The mainland has witnessed a boom in LED-type advertising in the last two years with billboards and roadside panels sprouting everywhere in major cities. 'In Xujiahui, one of busiest shopping areas in Shanghai, every day is like Christmas, with lights everywhere,' said Anna Seto, general manager of Beijing-based market research firm China Outdoor Data Corp. A striking 6,000-square-metre LED screen completely covers one side of the Citibank Bank Tower in Shanghai. 'It can be seen by people on planes taking off and arriving at Pudong Airport,' said Chandler Gao, an analyst of Analysys, another Beijing-based market research firm. One of the reasons for the LED boom is the government's decision to eliminate traditional billboards and roadside advertising panels as part of clean-up efforts before the Beijing Olympics this year and the Shanghai World Expo in 2010, Ms Seto says. She says all the billboards along the highway from Beijing Airport to the city centre have been taken down and advertisements on city buses have been restricted to cover only a fraction of the vehicles. Meanwhile, a technology breakthrough in LED screens has made advertising less costly. 'New technology has made the cost of LED screens drop to one-third or half of that two to three years ago,' Mr Gao said. LED displays are much brighter than before, 'making them visible in broad daylight and from a far distance', he adds. Moreover, many are equipped with a sound system, allowing them to play TV advertisements. 'These have made them the perfect media in city hubs packed with people and slow traffic.' Major foreign companies entering the mainland market have tapped outdoor media to build brand image. With fewer traditional outdoor media choices, advertising money is being channelled to LED advertisers, says Ms Seto. Even part of the budget for television ads, which still account for the bulk of the country's advertising spending, is going into the new medium. Rates are increasing fast. Ms Seto estimates LED display rates doubled last year from 2006. Stanley Chu, general manager of Network CN, a Hong Kong-based newcomer that used to supply computers to hotels, says his company will raise its rates 40 per cent more than originally planned to catch up with competitors. For the last two years, venture capital investors have been pouring money into LED displays. The largest LED billboard operator in the country, Tulip Mega Media, has raised US$70 million from Credit Suisse, JCDecaux and Warburg Pincus during the period. So far, Tulip has built 20 LED billboards in 11 cities - including seven in its hometown Shanghai, four in Beijing and two in Shenzhen. All of the billboards are over 150 square metres and carry eight- to 10-year contracts with the property owners, says David Zhang, Tulip's director of marketing. An earlier report said Tulip planned to raise an additional US$200 million by listing on Nasdaq. Focus Media, the country's largest out-of-home media company, has a division for LED displays, operating 200 such panels in city hubs. It just acquired the right to operate a 140-square-metre LED digital billboard on a boat sailing a circuitous route along the Bund in Shanghai. William Lee, deputy chief executive of Network CN, says his company has contracts to set up six LED billboards, 653 roadside LED panels and 122 traditional roadside light boxes in Beijing, Shanghai, Nanjing and Wuhan, in the next two years. However, Jason Brueschke, head of Citigroup's internet and media research for Asia, says the new advertising alternative still faces challenges. First of all, the capital requirement is substantial. Even though the cost of LED screen has been coming down, it still takes two to three million yuan to build a typical 150- to 200-square-metre LED billboard. The 6,000-square-metre billboard on Citibank Tower costs 50 million to 60 million yuan, Mr Gao estimates. Besides, rents have to be paid to the property owners to the tune of several million yuan a year for a typical 150- to 200-square-metre LED billboard, says Mr Zhang. Mr Gao estimates that the gross margin for LED billboards is only about 15 per cent, after two years of operation. Secondly, there are policy risks involved, which can significantly slow down a company's roll-out plan. 'Large LED billboards affect many parties. They need the approval of city planning authorities and other government departments. And this can take a long time,' said Mr Brueschke. Tulip has been developing well because of its charismatic founders, among them, Olympic medallist Zhuang Yong and ex-government official Wang Min. But even Tulip had problems getting its billboards approved once it tried to expand beyond Shanghai. 'It ran into problems in Beijing,' said one industry participant. Also, every large billboard has to be custom-made, which further increases the roll-out time, says Mr Brueschke. The smaller roadside panels, which are standardised, can be set up in a short time. But they still need government approval, which can also take a considerable amount of time, says Mr Brueschke. Tulip's Mr Zhang, however, thinks his company is growing fast enough: 'In all the major cities in China, there are only a total of 300 core business hubs busy enough to be worth setting up an LED billboard. We have already secured 28 of them - some being unique landmarks.'