Momo’s paying users have surged. What’s the operational growth logic behind it?

When it comes to Momo, many people still think of it as a hookup tool from two or three years ago. It has to be said that the only two companies that can truly compete with Tencent in the social field are Weibo and Momo. Coincidentally, both companies have bucked the market trend amid the bleak environment for Chinese stocks, and both show signs of a second spring. Weibo has entered the billion-dollar club, and Momo is following closely behind. According to official data released in the most recent quarterly financial report, net revenue was US$157 million, a year-on-year increase of 319%.

It is particularly worth mentioning that behind the surge in revenue is the astonishing growth rate of Momo’s user payments. The revenue from live streaming business based on individual user payments reached US$108.6 million, accounting for 70%, with a growth rate of 87%. Compared with many high-profile live streaming applications in the industry, it is making a fortune in silence. Let’s study together the operational growth logic behind the surge in Momo’s paying users.

1. In the second half of the mobile Internet era, companies that fail to realize revenue will eventually die.

In the capital winter, more and more investors pay special attention to whether the projects have actual profitability when selecting projects. The past model of burning investors ' money to maintain growth has caused big bubbles in many fields. When the bubble burst, a large number of unprofitable companies gradually disappeared. Recently, some industry leaders have said that as the mobile Internet enters the second half, they take it for granted that it is natural to acquire users in the initial stage and then monetize them at a certain stage. This view is seen as using tactical diligence to cover up strategic laziness. Revenue monetization is something a company should consider from the very beginning.

The year 2016 is known as the first year of live streaming. Just like the group buying war and O2O war of that year, a large number of platforms have emerged in the live streaming field. There are not enough internet celebrities and users, and many platforms use the method of brushing water to maintain the good-looking data. Now that the tide has receded, as is the case with business rules in all fields, only a few leading platforms will survive, such as Momo, Inke , Yizhibo, etc.

Momo's amazing performance in the live streaming field has surprised many people. After all, this is not a pure live streaming application. It is first and foremost a platform for stranger social interaction. After the rise of live streaming, Momo seized this opportunity very sensitively and deeply integrated it with its main business, resulting in a substantial increase in both user data and revenue data.

2. How does Momo achieve commercialization?

As early as 2013, after the release of Momo version 4.0, it gradually became commercialized and began to make profits. The bulk of its revenue came from membership, accounting for 67.1%, followed by games , accounting for 26.3%.

1. What supports Momo’s rapid commercialization?

There are many social products, but the ones with better profitability are the well-known leading products. Social products are very different from tool products and content products. To support the commercialization of a social product, the following four aspects are indispensable:

• User scale

Developing social products is actually a snowball process. Buffett said that if you want to make the snowball bigger, the most important thing is to find wet snow and a long hillside. Wet snow is actually the product tone, which is what kind of product features and community atmosphere are used to attract users, and the long slope is how big the target population is.

Momo has achieved absolute leadership in the field of stranger social networking. From localized social networking to interest-based social networking, Momo is constantly exploring ways to better connect strangers and establish social relationship chains. The transition from localized social networking to interest-based social networking has actually expanded the scope of the target population several times, which is like finding a longer slope.

According to official data as of Q3 2016, Momo has approximately 80 million monthly active users, which would put it in the top 20 on the domestic app rankings. Considering that most of the top products on the list are tool-type products, and the single-user AR PU value of social products is much higher than that of tool-type products, so if we only count social products, the only ones that rank ahead of Momo in terms of user scale are WeChat , QQ and Weibo.

• User usage time

Competition in the mobile Internet era is essentially a competition for users’ time and attention, so the length of time users use the app is very important. Social products have a natural advantage in this regard.

In terms of product form, Momo has launched a series of functions such as group chat, live broadcast, moments, circles, including the recently released group video, to help users with different needs find a sense of belonging on this product.

• User attributes

Momo's user base is generally young, with some money and more free time. After training, they have developed relatively good consumption habits and capabilities. This is the user profile of Momo. These characteristics make Momo a great help in the commercialization process, especially when it comes to forward charging business.

Charging users in advance is actually a very large market. Many people are now talking about a term called "consumption upgrade". In the past, we have always been promoting the theory of the Diaosi economy, so we worked hard to increase the number of users first and then monetize through advertising. Now the market environment is somewhat different. Users' payment habits are gradually cultivated, and mobile payments have become convenient. As long as the product can provide valuable content, services, and value-added projects, users are willing to pay for value.

• Usage scenarios

I just mentioned that users are willing to pay for valuable products, but ultimately it depends on specific scenarios. Users’ willingness to pay does not mean that they are fools. Only in reasonable usage scenarios will users be willing to pay. For social products like Momo, from a human perspective, users hope to be able to come into contact with higher-quality matches and to make themselves more attractive during the social process. This is the specific usage scenario, so users will spend money to buy memberships and paid emoticon packs. For live broadcast products, internet celebrities broadcast live and the spectators give tips, which is also a payment scenario.

