YY spends big to grow overseas user base in Q1

Livestreaming social media company YY recorded substantial increases in net revenues and active users but almost doubled operating expenses in the first quarter.

Net revenues increased 47% year-on-year to RMB 4.78 billion ($705 million), primarily driven by increases in live-streaming revenues and the acquisition of tech company Bigo in March 2019. Close to 94% of net revenue came from YY’s live-streaming service portfolio, with YY Live and Huya the top two contributors.

Net income rocketed 224% year-on-year, reaching RMB 3.12 billion. YY attributed this increase to remeasurement gains of its previously held interests in Bigo, which amounted to RMB 2.67 billion.

Monthly active users (MAUs) of YY’s global video and live-streaming services reached 400 million, three-quarters of which were from overseas markets. Combined average mobile MAUs for YY Live and Hago increased 66% year on year to nearly 60 million, driven primarily by Hago, a game-based social app targeting the Indonesian market.

Subsidiary Bigo saw the MAUs of its apps surge by 160% year-on-year, and Huya recorded a 30% year-on-year increase in its mobile MAUs.

While the user base of Bigo Live—Bigo’s main live-streaming product—is largely in developing countries, it is also gradually expanding to developed countries, which accounts for around 20% of its revenue, CEO Li Xueling said. CFO Jin Bing added that the average revenue per paying user (ARPPU) for Bigo is still relatively low except for the Middle East market, where users have high purchasing power.

YY’s gross profit increased 31% year on year, but gross margin dropped to 34% from 38% in the corresponding period of 2018, mainly due to Huya‘s improving but still relatively low gross margin. Huya’s contribution to YY’s net revenues rose significantly compared with the same period a year earlier.

Stepped-up overseas marketing and sales efforts in Q1 almost doubled YY’s operating expenses compared with the same period last year, reaching RMB 1.22 billion.

The company expects net revenues for Q2 of between RMB 6.0 billion and RMB 6.2 billion, which includes YY Live, Huya, and Bigo.