The company issued a profit warning today. It is expected that net profit after tax for the full year of 2019 will not be more than 55 million yuan, mainly due to increased competition in the industry, a decrease in group revenue, and a sharp increase in R&D expenses due to the company's increased investment in technology and innovative products. Revenue increased by more than 10% and 20% year-on-year and month-on-month respectively in the second half of 2019. Innovative products are beginning to bear fruit, driving user and revenue growth, while the main business and cash flow remained steady. The company will continue to focus on the strategic layout direction of “interactive entertainment+social networking”, and continue to drive new development space along with the gradual maturity of the innovative product matrix.
The live streaming business has adapted to the traffic ecology, and the cash flow performance is strong. China's pure live streaming platform's revenue exceeded 60 billion in 2019, and the number of webcast users reached 433 million. Along with the diversification of live streaming content and formats, the market size continues to grow. The company's live streaming revenue in the first half of 2019 reached 1.4 billion yuan, accounting for 94.3% of the total revenue, and the cost of anchors was 900 million, falling to 86.2% of the total cost. On the basis of a highly integrated “video+audio” product form, the company has built a rich “anchor+fan+big R” user ecosystem, expanded its business reach to e-commerce and other segments, further promoting the diversification and evolution of business models. The live streaming business adapts to the ecological environment of downstream traffic, and the company's strong promotion ability and continuous expansion of the number of users are the moat of product competitiveness. Strong cash flow and continued investment confirm the strong monetization power of the company's interactive entertainment business model.
The matrix of innovative products is growing, focusing on Gen Z's online social networking. In the second half of 2019, the company purchased the Gen Z social networking app for $85 million. The latter targeted young people's social interests, with 80% of users after 95-00. Up to now, there are close to 1 million active people. According to the “2019 Stranger Social Industry Insights” report produced by MobTech, the daily retention rate of Reward has reached 71.2%. Cumulus has been testing the waters for commercialization since December 19. Currently, modules such as triggered payment functions and VIP upgrade privileges have been launched to explore new gameplay based on product characteristics. The highly educated chaotic cultural community helps Inke quickly build a closed loop of business. As Gen Z enters society and the ability to pay continues to improve, there is broad commercialization space in the field of social networking for strangers.
“Cloud Blind Date” has become a new dating site, accurately serving the dating needs of Gen Z. Driven by the pandemic and the Spring Festival holiday, Yingke's online dating app, DAU surged 300% during the Spring Festival, leading to more than 2 million online video blind dates. The total length of online blind dates was nearly one million hours. More than 200 million small-town youth are in strong demand for dating. The “cloud blind date” model combines advantages such as accuracy and efficiency, breaking the limitations of time and space, and intuitive video communication. It bid farewell to the traditional “one-on-one” or “one-to-many” blind date models, innovatively chose the “guest+matchmaker” format, upgraded the user experience, and strengthened user stickiness. Given that the platform's users cover young and middle-aged people with stable income, who are in need of a relationship, and there is a clear trend of further expansion to Gen Z users, I am optimistic about the profit prospects of this business in the long term.
Risk warning: The competitive landscape is intensifying; the scale of innovative products is small; the company's profitability falls short of expectations.