2. Momo is always exploring the commercialization method that best matches the product attributes

For most products, when mentioning commercialization, people will think of advertising. This is the most primitive form of commercialization. After accumulating a large number of users, advertisements are implanted into the product to generate revenue. However, the biggest problem with the monetization model based mainly on advertising is that it easily arouses user disgust, leading to an imbalance between user growth and commercial monetization. The crude advertising monetization model is most likely to cause the loss of old users.

For a social product, Momo's several commercialization directions are consistent with its main social direction, including membership, games, live broadcasts, paid emoticons, as well as information flow advertising and LBS-based mobile marketing .

Members are naturally appendages of social products. Whether it is QQ, Tieba or Momo, they are all using members to create identity level differences in the community. For Momo, matching users by membership level can more effectively facilitate the establishment of stranger social relationship chains and reduce some spam in the community. While allowing users to have fun, it can also bring in revenue growth.

Games, this route imitates WeChat. Relying on the game distribution capabilities and social relationship advantages of the WeChat platform, Tencent Games has become the biggest winner in the game industry and made a lot of money. Momo is similar to WeChat in this respect, with 80 million monthly active users and the same social relationship chain. Momo did not hesitate to follow up and implement the commercial model that has been proven feasible by its peers.

Live streaming is the biggest highlight in the financial report. Its revenue even exceeds that of the membership business and gaming business, which have been in operation for two years. The strong combination of stranger social networking and live streaming has led to a surge in user activity and revenue. From a product perspective, Momo puts "live streaming" at the first-level entrance, which shows how much importance it attaches to it. Momo's users are generally young and have accumulated payment habits from previous membership and game projects. Coupled with the accumulation of long-term social relationships, although they started late, they are the fastest among their peers.

Paid emoticons are also a project imitating WeChat. Emoji packages have now become a must-have tool for people to communicate, especially in scenes with strangers. When adding new friends to break the ice, emoticon packages are the most popular among users.

The above commercial scenarios are all rooted in social interaction itself, and cover or extend around the social needs of users. This commercial approach is the least likely to cause user disgust and may even increase user stickiness.

Information flow advertising and mobile marketing are commercial scenarios for the B-side, especially LBS-based mobile marketing. When combined with the previously popular O2O services, it can have a better conversion effect, which is an advantage that other platforms do not have.

3. How did Momo’s live streaming business start late but grow rapidly?

From the data released in Momo’s 2016Q3 financial report, we can see that the revenue from the live broadcast business has accounted for 70% of the total revenue. Basically, live broadcast now supports most of Momo’s business. Momo first started its live streaming business in September 2015, called "Momo Live", and approached the business from the perspective of interactive music live streaming. However, it was a PGC model with a high threshold. Ordinary users could not publish live broadcasts and could only watch them. The UGC model was only opened later. In April 2016, Momo opened a first-level entrance for live streaming in the bottom menu bar Tab, and added a "Nearby Live Streaming" entrance based on LBS, which can be regarded as the greatest strategic attention given to the live streaming business.

Live streaming is a business with strong operations. As one of the leading products in the live streaming field, we can learn what it has done in terms of operations to achieve today's high growth. The main aspects are as follows:

1. Low user acquisition cost

Compared with professional live streaming products such as Yingke and Xiandanjia, Momo and Yizhibo have a huge user cost advantage. Momo itself has 80 million monthly active users, and Yizhibo is backed by Sina Weibo , which solves the traffic problem that is currently the biggest headache for many mobile Internet companies. This should be Momo's biggest advantage to catch up.

The live broadcast business involves the acquisition of two types of users: one is the internet celebrities who broadcast live, and the other is ordinary users, which also includes viewing users and anchors.

Live streaming influencers are now a scarce resource that all major live streaming platforms are competing for. An influencer with a large number of fans and influence and appeal can attract a large number of fans to follow them to a new platform. The competition for influencers is actually a competition for users. When Momo first started its live streaming business, it started with interactive music live streaming and has collaborated with some companies in the entertainment industry, so it has certain advantages in resources in this area. In addition, among Momo's existing users, users with the potential to become internet celebrities can be identified and promoted. These internet celebrities who have made their fortune on the Momo platform will have higher loyalty, which will be more conducive to the long-term and stable development of the platform.

Ordinary users are another advantageous battlefield for Momo. Regardless of whether they are viewing users or ordinary anchors, with the opening of the first-level "live broadcast" entrance in the APP, a large number of Momo's original user base will surely migrate to the live broadcast business. The target audience of live streaming is highly consistent with Momo’s original target audience, and the migration cost is very low. There is no need to download a new APP or register a new account, and the existing social relationships and accumulated fans can still be brought over. All user behaviors have costs. The higher the user cost, the greater the loss in the process, and the higher the cost the enterprise has to pay.

In terms of incentives for anchors, Momo gives relatively high rewards to top anchors. According to Momo CEO Tang Yan, in September 2016, the top anchors whose monthly live broadcast turnover on the Momo platform exceeded 30,000 yuan accounted for more than 40% of the entire platform's monthly turnover. These users are called professional anchors and are at the top of the pyramid of the user group. Reaching this turnover amount means that users can make money through the Momo platform at home without having to work full-time. The long-tail anchors at the bottom of the pyramid, which are the majority of ordinary users, use the services for social entertainment and to kill time. There are 400,000 ordinary anchors whose monthly turnover is less than 1,000 yuan.

