(Chinese Version)

On May 25th, Momo released its 2017 Q1 earnings report, disclosing that the company’s net revenue had jumped by 421 per cent year-on-year to $265.2 million, registering a net profit of $90.7 million, a 615 per cent growth year-on-year. Undoubtedly, Momo demonstrated the success of its transition to video social networking and live streaming. The other days, Sina Weibo, another company came to to the public arena via short videos and live streaming, also released its 2017 Q1 earnings report. It is worth noticing that although Sina Weibo has 340 million MAUs (more than Twitter, or four times that of Momo), it lags far behind Twitter and Momo in terms of both net revenue and net profit. Sina Weibo’s earnings report suggests that its net revenue and net profit reached merely $199.2 million and $46.9 million. Judging from APRU index, Momo’s earning potential four times higher than Sina Weibo.

How come? Why is it that Sina Weibo lags so far behind Momo in terms of user monetizing efficiency?

In fact, both Sina Weibo and Momo adopt a singular business model. While 85 per cent of Sina Weibo’s revenue comes from ads, 80 per cent of Momo’s revenue comes from user contribution in live streaming.

“Sina Weibo’s primary focus is to keep ahead among social media platforms, so revenue from user contribution in live streaming is of secondary importance. Were there any contradiction, we would rather give up the latter and simply be a good platform,” Wang Gaofei, CEO of Sina Weibo, explained.

According to Wang, although monetizing efficiency is pretty high via live streaming, it’s, after all, another product form. Sina Weibo prefers to become a giant platform than putting much effort in products such as live streaming and gaming, which often require high cash flow. If we look closer at Sina Weibo’s revenue structure, we may find that its revenue owes next to nothing to users’ contribution. Instead, its revenue mainly comes from ads advertised by online celebrities, we media, MCN and other products on the platform.

Different from Sina Weibo, Momo’s revenue owes much to users’ contribution. On average, Momo’s 4.1 million users contribute 350 yuan each. Looking ahead, Momo’s growth will be determined by the growth of its APRU and paid users. While the growth rate of its paid live streaming users registered 100 per cent and 34.6 per cent in 2016 Q3 and Q4, this figure has dropped to 17.1 per cent in 2017 Q1. Besides, its user growth rate has dropped to single-digit.

As the growth of paid users has slowed down, Momo has gradually added more operation activities to boost ARPU. “Besides the monthly activity ‘Haini TV Be Your Star’, we haven’t carried out other activities to boost ARPU,” Tang Yan, founder and CEO of Momo, revealed that During the conference call 2016 Q3 earnings report. Up till now, however, Momo has already launched several activities, including Best Host & Hostess Competition, Momo Singing Dream Competition, etc. to boost ARPU.

Compared with other live streaming platforms, LBS-based stranger social networking platform Momo’s traffic is distributed in a more scattered and localized manner. By 2016 Q3, Momo had accumulated 400,000 “long-tail” streamers who earned less than 1,000 yuan a month. While these streamers are willing to interact with users even without much user contribution, users prefer to interact with them since they could be greeted with higher attention. Oftentimes, they feel better contributing several yuan to less-known streamers than contributing a couple thousand yuan to popular streamers.

While popular streamers contribute much to Momo’s revenue, long-tail streamers help maintain Momo’s user retention rate. To monetize, they will have to find alternative methods. To a degree, popular professional streamers and long-tail streamers are competitors: the former are like dancers on the dancing floor, the latter are like one-to-one private chatting couples in the bar corner.

“No matter how much live streaming contributes to Sina Weibo’s revenue, there’s a huge mistake in its business strategy: it mistakenly invested in a live streaming platform instead of opening live streaming access and building ecosystem,” some investors argued, believing that the low contribution rate of live streaming business to Sina Weibo’s revenue has to with the flaw in its business strategy.

However, this is not the case. As a media platform highly aware of information circulation efficiency, Sina Weibo understands that show room streaming calls for immersion and does no good to information flow. That’s why Sina Weibo users have to click and to jump to the live streaming platform, while 15-second short videos will automatically play in mute as users swipe through the screen.

In Sina Weibo’s product portfolio, live streaming is part of its high-efficiency information circulation chain, from short video premier, live streaming premier to live streaming, post-production and traffic accumulation (take People’s Daily for an example); in Sina Weibo’s ads strategy, however, live streaming is only one type of video ads.

According to Lei Tao, co-founder of Yixia Technology, show room only tapped into the needs of a minority group of people. “In the future, 80 per cent of internet users will become live streaming users, while only 5 per cent will become show room users,” he predicted. The revenue model of mobile streaming will no longer be limited to user contribution and product recommendation. Instead, live streaming may be able to grab the ads revenue of video websites and mobile games, according to Lei.

“The problem is: advertisers’ awareness often lags far behind the trend. At present, live streaming is considered one of the marketing methods, but there isn’t any settled budget for it. Therefore, randomness prevails,” Lei explained. Besides, he believed the market boom would come in two years. As a matter of fact, Yi TV has already accounted for 50 per cent of mobile marketing activities at present.

While Weibo considers live streaming a part of its effort to integrate video social networking, Momo regards live streaming as a core part of its video social networking strategy. By emphasizing on “social networking”, Momo might have realized the limited user base and potential of show room streaming and intend to differentiate itself with China’s show room giant YY in front of investors.

In Momo’s pan-entertainment and pan-social networking product portfolio, live streaming has always been a “gateway”. For Momo, live streaming not only contributes to its earnings report in the short term, but also possesses prolonged value underneath. However, it takes the wisdom of Momo’s management board to strike a good balance between short-term revenue and long-term strategic development.

For Sina Weibo, however, the primary focus is to improve ARPU as user growth rate slows down and user satisfaction worsens. As a matter of fact, the most-liked comment under Sina Weibo Assistant’s relevant post reads: “through user experience has been worsened, thanks to various kinds of short video ads”.

Fundamentally, the gap between Sina Weibo and Momo in earning ability lies in the different paths they’ve chosen: whether to attach higher importance to short term profit or long-term strategic development? We have every confidence that we shall see the result of different choices within this year.

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The article is published with authorization from the author @Zhang Yuan, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.