Live streaming generated 1.3 billion in revenue in three months, but Momo is not a live streaming company

On March 7, Momo's fourth quarter 2016 financial report once again dominated the screen - although it is now the financial reporting season, Momo's financial report is still the most eye-catching among Chinese stocks: net revenue increased by 524% year-on-year to US$246.1 million, and net profit increased by 674% year-on-year to US$91.5 million.

Although the net profit in the third quarter did not increase by nearly 12 times year-on-year, the revenue growth rate of more than 5 times and the profit growth rate of nearly 7 times are still unmatched among Chinese stocks listed in the United States. You know, the business models and business models of Chinese companies listed in the US tend to be stable. It is not easy to achieve a triple-digit ( over 100% ) growth rate in both revenue and profit. Therefore, it is not an exaggeration to say that Momo's financial report is the most eye-catching financial report among Chinese companies listed in the US.

Tang Yan, co-founder, chairman and CEO of Momo, said in a conference call with analysts after the release of the financial report: "In 2016, our users have maintained a steady upward trend, with net quarterly increases of around 2 to 3 million. Based on our current retention rate and the trend of new and returning users, it is relatively safe to maintain this rate of net user growth. Of course, our team will have higher goals above this, hoping to accelerate the growth of MAU (monthly active users)."

Live streaming is still the main contributor to Momo

This is the eighth consecutive quarter that Momo has achieved profitability, but it only experienced rapid growth in 2016. Everyone knows the reason: Momo launched its live streaming business in the fourth quarter of 2015 - to be more precise, it upgraded the Momo live streaming business in the PGC model to the amateur live streaming in the UGC model. Thanks to Momo's unique user attributes and platform atmosphere, Momo Live became a huge success once it was launched, and users' willingness to consume and pay was higher than everyone expected. How much contribution has the live streaming business made to Momo’s revenue? Look at the picture below to see it clearly:

In the four quarters of last year, live streaming revenue accounted for 30.65%, 58.48%, 69.17% and 79.15% of Momo's overall revenue respectively, and has now become the de facto absolute source of income for Momo. It can be seen that Momo has become a company that is highly dependent on live streaming. Therefore, I think Momo is likely to give a generous reward to the live broadcast team just like Tencent rewarded the WeChat payment team.

Tang Yan said: "Although we have already achieved the position of market leader in live video streaming , there is still a big gap between this and consumers' awareness of Momo. Many users don't even know that they can watch live and short videos on Momo. We expect to increase our efforts in brand (awareness) from the second quarter of this year to increase users' awareness of Momo's live streaming and overall video business. At the same time, our investment in channels will also increase significantly compared with last year."

He revealed that this year Momo will continue to combine short videos with existing usage scenarios at the product level to promote video content and spread it through users' existing social relationship chains. It is divided into two aspects:

On the one hand, the technical level continues to promote the integration of video with various product modules and usage scenarios to activate existing social functions;

On the other hand, we will continue to strengthen content operations around video and live streaming, and broaden usage scenarios and user base by providing higher quality and more diverse content.

In the foreseeable future, at least in 2017, live streaming, this cash cow, will continue to play the role of Momo's "money printing machine".

A quarter ago, when I was interpreting Momo's third quarter financial report, I pointed out that Momo's live broadcast business could make more money if it did any one of the following three things:

1. Let more Momo users become live broadcast users, and increase the proportion to 20%;

2. Let more live broadcast users become paying users , increasing the proportion to 16.8%;

3. Get paying users to spend more money, from $40 to $50 or even more.

Momo achieved all three points in the fourth quarter: the number of paying live broadcast users increased from 2.9 million to 3.5 million, and the user's AR PU value in a single quarter upgraded from RMB 289.15 to RMB 383.96. The paying capacity of a single user is still increasing significantly, far exceeding YY's 49 yuan and Tiange Interactive's 97.3 yuan.

Tang Yan also gave specific data and explanations on the distribution of Momo's live broadcast business. He said:

Let me briefly introduce the specific distribution of revenue from various aspects of our live broadcast business. In the fourth quarter, due to the year-end events, the concentration of anchors and paying users increased, but after the events, the concentration fell back.

In terms of anchor concentration, we had a total of 540,000 anchors generating revenue in December last year, and this number was around 400,000 in September. Among the 540,000 anchors that generated revenue in December, the contribution of anchors with monthly turnover of more than 30,000 accounted for a slightly higher proportion of the total turnover than about 50% in September. However, after our year-end celebration, the concentration returned to normal levels.

In terms of the concentration of paying users, in December, the number of high-paying users with monthly turnover of more than 5,000 was more than 15,000, compared with less than 10,000 in September. The revenue contribution of this part of users accounted for a slight increase from 50% in September. And like the concentration of anchors, it also returned to normal levels after the year-end celebration.

Overall, due to the social attributes of our platform and the traffic distribution mechanism that is relatively biased towards potential anchors, we feel that if compared with other platforms, our revenue should be more inclined towards the long tail.

