TikTok’s Chinese rival Kuaishou posted better-than-expected financials for the fourth quarter of last year, but the company’s shares dropped more than 6% as regulators signaled a tightened scrutiny of livestreaming e-commerce.
Why it matters: Kuaishou’s share drop reflects market concerns over further potential regulatory measures aimed at the livestreaming industry. The Chinese government has already stopped some of the top livestreaming celebrities, such as Viya and Cherie, from livestreaming and removed their public social media profiles due to their tax evasion behaviors.
Details: Kuaishou’s revenue increased by 35.0% in a year to RMB 24.4 billion ($3.8 billion) in the fourth quarter of 2021, exceeding the high end of forecasts ($3.76 billion) compiled by Yahoo Finance. The company’s total revenues for 2021 grew by 37.9% year on year to RMB 81.1 billion.
- However, the company’s shares dropped 6.24% today on the Hong Kong stock exchange despite opening high this morning after its Tuesday earnings report. A commentary posted by China’s state-backed China Taxation News may have triggered a change in market sentiment, according to local media. The state tax media called for stricter taxation policies for livestreamers.
- Analysts remain bullish on the long-term prospects of the company. Thomas Chong, analyst of investment bank Jefferies, said he expects “market share gains to continue in online marketing and e-commerce GMV with solid user growth trends and rising engagement” in the first quarter of 2022.
- The company’s annual report also revealed a major change in its revenue structure. Online marketing services overtook livestreaming to become the firm’s largest revenue source in 2021. Kuaishou’s online marketing services recorded RMB 42.7 billion of revenue last year, a 95.2% yearly increase. That’s 52.6% of the company’s total revenue, up from 37.2% a year earlier. Meanwhile, livestreaming revenue decreased by 6.7% in a year to RMB 31 billion in 2021. Its share of the company’s total revenue dropped to 38.2% in 2021 from 56.5% in 2020.
- E-commerce is another revenue driver for the company. Revenue for the company’s other services, mainly e-commerce, doubled to RMB7.4 billion in 2021. The company attributes the growth to “optimizing supply, content, services, technology and user experience.”
- The company’s globalization initiative, a move to compete with ByteDance on the international market, started to show “positive effects” in the fourth quarter after boosting operational efficiency and implementing more disciplined budget plans. The company said it saw increased daily active users, user time spent, and retention rates in the overseas market without further details.
- Kuaishou’s average monthly active users hit 578.0 million in the fourth quarter of 2021, growing 21.5% in a year.
Context: After a high-profile IPO in March 2021, Kuaishou has been fighting an uphill battle amid fierce domestic competition from TikTok sister app Douyin. The Beijing-based company recently underwent massive layoffs alongside other Chinese tech majors downsizing in the economic downturn.
- Kuaishou made its overseas business a priority in March by creating a new department for international commercialization.
Additional contributions by Ward Zhou