Content aggregator Qutoutiao doubled its net losses in the quarter ended March 31 despite strong revenue growth as the company pours money into aggressively growing its user base. Share prices for the Nasdaq-listed company plunged more than 8% on Monday by market close.
Revenues in the first quarter skyrocketed 373% to RMB 1,118.8 million ($166.7 million) compared with the same period last year, driven by ad revenues from a significantly larger user base. However, despite revenues landing on the high end of analyst estimates, net losses more than doubled to RMB 688.2 million from RMB 302.6 million seen in the same period a year earlier.
Average combined monthly active users (MAUs) increased nearly four-fold to 111.4 million for its two platforms, the Qutoutiao mobile app and its literature app Midu. The company reported that daily time spent on its core content aggregator app increased in the first quarter to 62.1 minutes.
Qutoutiao’s sales and marketing expenses were RMB 1,297 million in the first quarter, a sharp increase of 257% from the same period a year earlier, which the company attributed to user acquisition and engagement efforts. Research and development expenses were around RMB 155.4 million in the first quarter, also a significant increase from RMB 19.7 million in Q1 2018.
Following the announcement of its Q1 financial results, Qutoutiao said co-founder Li Lei has resigned from his position as CEO citing personal reasons, but will remain a director and vice chairman of the board. Meanwhile, Eric Tan, the co-founder and chairman of the company, has assumed the role of CEO.
“It has been a transformational 12 months with user base expanding almost four-fold and monetization enhanced. As historically been the case, the first quarter was a low season for advertising, therefore net revenues were lower quarter-on-quarter,” Wang Jingbo, the company’s chief financial officer, said in a statement.
Founded in 2016, the content aggregation startup debuted on Nasdaq in September. As a newcomer, Qutoutiao needs to maintain rapid growth in order to establish its market position in a market led by Bytedance. Last month, the startup said that it plans to add 2,000 new hires this year, against the tide of layoffs in the Chinese tech sector.
Qutoutiao app was temporarily removed from Apple’s China App Store on May 18 and restored on the morning of May 20, which may have been due to minor violations to Apple’s App Store terms.