From the perspective of the overall health of the platform, Momo is currently leaning towards cultivating its own team of anchors. After all, Internet celebrities recruited from outside also have the risk of leaving when faced with more temptations. In terms of operational resource allocation, traffic is allocated to potential anchors in the middle of the pyramid. Through official guidance and user self-selection, users who can reach the top of the pyramid will become Internet celebrities cultivated by Momo themselves.

2. Social media and live streaming promote overall user activity and retention

In fact, live streaming is essentially a form of social interaction. The social interaction in the subtitle here refers to Momo’s original social module. Social interaction consists of three parts: social relationship chain, social content carrier, and social scene. The social relationship chain is easy to understand. When users establish connections and interact with each other, this becomes a social relationship chain. Social content carriers refer to specific forms such as text, pictures, voice, emoticons, videos, and live broadcasts. These things are aggregated together to become the medium for interaction between users. The social scene is the place where users establish social relationships. Discovering people nearby, group chatting, and live streaming are all scenes.

Live streaming runs through the three parts of social interaction. This form is both a carrier of social content and an interactive scenario. Compared with text and pictures, live streaming even provides a richer and more intuitive social experience than video. Its real-time nature also increases the matching and establishment of social relationship chains, and the user usage time also increases.

On the one hand, live streaming has become a part of user social interaction on Momo. There is the possibility of forming relationship chains between anchors and viewers, and between viewers. Currently, the conversion rate of the platform's DAU to live streaming users has reached 20%. As long as conversion is continuously promoted, this ratio can be even higher. On the other hand, the existing social relationship chain makes it easier for the anchor to attract his own loyal fans when opening a live broadcast room. This gives the anchor greater motivation. In addition to sharing the reward income, there is also a sense of spiritual satisfaction. The two modules of social networking and live streaming promote each other's conversion rate, drive the user activity of Momo as a whole, and are even expected to increase the user scale of Momo to a higher level.

It is observed that a tacit understanding is formed between many anchors and their fans, that is, loyal fans have to come to support them on time. This is the same as chasing stars. As long as the anchor is still on this platform, users will always have a concern here. When the anchor starts the live broadcast, users will receive a prompt to open and watch. Unless they lose interest in all anchors, users will not uninstall easily. This is very different from the repeated installation and uninstallation of Momo users before, which invisibly improves the user retention rate .

3. Users’ payment habits can be cultivated, but you need to have a scenario

Momo's paying users in Q3 reached 2.6 million, compared to 1.3 million in Q2. The main reason behind the doubling of performance in one quarter is the rapid development of its live broadcast business.

• Strong operation and entertainment

Momo's users are young and have good purchasing power. Membership, games, emoticons, etc. have long been used to cultivate payment habits among users. Many social relationship chains have been accumulated in five years, which have laid the foundation for users to pay.

The entertainment-based payment scenario is exactly what Momo has focused on every time it has made a product revision in the past one or two years. After the enhancement of video and entertainment attributes, the social content carrier has various new possibilities for users to use. At the same time, Momo's operation team also planned some themed activities, such as the "Mid-Autumn Beauty Recruitment Order", and the trend of operation driving the development of the entire product is very obvious. It is no longer purely product-driven. This is the idea that social products must change after they reach maturity.

• Continuously increasing ARPU value

Many operations personnel may not have considered the ARPU (Average Revenue Per User) indicator. Regardless of whether you are doing forward charging business or backward charging business, no matter how you attract new users, retain users, and promote activation, what ultimately determines the quality of a user is actually the ARPU value. There are two factors that increase revenue: one is the user scale, and the other is the ARPU value.

When Momo went public, its ARPU value was $0.2/MAU. By Q2 2016, its ARPU value had reached $1.32/MAU, a seven-fold increase in just two years. Behind this is the fact that Momo's operations are constantly creating payment scenarios that meet user needs, attracting users to try the paid experience, thereby driving up the payment habits and payment amounts of the entire user group.

The monthly payment for ordinary members of Momo is 12 yuan, which is a fixed payment standard. However, it is different for live streaming. If the operation is good, the user's single payment amount will have a lot of room for growth. The turnover actually depends on wealthy users. Last month, high-net-worth paying users on the Momo platform who paid more than 5,000 yuan accounted for half of the total turnover. This is why Momo, as a latecomer, has grown so fast. Having a large number of high-net-worth users is also the driving force behind the surge in revenue.

Summary: The live streaming industry is expected to enter a multi-oligopoly market in the future, with only four or five platforms able to survive and develop stably. Momo will definitely be one of them. I believe that more intense competition in the live streaming field in the future will be concentrated on Momo and Yizhibo. I look forward to Momo's better performance.

Mobile application product promotion service: APP promotion service Qinggua Media advertising

This article was compiled and published by the author @白崎由 (Qinggua Media). Please indicate the author information and source when reprinting!