Content aggregator Qutoutiao’s significant user base growth in the third quarter powered solid but markedly slower revenue growth beating the mid-range of analyst consensus estimates while net losses narrowed.

Why it matters: Qutoutiao’s ability to monetize its lower-tier city-focused content services helped the company post a solid increase in advertising revenue for the quarter in a slowing economy that has significantly crimped growth for some of China’s biggest internet companies.

“We believe the lower-tier cities remain the most attractive space today with unmatched structural potential for growth and monetization. During the Double 11 Shopping Festival, GMVs generated by Qutoutiao users on e-commerce platforms increased more than 10-fold in comparison to last year.”

—Tan Siliang, Qutoutiao chairman and CEO

Details: Qutoutiao’s net revenues for the third quarter grew 44.0% year on year to RMB 1.41 billion ($197 million), a significant slowdown from 187.9% annual growth it saw in Q2 and a steep drop from 520.3% year-on-year growth it earned in the same quarter a year ago.

  • Revenues from advertising and marketing increased 54.1% year on year to RMB 1.38 billion, driven primarily by increases in the platform’s user base, user time spent, and ability to monetize traffic.
  • Combined average monthly active users (MAUs) more than doubled compared with the same period last year, reaching 134 million. The figure includes users from Qutoutiao, the company’s online reading app Midu Novels, and lightweight version Midu Lite.
  • Combined average daily active users (DAUs) also jumped 98% year on year to 42 million.
  • User engagement expenses rose 11.5% year on year driven by the increase in user base size, but spending per DAU per day for the two apps dropped 43.6% year on year.
  • The company shrank its net loss 14.0% year on year to RMB 888.2 million, with net loss margin improving to 63% from 106% in the third quarter of 2018.

Context: Qutoutiao’s online reading unit Midu, which includes Midu Novels and Midu Lite, closed a $100 million Series B in October.

  • Midu said it would use the proceeds for acquiring content, constructing a content creator ecosystem, and marketing purposes.
  • Midu Novels was suspended in July along with two other heavyweight reading apps for not removing lowbrow and sexually suggestive content.

Tony Xu is Shanghai-based tech reporter. Connect with him via e-mail:

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