Qutoutiao records strong growth but widened losses in 2018

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Content platform company Qutoutiao saw explosive growth in monthly active users and net revenues and a sharp increase in net losses for the fourth quarter and full year 2018, according to earnings results released Tuesday.

Combined MAUs nearly tripled to 93.8 million and combined daily active users (DAUs) more than doubled to 30.9 million for its two platforms, content aggregator Qutoutiao and mobile literature app Midu, in the fourth quarter of 2018 compared with the same period in 2017. Midu comprised around 5 million DAUs in December.

Average daily time spent per DAU in the fourth quarter also increased more than 96% year-on-year to 63 minutes across the two platforms. The metric is the average of Qutoutiao and Midu users.

Net revenues swelled 426% year-on-year to more than RMB 1.3 billion ($193 million) during the fourth quarter, driven by advertising and marketing revenues, which ballooned year-on-year to RMB 1.2 billion.

Sales and marketing expenses also jumped around 463% year-on-year in the fourth quarter, mainly the result of user engagement expenses, which more than tripled. User acquisition expenses increased seven-fold.

Qutotiao’s AI-based content recommendation technology drove the company’s research and development expenses in the fourth quarter up by 15 times year-on-year to RMB 127 million. The technology, however, enabled Qutoutiao to lower its user acquisition costs during the quarter, CEO Siliang Tan said.

The rapid expansion came with massive increases in net loss, which swelled seven times year-on-year for the fourth quarter of 2018 and close to 21 times year-on-year for the full year. Operating loss margin for full-year 2018 more than tripled to 65.6% compared to 2017.

The company guided first quarter 2019 net revenue from RMB 1.10 billion and RMB 1.12 billion and full year 2019 revenue from RMB 7.50 billion to RMB 8.50 billion. Upcoming revenue streams include paid subscriptions, live-streaming, games, and e-commerce. It is currently testing its short video app on a small scale and expects to step up its promotion in the second quarter of 2019, CEO Tan added.

Qutoutiao currently occupies 1.3% of the total of 3.2 billion hours that Chinese internet users spend on mobile internet, and is looking to increase the percentage to 2.5% to 3% by the end of 2019.