A Kuaishou application interface on a mobile phone, Yichang, Hubei Province, China, January 20, 2021. Kuaishou is preparing for an initial public offering (IPO) in Hong Kong.
Costfoto | Barcroft Media | Getty Images
GUANGZHOU, China – Shares of Chinese short video app company Kuaishou began trading on Friday in Hong Kong, marking the start of its life as a publicly traded company.
Kuaishou shares soared close to 200% to open at $ 338 from Hong Kong. The company listed its shares at $ 115 Hong Kong, which was at the top of its range. The initial public offering (IPO) raised $ 41.228 billion from Hong Kong ($ 5.32 billion).
It marks another victory for the Hong Kong stock exchange, which has managed to attract a number of high-profile Chinese technology quotes.
But what is Kuaishou and how does he make money? CNBC goes through the company’s business model.
What does Kuaishou do?
The company was founded in 2011 and started as a mobile application called GIF Kuaishou, which allows users to create animated images called GIF (graphic exchange format).
The short video and social media platform was launched in 2013 followed by live streaming in 2016.
Kuaishou apps now have 769 million monthly active users.
It is also beginning to push into other areas such as e-commerce.
How does Kuaishou make money?
Kuaishou earned revenue of 40.68 million yuan ($ 6.2 billion) in the nine months ended September 30, 2020, a year-on-year increase of 49%.
However, the company fell in losses in this period, reporting an adjusted net loss of 7.244 billion yuan as marketing expenses increased.
Kuaishou said it had 262.4 million active daily users for its application during the first nine months of 2020, compared to 165.2 million in the same period in 2019. Its monthly paying users exceeded 59.5 million to 48.5 million in this period.
The company gets money from its users in various ways.
1. Live broadcast: The main revenue factor is your live streaming business. This means that users buy virtual items from Kuaishou to give away to their favorite streamers. Revenue from live broadcasts generated 25.31 million yuan of revenue during the first nine months of 2020, accounting for about 62% of total sales.
2. Ads and online marketing: Kuaishou also makes money from online marketing or advertising services that contributed 13.34 million yuan during the nine months ended Sept. 30, a year-over-year increase of more than 200%. This accounted for about 32% of total revenue.
3. E-commerce and games: The Chinese technology firm has also begun venturing into e-commerce and mobile games. Users can purchase streaming items online using the Kuaishou app. Kuaishou said transactions worth 204.06 million yuan were facilitated through its implementation during the first nine months of 2020, an increase of more than 1,100%. Not all of this will translate directly into revenue for Kuaishou.
Risks for Kuaishou
Kuaishou’s IPO comes at a time when Chinese authorities are stepping up their review of the technology sector. The Chinese State Administration for Market Regulation last year released drafts of antitrust rules for digital platforms.
In November, the Chinese government also introduced rules on live shopping that include limits on user spending and restrictions on the purchase of items by minors.
The markets in which we operate are highly competitive and we have significant competition …
“Because the Internet business is highly regulated in China, intensified government regulation of the short video, live broadcasting and e-commerce industries in China could also restrict our ability to maintain or increase our business base. users or user traffic to our platform, which will materially and negatively affect our business operations and our financial results, ”Kuaishou warned in its IPO.
The company is also a competitor to Douyin, the Chinese version of the TikTok short video sharing app, run by Internet giant ByteDance. Douyin has 600 million daily active users compared to Kuaishou’s 262.4 million users.
Tencent, a major investor in Kuaishou, has also launched its own short video feature in its WeChat messaging app. Competition also increases.
“The markets in which we operate are highly competitive and we face significant competition from Internet companies operating content-based social platforms, online marketing companies and e-commerce platforms in China,” Kuaishou said.
“If we do not compete effectively, our business, our financial situation, results of operations and prospects may be materially and negatively affected.”