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Sherman So

Madhouse, the privately held operator of the mainland's largest mobile advertising network, expects its market segment to grow next year and buck an industry slowdown.
Spending on mobile internet advertising would reach up to 450 million yuan (HK$510 million) next year from 250 million yuan this year, as more advertisers switched to this platform,  Madhouse founder and chief executive Joshua Maa said.
'In a market downturn, advertisers will rethink how  best to allocate their budget,' Mr Maa said.
'The mobile internet platform can offer better traceability and return on investment than other media, so it will account for an increased share of advertisers' budgets.'
Shanghai-based Madhouse runs a mobile advertising network that comprises more than 1,100 publisher sites - including QQ, Sohu, 3G.cn and Baidu.
These publisher sites represented more than 75 per cent of total mobile internet traffic in the country, the company said.
Eden Zoller, the principal analyst at global advisory and consulting firm Ovum, described Madhouse as 'a serious player' based on 'the huge size of the addressable market for mobile advertising'.
'China has the largest population in the world and the largest number of mobile-phone connections at 531 million at the end of last year -  a 40 per cent penetration rate,  which means there is clearly  plenty of room for growth,' Mr Zoller said.
Mobile-telephone subscribers in the country reached 601 million at the end of June, according to government figures.
Madhouse has also developed its own ad-serving and campaign-management platform based on either a mobile service subscriber's location or spending profile.
'We can track users' location, whether they are  in Shanghai or Beijing, from their mobile carrier,' Mr Maa said.
'We can also estimate  a person's spending power based on the type of mobile phone he uses. For example, an iPhone or Nokia N-series handset user would probably be a high-end consumer, compared with those carrying low-end domestically branded phones.'
So far,  acceptance of mobile internet advertising has increased among advertisers.
Madhouse estimates that in the nine months to October, it had served 3.9 billion targeted advertising impressions on behalf of its clients - up from  450 million  last year.
The company also claimed to have 49 per cent of the brand advertising market for mobile internet on the mainland.
Founded in 2006 and  employing a staff of about 170,  Madhouse  forecast that its revenue this year  would  rise 90 per cent from last year.
'We will start to be profitable this November or December,' said Mr Maa, adding that the company would soon break even.
His market segment appears to be one of the bright spots in an otherwise softening advertising industry on the mainland.
Richard Ji, an executive director of Morgan Stanley, estimated total advertising spending growth on the mainland  would be in the low to mid-teens next year, down from a  forecast growth range of  30  to 35 per cent this year.
'All the major brands are cutting their marketing budgets next year,' Mr Maa said.
'Every sector is affected, including those in the financial services, automotive, information technology, consumer electronics, and the fast-moving consumer goods sectors.'
Despite that worrying domestic scenario, Madhouse plans to expand overseas.
'Our solutions are innovative and unique. We believe these will work in markets outside  China,' said Mr Maa, noting that a public listing  would have to wait until the global economy recovers.
Madhouse has received a total of US$60 million from investors including TDF Capital, Gobi Ventures, Jafco Asia, D2 Communications and Nokia Growth Partners, the venture capital arm of leading global mobile-telephone maker Nokia.
Madhouse forecast
Crisis forcing advertisers to switch to mobile advertising platform
Mobile-telephone connections on the mainland reached 531 million last year, a penetration rate of: 40%



Advertising spending seen rising to 450m yuan