Momo's new growth point and monetization rules

In the past ten years, Momo has still not been able to get rid of the suspicion of being a gray industry.

Recently, a netizen posted on a social platform saying that "Momo is suspected of marriage and dating fraud." The person involved said that he had given 2,900 yuan in rewards in the "Yue Lao Live Room" within an hour. After he refused to continue giving gifts, he was blocked by Yue Lao and the female guest.

In fact, such incidents are not uncommon on the Momo platform. In the so-called "blind date live room", turning on the microphone is one price, video is one price, and exchanging contact information is another price. One link after another, just waiting for users to join the circle. In the live blind dating business, which has a clear price tag, the initiative is always in the hands of the platform and the live broadcaster.

What is more worthy of attention is Momo’s new way of making money. Although Momo started out as a stranger social networking platform, its core profit point today is its live streaming business. The third-quarter 2021 financial report showed that live streaming services contributed 58% of the group's revenue. With live streaming as its core profit engine, the group achieved revenue of 3.76 billion in Q3 last year, of which Momo App contributed 600 million in net profit.

However, in recent years, Momo's live streaming business has gradually shown signs of fatigue. Just like "blind date live broadcast", this seemingly "sexy" business of live broadcast has never been able to get rid of moral controversy, coupled with the unreliable phenomena on the platform, which makes users gradually lose interest in "Momo". Moreover, facing competitive pressure from short videos, Momo's live broadcast revenue is still under pressure to grow revenue.

Under the increasingly stringent Internet regulatory environment, Momo must eventually get rid of the gray industry. But if Momo wants to find new business beyond the labels of stranger social networking and live streaming, where is its new growth point? How to make the capital market believe in your new story? Momo has not yet given an answer.

Momo has been around for ten years, but it is still a gray market

"I went on a blind date on Momo and was defrauded of 2,900 yuan in one hour! Then I was blocked by the female guest."

Recently, a netizen posted on a social platform that Momo was suspected of marriage and dating fraud. The netizen said that he entered a "matchmaker room" through Momo messages in December, and met the female guest after Matchmaker repeatedly invited him to a blind date. During this period, Yue Lao repeatedly asked him to give gifts to the female guests. At first, the gifts were worth dozens of yuan, and then gradually increased to hundreds of yuan and more than a thousand yuan. After giving out gifts worth 1,300 yuan, the matchmaker asked him to continue giving gifts, but the netizen refused. He was then blocked by the matchmaker and the female guest, and the gifts were not returned, totaling more than 2,900 yuan.

Momo responded quickly to this matter, and the official stated that the dating live broadcast room only provides a platform for users to break the social ice. The host’s personal promise of making successful friends and inducing the gift giving are violations, and the platform will resolutely crack down on and punish them. At present, the platform has permanently banned the relevant anchors.

In fact, such incidents are not isolated cases on Momo. When you type "Momo was scammed" on the web page, more than 13,000 related search results will be displayed. On the complaint platform, Momo also has tens of thousands of complaints.

A complainant who had the same experience as the above user said that after entering a dating room in the Momo app, which was similar to a blind date, the host would induce users to spend money and give gifts step by step.

Another user who claimed to have spent 4,281 yuan on gifts said that the hosts and guests kept asking for gifts to unlock various relationships, using the excuse of introducing partners. The guests also induced consumption and even publicly asked for gifts on WeChat. The host of the blind date did not tell the male guest in advance how much money was needed for a successful blind date, but repeatedly used various excuses to induce him to recharge. "If you don't even have a gift, then it means you are not sincere enough."

There are countless such cases in user complaints, and blind date live streaming has become another gray industry on the Momo platform after micro-business, gambling diversion, and wine-selling.

An Internet practitioner told Pencil Road that many matchmakers and female guests are in the same group. To put it bluntly, they are all working to earn money. They work two hours a day and get the profit in proportion. They also have KPIs every month. "In fact, these are all old models, all about reaping the money of the leeks. As for what role the platform plays in it, you have to experience it yourself."

An industry insider familiar with the market told Pencil Road that in Momo's live broadcast model, the official usually takes 50%, and the rest is shared by the anchor and OW (room/channel owner).

This means that in the relevant live broadcast chain, the anchor needs to induce users to spend money as much as possible. Therefore, in the so-called "blind date" live broadcast room, turning on the microphone is one price, the video is one price, and exchanging contact information is another price. One link after another, just waiting for users to join the circle. In the live blind dating business, which has a clear price tag, the initiative is always in the hands of the platform and the live broadcaster.

Stranger social networking relying on live streaming

Last month, media reported that Momo, which has been renamed "Zhiwen Group", officially launched its secondary listing plan on the Hong Kong stock market. In response to this news, Zhiwen Group said it "would not comment".

It is not yet known whether the rumor is true, but many people are not optimistic about the prospects of Momo's second listing.

On the one hand, Momo’s parent company’s performance in the U.S. stock market is not ideal. After June 2018, the share price of Momo, which is listed on the Nasdaq Stock Exchange, fell all the way from its highest point of US$48.766 until it fell below the issue price and hit bottom again. As of the date of publication, Momo's stock price was US$7.3 and its total market value was US$1.438 billion.

Regarding the stock price, Momo CEO Wang Li once explained in an interview with the media that "because we can't find a benchmark in the United States, we are actually at a great disadvantage." "I think our stock price is undervalued, but others may think it is overvalued."

On the other hand, Momo still has other problems to solve. Momo was launched in 2011, and it has been ten years since then. It is a long-established social app in China. However, the profitability of this "stranger social networking" giant has not been optimistic in the past two years.

