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In the past six months, Meituan has made frequent new moves. First, its self-incubated new B2C e-commerce business "Tuan Haohuo" was officially launched, and then "Meituan Maicai" was renamed "Xiaoxiang Supermarket", entering East China in a strong manner.

Recently, a piece of news that "Meituan disrupts the elevator media market" has spread rapidly. This time, unlike in the past, Meituan is not "alone". According to China News Network, Meituan has reached a cooperation intention with Focus Media and is accelerating the development and operation of elevator video media in low-tier cities.

It is worth noting that this time, Meituan and Focus Media are not targeting the first- and second-tier cities where they have an advantage, but the lower-tier markets. As the saying goes, "plan carefully before taking action", what is the deep meaning of this move by both parties?

1. The sinking market has become the entry point for traffic competition

As we all know, Focus Media is in an absolute leading position in first- and second-tier cities, but its expansion in the sinking market has not been smooth. After rapid expansion, it quickly withdrew. It was not until 2023 that its points in third-tier and lower-tier cities broke away 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 the slowdown in the growth of Focus Media's performance in the first quarter of this year, this may mean that the golden age of violent money-making has become a thing of the past, and at this point in time, hidden worries are gradually emerging. At this time, redeveloping the sinking market has become a necessary move.

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

In addition, Meituan also has traffic anxiety. This is mainly due to the booming content consumption. Due to Meituan's relative disadvantage in content output, Douyin, Kuaishou, and Xiaohongshu entered the market and divided the traffic of the local life market.

Therefore, Meituan’s layout of ladder media is not just to hope that the ladder media itself will make a profit, but to need more traffic entrances. Especially today when consumption in first- and second-tier cities is becoming saturated, both local life services and media are looking for growth.

The latest urban classification pattern shows that China's urban system exhibits distinct hierarchical characteristics. The number of first-tier and new first-tier cities is limited, while third- to fifth-tier cities constitute a huge base, carrying a population of more than one billion, showing huge market potential.

This is especially true for third- and fourth-tier cities, which not only have relatively complete urban facilities and a reasonable industrial structure, but also have residents whose quality of life and consumption capacity continue to rise, leaving unlimited possibilities for in-depth exploration and expansion of the market.

From a macro perspective, China's economy has entered the stock era from the incremental era. The core feature of the stock economy era is that the money in consumers' pockets may not have decreased, but their expectations for their income growth have weakened to varying degrees, which has led to a switch in consumption from the incremental economy to the stock economy.

Therefore, if you want to become a national brand in China, the sinking market is the main battlefield in the future. After the market direction is determined, how to choose a helper is very important. The "cooperation" between Meituan and Focus Media is also quite meaningful.

2. Meituan and Focus Media are "additional points" to each other

According to the WeChat public account of "Meituan Takeaway Cooperation Cities", Meituan plans to recruit elevator media advertising franchisees in lower-tier cities. Meituan will provide equipment and business support, while franchisees will be responsible for laying out equipment, sales and producing advertisements.

Judging from this cooperation model, the reason why Meituan and Focus Media formed an alliance is obvious.

1. Opening up customer resources

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

Moreover, by cooperating with Meituan, Focus Media can not only directly reach these potential customers, but also use Meituan's business relationship network to simplify the customer development process and save a lot of market development costs.

As for Focus Media, Tianyancha data shows that Focus Media, which was founded in 1997, has always ranked first in the industry in terms of market share.

The advertising space covers more than 280 cities in China and even spreads to many foreign countries. After years of operation in the elevator media market, Focus Media's experience in site selection and city layout can promote both parties to quickly expand in the sinking market.

In addition, Focus Media's many years of experience in maintenance, development and installation of elevator media equipment can also help Meituan save a lot of effort when providing equipment to franchisees and maintaining the equipment.

2. Complementarity of traffic conversion

At present, although Meituan has a huge pool of merchant users, the platform display is limited. After the daily traffic is allocated to each merchant, it is inevitable that there will be situations where it "cannot take care of everything" and "the effect is random". However, if a wide range of media ladders are introduced, the nature of merchants and products can be distinguished, and then advertising is delivered in different scenarios and in different ways, the effect may be better.

Focus Media can also fully leverage its powerful advantages as a content amplifier, effectively improve online store visits, turnover rates and conversion rates, provide high-quality capabilities for small and medium-sized advertising clients represented by local life services, and continue to raise the company's competitive barriers through scale and structural advantages.

Focus Media can leverage the existing low-tier customer traffic on the Meituan platform to expand into third- and fourth-tier cities, thereby resisting the impact of new trends.

3. Closed loop at the business level

For Focus Media, the current stage of expanding market positions, especially for the sinking market, is to balance the cost of advertising and advertising revenue. Customer development and market research in the early stage of advertising are essential, and Meituan's support can fill this gap and help Focus Media complete the closed loop at the business level more quickly.

Meituan, with the support of escalator media, can achieve a faster business closed loop based on the existing system. The combination of escalator media and mobile media allows advertising to cover more scenarios, and consumers are more likely to see an advertisement. It also makes it more likely that consumers will trigger the desire to buy after seeing the advertisement on escalator media. Elevator media makes the effect more visible, and at the same time as consumption, it also increases secondary income.

With complementarity and optimization in three dimensions, the combination of Focus Media and Meituan can be described as a powerful alliance.

3. A powerful alliance, or a war about to begin?

In the short term, the cooperation between Meituan and Focus Media can be seen as the result of complementary resources and businesses between the two parties. They are expected to jointly develop markets in lower-tier cities, provide more comprehensive and high-quality services to small and medium-sized enterprises in the sinking markets, and bring incremental performance to both parties.

However, in the long run, the cooperation between Focus Media and Meituan is more focused on lower-tier cities such as third-tier and fourth-tier cities, and no further cooperation has been carried out in first-tier and second-tier cities. Therefore, it is difficult to determine whether the "blank" in first-tier and second-tier cities will continue the alliance or turn into hostility.

Furthermore, since the news of Meituan's strong entry into the media industry broke out, Focus Media's stock price has plummeted instead of rising. And the subsequent decline has been stronger than the rise, and the stock price has not yet returned to the price before the news broke out. It can be seen that the market voice is more bearish than bullish.

Image source: Xueqiu

The reason why the market is bearish may be that the elevator media industry is highly concentrated, and Focus Media has already occupied an absolute advantage, especially in first- and second-tier cities, where the ceiling of Focus Media is gradually emerging.

As the cooperation deepens, will Meituan turn to first- and second-tier cities and take the route of "surrounding the cities from the countryside"? At this time, how will Focus Media respond? This is exactly what the market is worried about.

Moreover, when Meituan surpassed Ele.me, it actually took the same route. Meituan first focused on low-tier cities, and then turned to high-tier cities, and then took over the market.

Furthermore, on June 24, the former second-largest media company, Chinese Media, had just officially announced its bankruptcy, and Meituan officially announced its entry into the media market. The timing was also very clever.

It is clear that the withdrawal of Chinese Media has provided Meituan with an opportunity to enter the lower-tier markets. Although the Internet leader and the media leader have temporarily suspended the competition between the two cross-border leaders, it will inevitably intensify the changes in the media market and the possibility of a reshuffle.

4. Conclusion

As soon as the news of Meituan's entry into the elevator media market and its cooperation with Focus Media came out, "turbulence" in the elevator media market was inevitable.

As China gradually enters the era of stock economy, the ladder media market is volatile on the surface, and a new battle for how to seek growth will also begin.