journalists at the Beijing Games because of logistical demands made by the Chinesegovernment. Reebok, which has a major marketing campaign built around Yao Ming, the Chinese basketball star and Reebok endorser, also said there was now only a slim chance that the brand would be able to host a public event with Yao in Beijing, as the...

For other companies, watch the New America Report.

In America these days, it’s getting harder and harder to get away from a TV screen. Whether you’re waiting for a haircut, buying groceries or pumping gas, you may well have video accompaniment.

But when it comes to TV in public places, the U.S. is just catching up with China.

According to Susquehanna Financial Group, almost 17% of Chinese ad spending goes to outdoor media, compared with just 3.5% in the U.S. Some of that goes to more familiar venues like billboards and bus banners. But digital screens also turn up in the unlikeliest of places.

Previous Ad Media

In the last few years, the U.S. stock markets have greeted several Chinese firms specializing entirely in out-of-home TV advertising networks.

First came Focus Media, () which puts the screens in retail stores and commercial buildings. Then came AirMedia, () purveyor of airport video. And now VisionChina Media, () which came out in December, snares an even more captive audience: bus riders.

Although unique in the U.S. market, VisionChina is one of several firms providing TV to China’s jam-packed public transit. But Chief Financial Officer Dina Liu says that unlike its rivals, it offers real-time content rather than recorded DVDs. This lets VisionChina provide news and sports coverage live.

Sports coverage will ramp up this summer as the Olympic Games roll into Beijing. VisionChina will offer special Olympic packages on its screens, including real-time updates such as medal counts.

“During the Olympic period, most people will be encouraged to take buses and subways to the Olympic stadiums,” said Liu. “On our buses and subways, people are going to be able to watch the Olympics.”

Such differences matter, because the industry is a turf war. Providers make contracts with local transit systems for four to 12 years and aim to make exclusive deals.

VisionChina now has contracts in 16 cities, about half of them exclusive. All are among the 20 richest cities in China, says Liu. It added two of these Shenyang and Taiyuan in the first quarter. In April, it also contracted with Guangzhou’s subway service, making Guangzhou the first city where VisionChina operates both above and below ground.

In a Jan. 23 research report on the sector, Susquehanna Financial analysts described the “Bei-Shang-Guang-Shen” effect.

“When a new digital media network operator has obtained coverage of Beijing, Shanghai, Guangzhou and Shenzhen (Bei-Shang-Guang-Shen) cities, it means a creation of a critical mass that makes the entire network a lot more valuable than individual cities combined,” they wrote. “While short of third-party stats, we have been told by people in the industry that more than 50% of ad dollars in China are spent in these four cities.”

VisionChina is in all of those cities except one: Shanghai. Susquehanna says the fact that another company, Oriental Pearl, controls the Shanghai bus market is an “investment concern” for VisionChina. Liu admitted that Shanghai is the firm’s “only missing piece.”

For all the geographic battles, the actual income for outdoor TV providers comes from advertising. Once a provider has installed the screens, it can lure advertisers with viewer demographics.

“Passengers can watch news in the morning when they are traveling to work,” said Liu. “In the afternoon, when kids are traveling home from school, we play cartoons on the networks. This really gives us the ability to reach a target audience for advertisers.”

VisionChina had 381 advertising clients at the end of the first quarter, up from 300 at the end of 2007. The three biggest ad categories are medicine, household goods, and food and beverages. Financial services, restaurants, clothing, travel and other mass consumer items also get pitched to VisionChina’s audience.

In the conference call on first-quarter results, Chief Executive Limin Li said the company has hired a third-party research group to gather data on the network’s effectiveness. Through an interpreter, Li said the data should “enhance advertisers’ understanding of nontraditional media, compared with traditional TV.”

And, presumably, persuade them to allocate more money to it.

Earnings Report

VisionChina reported a strong first quarter, with sales jumping more than 300% to $13.6 million. Profit was 7 cents a share, compared with a 1-cent loss a year earlier.

The results pushed the stock to a new high above 16 as it continued to rebound from its weak start after the Dec. 6 IPO. After pricing at 8, shares were trading below 6 by late January. But since then, VisionChina has steadily gained even as its two Nasdaq rivals have stumbled.

Li said his firm aims to be in 20 cities by the end of the year. The longer-term goal is to get into all of China’s top 30 metropolises.

The firm is also actively looking for strategic buyouts. Liu says the company seeks “complementary networks” within the same public-transit video field.

Analysts foresee more growth from VisionChina, though naturally it will cool down from its current ramp-up phase. Those polled by Thomson Reuters expect profit to rise 241% this year to 58 cents a share, with 45% growth next year and 27% in 2010.

The managers of Allianz OCC Growth Fund look for big stocks ready to make big moves. “We do it through fundamental analysis,” said co-manager Robert Urquhart. “Our analysts try to find stocks with anomalies. We look for stocks that are underappreciated by the market.” The fund likes stocks with attractive valuations. But the managers are not bargain hunters. “We’re looking for the best return opportunities at a given price,” said co-manager Martin...