Momo sees net revenues jump by 51 pct for 2018 Q3, but still faces headwinds

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Dec. 7 (NBD) – Net revenues for the third quarter in 2018 of Momo Inc., a mobile social networking platform in China, stood at 536 million U.S. dollars, a year-over-year increase of 51 percent, according to the unaudited financial results announced on Thursday. 

The financial report also showed net income attributable to Momo reached 85.2 million U.S. dollars for the third quarter of 2018, up by 7.71 percent year on year.

The Chinese social networking company has been gaining profits for consecutive 15 quarters.

According to the report, the net revenues primarily come from live video services and value added services.

Revenues from live video services for the third quarter of 2018 grew by 34 percent to 406.9 million U.S. dollars from the same period of 2017. But its contribution to Momo's revenues for the third quarter dropped to 75.9 percent from 83.1 percent for the second quarter.

Compared with the slowdown of the live video business, Momo's value added services gained a strong momentum.

The report indicted revenues from the value added services for the third quarter of 2018 rocketed up by 221 percent year on year. 

The whopping increase was primarily attributable to the continuous growth of the virtual gift business on the Momo application and to a less extent, the consolidation of revenue from membership subscription of another social networking application Tantan which was acquired by Momo in February this year.

It is worth noting that Momo put more investment in marketing and promotion in the third quarter, for example, it sponsored a popular music show. The move is believed to be conducive to the rise in the number of monthly active users for the third quarter of 2018.

When asking about the influence of other live streaming platforms like Douyin on Momo, Tang Yan, CEO and chairman of Momo, said the company provides social networking-centered live video services, hence no competition between Momo and other livestreaming platforms in terms of user base. 

In fact, Momo is not challenged by other live video services providers but by the live streaming industry itself, he added.

In response to how Momo will brave the pressure brought by the slowing-down growth of live video services and profit sharing between top-level live streamers and their companies, Tang Yan noted Momo will adjust its corporate system in the future to stimulate the consumption. 

Tang also expressed the company's confidence in making Tantan a new growth pole next year and disclosed that Momo plans to shrink the budgets for marketing with low return on assets in a short period of time next year so as to enhance the profit margin.

Despite the net revenue growth, Momo still sees headwinds which may affect its growth for the next quarter. Before the report was released, sources claimed that the company's user information was sold at a low price on the dark web, an allegation which Momo later denied. Besides, investment consultancy firm J Capital listed Momo as a target of short selling.

Moreover, investors may also worry about if marketing cost will cause a dip of the profits.

 

Email: wenqiao@nbd.com.cn