Social media

Live-streaming video helped this Chinese hook-up app surpass US$10 billion in market value

Nasdaq-listed Momo, whose net income rose 60 per cent to a record US$129.9 million in the March quarter, now has a higher market capitalisation than Sina Corp

PUBLISHED : Wednesday, 13 June, 2018, 8:03am
UPDATED : Tuesday, 03 July, 2018, 6:01pm

Momo, operator of a Chinese hook-up app turned live-streaming video platform with the same name, has breached the US$10 billion mark in terms of value, another beneficiary of the so-called Social+ business model of combining social networking in the world’s largest internet market.

The Nasdaq-traded company, whose net income rose 60 per cent to a record US$129.9 million in the March quarter, has seen its share price increase almost fourfold since its initial public offering in December 2014, when its shares sold at US$13.50 each.

That pushed up Momo’s market capitalisation to US$10.8 billion as of June 11, lifting it higher than the US$6.7 billion commanded by microblog operator Sina Corp and video-based social network YY’s US$7.1 billion. American live-streaming app provider Snapchat, by comparison, had a market value of US$16.6 billion.

“While other live-streaming platforms focus on the content of videos, Momo’s users are more interested in the people who provided the content, with the goal of establishing a connection and befriending them,” said a statement released by the company on Tuesday.

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It said further growth in the sector is expected, driven by strengthening partnerships with talent agencies who will bring in more professional broadcasters and offer diverse, quality content on the platform.

Launched in 2011, Momo started as a hook-up app for young Chinese people. The company entered China’s live-streaming market in November 2015 after spotting the shift to video as a new medium for young people to interact and share content.

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Momo’s live-streaming function was introduced to bolster the app’s core social networking function, which sets its apart from other live streaming platforms, according to the company.

In Momo’s “open” social network, which allows direct interaction without the need for a friend request, users can directly send private messages to video broadcasters and get connected.

The firm’s live-streaming video business generated revenue of US$371 million in the three months ended March, making up more than 85 per cent of its total quarterly revenue. That was up from 80 per cent share in the same period last year.

That strong performance reflected the growth momentum from the company’s live-streaming video business, which was driven by its strong content ecosystem, according to Momo chairman and chief executive Tang Yan at a conference call with analysts on May 29.

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“The focus for the management team at this point is still to drive the organic growth in user base and business,” he said. “But of course, in the general area of social and entertainment space, if there are good target companies that can help us expand along the industry value chain or help us to diversify our product lines or brand portfolios, we’re going to consider to go through M&A opportunities.”

Tang and Li Yong, who had both served as editors at Chinese internet services and video games company NetEase, co-founded Momo in 2011.

With 103 million monthly active users, Momo envisages ample room for further growth in its user base of at least 200 million, according to a report on Monday by Jefferies equity analyst Karen Chan.

The country’s penchant for social media and social networking has led to a new type of business model that is referred to as Social+, where different industries such as education, news and e-commerce are anchored by a social pillar that drives user engagement and growth.

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For companies like Momo that have successfully navigated Social+, a model unique to China, victory comes in the form of millions of active users amassed in a relatively short amount of time. Social+ apps are often recognised for their user stickiness, incorporating social elements that incentivise users to come back day after day.

The Social+ model typically happens in one of two ways: Chinese companies either leverage a user’s current social network to grow its user base, or they start a small community of their own, attracting users to be a part of it and contribute.

Live streaming video has enabled Momo to make social networking more diverse in the app. In the past few years, Momo has introduced karaoke, audio chat room, short video and a collection of interactive social games, including popular party game Werewolf, to its users.

At peak times each day, more than 100 platforms are live-streaming across China. Credit Suisse estimates the country’s live-streaming video market last year was worth US$5 billion, putting it just behind the total movie box office of US$5.8 billion in 2016, as more young Chinese enjoy the convenient way of consuming smartphone entertainment without stepping out of their homes.

A recent Deloitte report forecast the Chinese live-streaming market to have viewer numbers topping 456 million this year.

Tantan, the rival Tinder-like online dating app acquired by Momo last month, is expected to be the company’s new growth engine, according to Momo.

“We currently estimate US$42 million contribution from Tantan in the second half of this year,” Jefferies analyst Chan said in her report. That is based on Tantan’s launch of a premium feature, similar to Tinder Gold, in the next six months of this year.

Momo, however, is expected to ramp-up sales marketing spending for the rest of the year given the branding campaign in online variety shows and consolidation of Tantan.