Digital Media Group (DMG), a Beijing-based start-up battling for a share of Asia's surging LCD advertising market, has secured a new round of financing from Oak Investment Partners and other investors backing its bid to make a profit underground. DMG, which believes that operating displays in subways will be the key to competing against dominant above ground rival Focus Media, has raised US$30 million to US$35 million from investors, according to a source familiar with the situation. Contributing investors also include Sierra Ventures, NIF SMBC Ventures and Gobi Partners. The new funds will help DMG progress to a listing on Nasdaq next year, when the company aims to raise US$150 million, according to chief executive James Lim. DMG is competing in a market where out-of-home displays, as they are known, have cropped up everywhere from office buildings, supermarkets, convenience stores and university cafeterias to airports and every form of transport such as taxis, buses and trains. The displays, rare before 2003 when DMG and Focus Media both started, attracted an estimated US$359.2 million of mainland advertising last year, about a third more than the US$240 million garnered by all the magazines in the country combined, according to a report by Deutsche Bank. The out-of-home display market may more than double to US$771 million by 2008, Deutsche Bank said. That growth has helped the share price of Focus, so far the only listed company in the sector, surge fourfold in the past 18 months to US$68.86 at the Friday close. The company raised about US$170 million with a July 2005 initial public offering when its shares listed on Nasdaq at US$17. DMG has built up a network that started in 2004 in Shanghai's subways to cover lines in Chongqing, Tianjin, Guangzhou, Nanjing and Shenzhen. Beijing and other cities are being targeted and by next month all the MTR Airport Express trains in Hong Kong will have the display company's panels. That gives DMG, which says it will expand beyond China to Southeast Asia starting with Bangkok, a reach of about seven million to eight million people each day, according to Mr Lim. That pales compared with the 100 million people reached every day by Shanghai-based Focus Media, which has about half the overall market with 109,000 displays, mostly in office buildings, according to Deutsche Bank. Even so, DMG, which claims to be the only company in China awarded contracts for subway LCD displays, can make up lost ground while high entry barriers such as the technological level and lengthy roll-out process put off challengers, Mr Lim said. Each line requires total investment of between US$2 million and US$5 million while it comes to about US$2 million for the Hong Kong Airport Express line. 'Local companies are too small to be serious threats,' he said. 'Some companies such as Singapore Technology Enterprise, Citic Technology and Cisco have part of the technology but lack know-how of subway operation or advertising business. Instead, they become our technology partners.' Compared with Focus, DMG seems to have picked a tough sector to tackle. 'From start to actually signing a contract, each subway line on average takes two years,' said Mr Lim. Building the systems and mounting LCD displays on all the trains in a particular line takes another six months to two years. The contract for Hong Kong Airport Express was signed in September 2005. It took only two years for Focus to cover most large cities in China, building to about 86 cities at present from about 40 in 2005. The requirements of subway operators are complex and unique, Mr Lim said. 'There are many special concerns about safety and reliability. The fire safety requirements are very stringent. There are requirements for anti-shock, electric magnetic waves and so forth. The system must also not interfere with the subway operations' current system. 'Each subway line is also a little bit different from the others and each new line requires customisation. The system also has to able to deliver live messages, so that in case of emergency, passengers can be informed instantly.' Focus's panels play only pre-recorded programmes in one-hour cycles in the lift lobbies of office buildings. A memory card, changed weekly to offer new programmes, stores the programmes, so there is no live broadcast. Also slowing DMG's roll-out of displays is the number of parties that have to be involved. 'As the subway is public transportation, local governments also want to get involved,' said Mr Lim. In many cities, DMG also has to work with companies close to the local governments. For example, Oriental Pearl, a company held partially by government-backed Shanghai Media Group and operator of the mobile TV in the city, is a strategic investor in DMG's operation there. In Beijing, the company will have to co-operate with Beijing All Media and Culture Group, a city-government controlled company that runs a cable TV network and various program production businesses. Mr Lim's optimism that other leading out-of-home panel operators such as Focus will not compete head-to-head with DMG for subway contracts is shared by analysts. Market leaders have been growing mainly by identifying new possibilities in different locations or transportation and then establishing dominant positions and entry barriers in the new channels rapidly, instead of competing head-to-head on all fronts, wrote Deutsche Bank analyst William Bean. Mr Lim forecasts steady growth for DMG in the next few years. 'We have new subway lines planned up to 2009-2010,' he said. By the end of this year, coverage would more than double to reach 20 million people per day, he said.