China economy

PapayaMobile pursues global growth strategy after raising US$40m in IPO

PUBLISHED : Tuesday, 24 May, 2016, 8:43pm
UPDATED : Tuesday, 14 June, 2016, 11:54am

Chinese online advertising service provider PapayaMobile is on track to close multiple acquisitions internationally with funds raised from its recent initial public offering.

With its trading debut Tuesday at the National Equity Exchange and Quotations(NEEQ) in Beijing, PapayaMobile is expecting to raise up to US$40 million of funding. NEEQ is a smaller stock exchange with simpler listing process compared with the two main Chinese exchanges in Shanghai and Shenzhen.

PapayaMobile is in discussion with a number of potential clients, as mainland companies seek out online agencies to help promote their brands internationally.

“[The IPO] will enable us to raise more funds to implement an aggressive international M&A [mergers and acquisitions] plan,” said Shen Si, co-founder and chief executive of the company. Shen said the company will acquire at least two local advertising technology companies in the US, Europe or India.

Research company eMarketer estimates mobile internet ad spending from mainland China will exceed US$22 billion this year, up more than 58 per cent than last year. The online advertising spending is expected to grow at 41 per cent and 29 per cent in 2017 and 2018 respectively.

The company’s growth is also fueled by Chinese mobile apps developers that are entering international markets, said Wen Chaohui, an analyst from GuangZheng Hang Seng Securities, a joint venture between Guangzhou Securities and Hang Seng Securities, a subsidiary of Hang Seng Bank.

“The domestic competition is too fierce and there is not much market space to expand at home. Meanwhile, emerging countries’ app industries are still underdeveloped,” he added.

Shen believes Chinese companies’ aggressive approach to promotion—intense advertisement and heavy promotional spending in a short amount of time—can help raise the profile of Chinese companies and provide PapayaMobile with business opportunities.

Founded as a mobile game developer in 2008, the Beijing-based company later discovered the need of Chinese companies to promote internationally and transformed itself into an advertising company. Its main product, Papaya DSP or demand side platform, helps advertisers target a global audience through an automated programme.

Online advertising nowadays is highly complex and automated, with advertisements allocated on the basis of demographics, platform and location. And instead of buying advertisements one by one, advertisers rely on management tools such as the Papaya DSP.

“We are good at locating an advertising audience and that’s not only valuable to Chinese companies but also to foreign ones,”

Shen said. She wants to expand the company’s client base by international expansion instead of organic growth.

“Through acquisitions, we aim to gain an existing client base, advanced technology or advertising audience,” Shen said.

Papaya faces competition from both large and small players. It ranked as the eighth-bestnon-gaming advertising source globally on the Android platform by analytics firm AppsFlyer this January after Facebook, Google and leading Chinese advertising company Mobvista. It did not make it to the top-30 iOS ranking.

Listed at NEEQ in November, Mobvista is currently valued at close to 6 billion yuan(HK$7.1 billion) and took the third place in the Android non-gaming ranking.