Traditional advertising is still dominant in China - Focus Media announced last week that its 2006 full-year revenues grew 212 percent year- on-year to US$213 million (HK$1.66 billion), but the changes happening in the industry in China, and specifically major cities such as Shanghai, are tangible, with advertising on mobile phones leading the charge.

Several companies that operate out-of-home flat screen advertising networks are offering more interactivity to consumers than Focus Media is able to. Focus Media's ads are static - they run in a set cycle that is changed at most once a week by Focus Media employees that must manually update every screen.

However, the company Cgen Media, which runs ads on LCD and plasma displays in hypermarkets in China, links its screens up to a central server in each store, allowing Cgen to update content on the screens in real-time.

Subway flat screen advertising network operator Digital Media Group (DMG) syncs its screens through a wireless network. Because its screens are networked, DMG is able to display information such as train arrival times and weather forecasts.

In an effort to further engage its viewers, DMG has begun adding features that allow viewers to participate in original programming through their handset. One program asks users to vote for the best picture by sending short messages to DMG. The company plans to further enhance its interactive wireless services in the future.

Touch Media places touch-sensitive LCD screens in the headrests of Shanghai taxis, allowing users to navigate through advertisements on their own, with Touch all the while recording screen touches to show advertisers what consumers are interested in.

As its competitors move toward truly networked displays, Focus Media continues to stand by its strategy of manually updates screens, saying that consumers are not yet demanding the service, and, more importantly, that the company believes that the safest way to avoid regulatory issues is to stay keep its screens separate so that the company can not be accused of being involved in broadcasting, which is a heavily regulated industry.

While Focus Media's LCD screens generate the revenues and get all the attention, the company has recognized that the market may be changing.

Advertisers are now looking for ways to reach consumers through the device they spend the most time with: their mobile phone.

While Focus Media screens are conspicuously placed near elevator banks all over China, more and more people are spending less time looking at the ads on the screens, and more time engaged with their mobile phones or portable media devices. Focus Media acquired a mobile advertiser last year and generated US$3.5 million in wireless advertising services in the fourth quarter of 2006.

Many other companies are also piling into mobile marketing. Wireless value added services provider Kongzhong reported a seven percent drop in sequential earnings in the fourth quarter last week, but its wireless advertising revenues were up 75 percent quarter-on-quarter. Shanghai-based Madhouse, which operates a network for advertising on wireless application protocol (WAP) sites, served up over 100 million mobile ad impressions in the second half of 2006.

The problem with mobile advertising is that if not done correctly it can be as intrusive as online pop-up ads and telemarketing. Handset users in China are bombarded with unwanted short message ads, many for semi- pornographic content.

Most of Focus Media's wireless marketing services are mass SMS mailings "pushed" to handset users.

If done, right, however, mobile marketing can be very intriguing. Many companies are adding interactive wireless features to TV commercials and other traditional marketing campaigns.

Many of these campaigns direct users to WAP portals opened by the advertisers, giving companies a chance to directly interact with consumers.

Shanghai-based mobile marketing company Fugu Mobile is looking to combine mobile marketing with mobile gaming. Advertisers can "brand" Fugu Mobile games, and Fugu can update ads in games based on parameters such as a customer's location and time of day - different ads from different companies can be inserted into the game at different times.

With interest in mobile advertising growing, Beijing company CASEE Mobile Ad Network (casee.cn), set up by former Linktone and Sohu.com executives, has set up an online marketplace for mobile advertising. Advertisers can create their text ad on the site and find a WAP site to publish on. Publishers can also use the platform to find advertisers.

As the world's largest handset market with over 400 million users, advertisers will continue to look to new ways to reach their target audience, giving enterprising entrepreneurs incentive to continue developing innovative marketing solutions.

Elias Glenn is an editor at Shanghai-based consultancy, Pacific Epoch, which offers business intelligence on investment opportunities in China's emerging media, entertainment and technology industries.