Focus media gives property.

I have been following Focus Media for over a year. In this process, I found that the market's views on Focus Media are seriously polarized. Spectators think that people will not watch advertisements when they take the elevator, and the headline Tik Tok will kill the elevator media sooner or later.

There are also some bullish voices, the most typical of which is the trendy media. Zhang, its chairman, said: "The track of ladder media is so big that it can accommodate 200 billion companies, and the elevator advertising revenue will reach 60 billion in the next five years." Also favored are Ali, Baidu and JD.COM, all of which have invested in this industry.

In fact, many people in the market are bearish on a company just because its share price has fallen. When the market reverses and the company's share price rises, people who have been negative and bearish immediately become positive and bullish.

In the process of making investment, we should pay more attention to the study of business model, rather than staring at the rise and fall of stock price every day to judge the gains and losses of investment. The following industry characteristics can help us better understand this business.

1 is the behavior characteristic of customers.

In the official WeChat account, the Tang Dynasty summarized the core competitiveness of Focus Media as big, accurate, strong, provincial and specialized. Even if the share price is halved, he said that his views on these competitiveness of the company have not changed. Moreover, he admits that the biggest misjudgment of investment focus is the misjudgment of advertisers' behavior characteristics.

Lao Tang said that in the past, he thought that enterprises should pay more attention to the domestic market and increase the advertising budget to snatch consumers when the macro-economic recession or some kind of conflict caused the export to be frustrated. Therefore, Focus may even benefit from this, at least it can be guaranteed that it will not be greatly affected.

However, the reality is that when advertisers are faced with a downturn in the industry, they do not take the initiative to attack, but adopt the principle of conservatism. The first thing that funds guarantee is the expenses related to raw materials and assets, and the first thing to be cut is the advertising fee. Among them, priority will be given to effect advertisements that can bring short-term direct effects, and then it will be the turn of brand display advertisements.

Focus Media's main advertising form is brand display, so in the economic downturn, Focus's performance decline really exceeded market expectations.

When the macro economy is in recession, users will cut off advertising expenses first, so we can also launch it according to this logic. As the macro economy warms up and the company's performance rises, it will definitely pay more for advertising. I have seen a research report before, saying that the advertising industry in the United States has fallen more than GDP in every economic downturn, but after every economic downturn, the increase will greatly exceed the economic average. Therefore, when the macro economy warms up, Focus will definitely receive a bigger economic red envelope than other industries.

The second is a fixed-cost business model.

Different from the traditional manufacturing industry, the operating cost of Focus Media is positively correlated with its income. Focus Media's business model belongs to the mode of high fixed cost and low variable cost. The annual rental cost is fixed, and the change of operating income will be amplified at the profit end. If the operating income increases in the future, the profit will double. This is what we often call operating leverage.

We can see this change by making a simple table. According to the data of Focus Media's income statement for 20 18 years, the income of 100 yuan includes cost 34 yuan, sales expenses 16 yuan, management expenses 3 yuan and income tax 17%.

Case 1, when the income increases by 20%, because the cost is mainly the rent paid to the upstream property, this part has been paid and the cost remains unchanged. It can be assumed that the sales expenses increase by 10% year-on-year, the management expenses remain unchanged, and the financial expenses are zero. In the end, the company's net profit was 5 billion yuan, a year-on-year increase of 39%. In this case, we can see that revenue has increased by 20%, and the growth rate of net profit is basically twice that of revenue.

In the second case, when the income drops by 20%, the same cost has been paid, and this part remains unchanged. The sales expenses here will not increase, but this part will basically not decrease with the decrease of revenue. Other expenses remain unchanged. In this case, the company's net profit became 20.5, and the net profit decreased by 49% year-on-year, which also far exceeded the change range of operating income.

This is the business model of Focus Media's track. If the fixed cost remains unchanged, the change of operating income will be transmitted to the net profit, which will double the change. In the first half of this year, the net profit fell by 79%, which surprised many people, and many even shouted out the voice of Focus.

Among them, the essence is that the company's revenue decreased by 25%, because the cost brought by point expansion increased by 65% year-on-year, and finally it was transmitted to the tragedy of a sharp drop of 79% in net profit. When the economy improves in the future, this kind of operating leverage will inevitably make the net profit increase significantly higher than the revenue increase.

The third feature is that companies have different negotiating positions in different environments.

Focus operating income can be roughly simplified as a formula, namely: revenue = number of points * unit price * publication rate * discount.

From this formula, we can see that the performance of Focus Media is closely related to the publication rate and advertising discount. When the economy is prosperous, advertisers' willingness to place advertisements is strengthened. Then the release rate of Focus Media is relatively high, and advertisers often have to make an appointment long in advance. At this time, Focus Media has a strong negotiating position and the discount is very small. However, due to the economic downturn, advertisers' willingness to put in is reduced. At this time, the company's release rate is low and more discounts are given.

Therefore, when the economy improves, Focus will have a strong advantage in publishing rate and discount, which will further strengthen the recovery of the company's performance.

The above three characteristics of the ladder media industry can help us better understand this business. At present, Focus only lacks the signal of economic improvement. No matter from the behavioral characteristics of advertisers, changes in the negotiating position of Focus Media and the amplification effect brought by operating leverage, when the economy improves, Focus's performance will definitely show greater flexibility.

At this time, all we need to do is wait patiently and wait for the flowers to bloom.