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As the number of people turning to social networking apps for entertainment increases worldwide, industry first-movers such as China's Newborn Town Inc. [9911.HK] and Dallas-based Match Group (NASDAQ: MTCH) look towards an optimistic future of sustained growth.
Newborn Town, China's top social networking enterprise focusing on global markets, recently announced for the six months ended June 30 2021, they recorded revenue growth of nearly 6 folds YoY to RMB 1.04 billion, while net profit growth of nearly 40 folds YoY to RMB 0.14 billion. Across the Pacific, US-based Match Group grew revenue 27% YoY.
While some analysts might be skeptical about whether the industry can sustain such figures over the long term, global market trends indicate that the recent solid performance of social networking companies is just a taste of things to come.
“Up to now, we’ve only seen the first stage of growth for social networking apps, as tremendous as it’s been,” said Li Ping, CEO of Newborn Town.
“Advances in mobile technology like 5G and AI, as well as the swelling number of mobile users in developing countries, will continue to push the industry forward very quickly in terms of revenue and new products.”
Founded in 2009, Newborn Town has a portfolio of household names in emerging markets like the Middle East, Southeast Asia and South Asia. For example, MICO, a video-chatting and live-streaming app with over 100 million downloads worldwide; YoHo, which focuses on audio and is one of the Top 2 most popular apps in its category in the Middle East.
The company has recently seen rapid expansion in developed markets like Europe, North America, Japan, and South Korea, where the user value continues to grow.
The firm has also managed to leverage its considerable accumulation of data and extensive localization operations—it has operation centers in more than 10 countries worldwide to propel new offerings up the charts.
For example, as one of the major internet companies in Egypt, Newborn Town receives support from the local government which is willing to embrace the advanced internet concept and technologies to the country. MICO for a long time has topped the list of social apps in the country. It is no exaggeration to say that MICO is the most popular social platform in Egypt.
High Expectations for the Match Group Model
Newborn Town and other China-based social media companies hope to use their unique advantages to replicate the success of Tinder-owner Match Group, perhaps the best-known social media company in the mobile industry.
Despite its competitiveness, the vertical has enormous room for growth. Match still managed to post Q2 revenue growth of 27% YoY despite having complete market penetration and awareness.
Among the most promising figures across the board is rising user monetization. While many social and dating apps struggled for profitability in the past, this year saw the number of paying users grow 15% YoY, with the average revenue per payer increasing from $14.01 to $15.46 per month.
An Innovation to Drive Sustainable Growth
With nearly complete market awareness and saturation, how does Match Group expect to drive growth in the future?
The reality is, swiping has lost its novelty among a generation of mobile users who treat it as the default in making connections with strangers online. For dating apps, an exclusively text-based interface often leads to ghosting and soon becomes a stale experience.
Therefore, to drive further growth and innovation, Match Group made a $1.7 billion bet on video and audio last month with its acquisition of Hyperconnect.
South Korea-based Hyperconnect operates two leading social discovery apps, Azar and Hakuna Live. Like Newborn Town, the firm focuses on connecting users through 1:1 live video and voice chat—a capability Match is eager to harness for future sustainable growth.
"One of the holy grails for us in online dating has always been to bridge the disconnect that happens between people chatting online and then meeting someone in person," said Match CEO Shar Dubey in an interview with Techcrunch.
"These technologies will eventually allow us to build experiences that will help people determine if they have that much elusive chemistry or not."
From Niche Feature to Mainstream
Creating connections that feel natural will be the critical factor for differentiating apps in a world already saturated by online dating and entertainment offerings.
For younger mobile users—who spend much online time on TikTok watching short videos—the fast-paced video features of apps developed by Newborn Town and (previously) Hyperconnect are a welcome change from the stifling limitations of text-based products.
As mobile adoption grows worldwide, along with the population of young people in regions including Africa and the Middle East, companies that tap into video and audio social networking have a tremendous road for continuing growth.
While Match Group quickly accepts this reality and integrates these technologies into its portfolio through acquisition, expect companies such as Newborn Town—who already have a significant foothold in developing markets and in-house video and audio app capabilities—to gain prominence.
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