Focus Media's decision to buy Allyes appears to have been triggered by the latter's announcement of plans to hold an initial public offering of its shares on the Nasdaq market later this year.
Jason Jiang, chief executive at Focus Media, was already a shareholder in Allyes.
Focus Media specialises in video advertising on LCD display boards and large outdoor LED screens. The company's screens are positioned in thousands of elevators, supermarkets, shops and other businesses across China.
Following its own Nasdaq debut in mid 2005, Focus Media has used new capital to complement its existing expertise by absorbing an array of smaller advertising firms in areas such as mobile phone text advertising.
Allyes has developed a hardware and software platform for delivering online ads which it claims has an 80 per cent market share in China.
The platform is used by major Chinese web portals and other sites to organise and display on-site advertising. Allyes also operates a pay-per-click affiliate advertising network which executives say reaches more than 20,000 websites.
China's internet advertising market is estimated to generate revenues of close to $1bn.
"This acquisition extends our life-style media platform to one of the fastest growing media segment in China, the internet, reaching the high-end of urban consumers," said Jiang.
"The acquisition of Allyes enables Focus Media to quickly establish itself as one of the market leaders in this area while adding a new channel for us to reach Chinese urban consumers based on their lifestyle and consumer behaviour."
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