In December, there were more than 70,000 guild anchors on our platform. Their revenue contribution accounted for slightly less than 50% of the total revenue. Our guild concentration is relatively dispersed. Our largest guild accounted for only 3% of the revenue in December, and the top ten guilds together accounted for 16% of the total revenue.

Someone commented in my circle of friends , wondering if Momo live broadcasts were also fake? After all, inflating the number of viewers to create a black screen with viewers is an unspoken rule in the live streaming industry. However, the data released by Momo is not business data such as the number of viewers, but financial report data such as revenue, which cannot be inflated. I have also observed that many Momo live broadcasts only have a few hundred or even dozens of viewers, but the proportion of user tips is very high. This is because the audience wants to socialize with the female anchors, and their strong willingness to consume and pay for live broadcasts is completely understandable.

However, Momo is not a live streaming company

When live streaming has brought 80% of Momo’s revenue, can we consider Momo to be a live streaming platform ? The answer is no.

Tencent is the largest gaming company in China, with gaming revenue accounting for half of the total. However, we do not think of it as a gaming company first, but rather as a social company. Similarly, Momo is not a live streaming company. It is not a competitor of Yingke , YY or Tiange Interactive. It is more of a social platform, and a social platform with three major attributes: LBS, video and entertainment. Momo Live is successful because of its LBS+social attributes. Nowadays, every live streaming platform emphasizes socialization, but it is not easy for non-social platforms to become socialized. Even if they have social attributes, it is difficult to have LBS attributes. This is another key factor in the success of Momo Live.

For Momo, live streaming is only part of its video social strategy. In addition to bringing in real money, live streaming has a more far-reaching value for Momo:

1. Prevent users from “making an appointment and leaving”

If Momo is just a "stranger social" platform, it will face a problem: after users become familiar with it, they will return to WeChat and generally will not come back. The popular signature on Momo a few years ago was "I wish to win the heart of one person, let's uninstall Momo together", which shows the risk of user loss. Dating apps such as Huatian and Tantan have indeed encountered this problem. Momo initially hoped to attract and retain users through interest-based interactions, and launched features such as the Momo Bar. Now it has clarified its idea of ​​video social networking.

In 2015, it introduced live streaming, last year it introduced moments similar to SnapChat "Stories" and a group video feature, and this year it put moments on an equal footing with nearby people. Users no longer go to Momo for the purpose of dating, but instead can post videos that are not suitable for posting on WeChat Moments because there is no social pressure. Users may also watch live videos for entertainment, to kill time, and to relieve loneliness.

2. Increase user activity

If a female anchor that a user follows starts a live broadcast, he or she will receive a push message. In this way, the frequency of Momo users opening the app has been greatly increased, and user activity has also been improved. Momo CEO Tang Yan revealed that after four consecutive quarters of steady recovery, Momo's MAU surpassed its historical peak in early 2015. As of December 31, 2016, Momo had 81.1 million monthly active users.

3. Strive for user time

As I said in one of my previous articles, the key to the second half of mobile apps is to win over users’ time. The latest positioning that Tang Yan has set for Momo is “social media”, which is somewhat similar to Tencent’s strategy. Both companies value content because it is the only way to gain user time. "Immersive consumption" content such as live streaming and "fragmented consumption" content such as short videos are both magnets that attract users' attention. Users can consume content while socializing, and can open Momo to watch live broadcasts and short videos when they are bored. During the conference call, Tang Yan revealed that the average usage time of Momo's daily active users in the fourth quarter of 2016 increased by more than 10% year-on-year. Video social strategies are effective in attracting time.

4. Improve social efficiency

Momo's original intention was to connect strangers, so when it entered into many new businesses such as live streaming and short videos, it was all with the consideration of improving the efficiency of connecting with strangers. Tang Yan revealed in a conference call that the number of relationships reached on Momo's platform in the fourth quarter increased by 48% year-on-year, which is a terrifying growth. Tang Yan said that it was because of "optimizing the existing social experience and introducing new social scenarios and scenes", but in my opinion the core reason is that short videos and live broadcasts can avoid "photo fraud". At the same time, if users are willing to come to the live broadcast, it means that they are willing to socialize, so there will be reward interactions, which ultimately lead to the establishment of social relationships. In fact, the popularity of SnapChat after its launch and the fact that Instagram and other companies copied Stories all indicate that video and social networking can produce a chemical reaction. After the 4G mobile era, the proportion of video in mobile Internet is increasing.

It can be seen that while Momo was making a lot of money from live streaming, it also completed the transformation of the platform from a location-based social platform to a pan- entertainment video social platform, which can be regarded as a textbook case of the Internet.

In fact, more and more platforms, including e-commerce platforms and content platforms, are introducing live streaming functions in the hope of retaining users, activating users, attracting time and improving efficiency. Tmall hopes to use live streaming to improve sales efficiency, NetEase hopes to use live streaming to improve information dissemination efficiency, and YY hopes to use live streaming to improve education efficiency. Live streaming has become an indispensable infrastructure for the Internet.

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