According to Zhiwen Group's third-quarter 2021 financial report, its quarterly revenue and net profit both showed a downward trend, with revenue of 3.76 billion yuan, a year-on-year decrease of 0.2%; net profit of 400 million yuan, a year-on-year decrease of 11.7%. Among them, Momo App's net profit was 611.1 million yuan (about 94.8 million US dollars); Tantan's net loss was 179.0 million yuan (about 27.8 million US dollars).

Zhiwen Group's net profit is solely supported by the Momo App. Although Momo started out as a "stranger social networking" platform, this is not where its profits lie.

According to iMedia Consulting data, the scale of China's stranger social users has continued to rise since 2015, reaching 649 million in 2020, but the annual growth rate has gradually slowed down. It is estimated that the user scale of 700-800 million will be the ceiling of the stranger social industry. However, the shortcomings of stranger social networking are also quite obvious - the revenue channels of this track are currently unclear.

According to the financial report, Zhiwen Group's revenue comes from five sources, but the main sources of income are two: one is value-added services, including virtual gift service revenue and membership subscription service revenue; the other is live broadcast service (reward commission), and live broadcast is also the basic foundation of Zhiwen Group.

The financial report shows that in the third quarter of 2021, live broadcast services contributed 58% of the group's revenue, with revenue of 2.167 billion yuan, but a year-on-year decrease of 8.8%, continuing the negative growth trend of live broadcast since 2020.

Momo has experienced many ups and downs. From being not favored when it went public in 2014 to finding a profitable model in 2018 due to the live show trend, its market value soared to tens of billions of US dollars. But now Momo, which suffers from "live streaming addiction", has encountered a development bottleneck. According to the Sullivan report, the dividends of show live streaming have reached its peak. Since 2019, the market size of domestic show live streaming has begun to shrink.

Previously, Momo gained a cash cow business by entering the live streaming industry, thereby establishing a stable source of revenue. However, under the pressure of live streaming competition, Momo faces competition from super apps such as Douyin and Kuaishou, and has no obvious advantages compared to other app businesses. As Huatai Securities pointed out, Momo’s mainstay business today is live streaming, but “Momo’s live streaming business is still in the transition stage.” Faced with competitive pressure from short videos, Momo's live streaming revenue is still under pressure to grow revenue.

The more troublesome problem is that live streaming, a seemingly "sexy" business, has never been able to escape moral controversy. In addition, with the increasing number of unreliable phenomena on the platform, it faces more and more controversies. It also makes users gradually lose interest in Momo.

The third quarter financial report of 2021 also showed that the company's paying users had declined for four consecutive quarters. In the third quarter of 2020, its total number of paying users after deduplication reached 13.1 million, including 4.1 million Tantan paying users. By the third quarter of 2021, these two figures were 12.2 million and 2.9 million, respectively.

Some users are abandoning Momo.

Where is Momo’s new growth point?

Of course, Momo is also seeking change and has made many attempts in the past few years.

The first is the big acquisition. In early 2018, Momo chose to acquire Tantan. The deeper reason behind this is that at that time, Tantan complemented Momo in terms of user gender and age.

In the early days of Momo's acquisition of Tantan, it did bring good responses. However, Tantan’s positioning and product model are now converging with Momo, the ratio of male and female users is beginning to become unbalanced, and it lacks competitiveness in the face of products like Soul. It is also worth noting that the financial report shows that the number of paying users of Tantan, which has grown rapidly, is decreasing.

The second is the launch of a large number of new products. In 2019, Momo released dozens of pan-social and pan-entertainment apps, including ZAO, Heshi, Hertz, cue, Hani, Qiaoqiao, etc. It also launched "MEET" based on photos, and two platforms focusing on marriage and dating, "Dui Dui" and "Qian Shou Lian Ai". However, apart from ZAO which became popular overnight and was taken off the shelves a few days later, the rest of the products did not make much splash.

The second is to actively go overseas. In the past few years, Momo has developed at least four stranger social apps that have been launched overseas. In 2012, Momo, which had been online for a year, launched its overseas version "MO"; in 2014, Momo took the opportunity of its listing to launch "Blupe"; in 2019, Momo launched "Olaa" based on LBS (i.e. geographic location) for the Southeast Asian market. It is reported that last year, Momo launched the gaming social APP "Vago" and the soul social product "Soulchill" for the Middle East market.

But the development trajectory of most of these products is that the products are born and then fail.

In addition to the social track, Momo's main businesses currently include Momo Pictures and Coolbot Culture, covering film, television, music and other entertainment fields. However, in the view of many analysts, the entertainment and film and television industry itself has a small size, fierce competition, high risks, and is uncontrollable, and it is difficult to truly bring stable revenue to Momo. The pan-social and short video fields also have their own top players.

In addition, the name change also shows Momo's determination to get rid of the outside world's single impression of Momo. As Wang Li, the current CEO, said in an internal letter, "The company's new Chinese and English names express our good wishes for the integration of technology and culture in the future. Technology will drive culture, and culture will carry technology. They are mutually causal, and we rely on each other."

As for the specific direction, Wang Li also mentioned it in an interview with the media, "(Momo)'s original boundary was social networking. If I were to do it, I would find ways to expand the boundaries and not stick to social networking. I hope that the positioning of our company in the future will not only focus on pan-social networking and pan-entertainment, but focus on longer-term development and think about where the boundaries of the business are."

In short, even though Zhiwen Group has started reforms since the beginning of last year, there has not been much success so far.

"If Momo wants to break the label of stranger social networking and find new business, where is its new growth point? How to make the capital market believe in its new story?" An industry insider told Pencil Road that this is a problem that Momo urgently needs to solve. Before giving a convincing answer, everything is empty talk.

Author: Han Xiyan, Editor: Wu Jinna

Source: Pencil News (ID: pencilnews)