Kuaishou’s $5 billion IPO: Everything you need to know about the TikTok rival

A Kuaishou app interface on a cellphone, Yichang, Hubei province, China, Jan 20, 2021. Kuaishou is gearing up for an initial public offering (IPO) in Hong Kong.

Costfoto | Barcroft Media | Getty Footage

GUANGZHOU, China — Shares of Chinese short video app company Kuaishou started shopping and selling on Friday in Hong Kong, marking the commence of its lifestyles as a publicly listed company.

Shares of Kuaishou soared almost 200% to open at 338 Hong Kong bucks. The corporate priced its shares at 115 Hong Kong bucks, which used to be at the discontinue of its vary. The initial public offering (IPO) raised 41.28 billion Hong Kong bucks ($5.32 billion).

It marks one other purchase for the Hong Kong stock commerce which has managed to attract quite loads of high-profile Chinese tech listings.

But what’s Kuaishou and the scheme does it win money? CNBC runs by the company’s industry model.

What does Kuaishou enact? 

The corporate used to be founded in 2011 and started out as a mobile app called GIF Kuaishou, which lets customers acquire intelligent photos called GIFs (graphics interchange structure).

In 2013, the short video and social media platform used to be launched followed by are residing-streaming in 2016.

Kuaishou’s apps now bear 769 million monthly active customers.

It’s moreover beginning to push into other areas similar to e-commerce.

How does Kuaishou win money?

Kuaishou brought in income of 40.68 billion yuan ($6.2 billion) within the nine months ended Sep. 30, 2020 — that’s a 49% year-on-year rise.

Alternatively, the company swung to a loss in that length, reporting an adjusted acquire lack of 7.24 billion yuan as marketing costs ballooned.

Kuaishou mentioned it had 262.4 million daily active customers for its app within the first nine months of 2020, up from 165.2 million within the an analogous length in 2019. Its monthly paying customers grew to 59.9 million from 48.5 million in that length.

The corporate makes money off its customers in quite loads of ways.

1. Stay-streaming: The foremost income driver is its are residing streaming industry. This involves customers shopping virtual objects from Kuaishou to gift to their current streamers. Stay streaming income brought in 25.31 billion yuan of income within the first nine months of 2020, accounting for around 62% of total gross sales.

2. Commercials and web online affiliate marketing: Kuaishou moreover makes money from web online affiliate marketing services and products or marketing which brought in 13.34 billion yuan within the  the nine months ended Sep. 30, a better than 200% year-on-year rise. This accounted for around 32% of total income. 

3. E-commerce and games: The Chinese tech agency has moreover began venturing into e-commerce and mobile games. Users should purchase objects from online streamers by the Kuaishou app. Kuaishou mentioned that 204.06 billion yuan price of transactions had been facilitated by its app within the first nine months of 2020 — an raise of better than 1,100%. No longer all of this would well translate immediately into income for Kuaishou. 

Risks for Kuaishou

Kuaishou’s IPO comes at a time when Chinese authorities are stepping up scrutiny of the abilities sector. China’s Inform Administration for Market Regulations released draft anti-monopoly guidelines final year geared in direction of digital platforms. 

In November, the Chinese authorities moreover launched guidelines around are residing-streaming taking a look which contains limits on person spending and restrictions on minors shopping objects. 

The markets wherein we honest are highly competitive, and we face critical competition …

“On condition that the acquire industry is highly regulated in China, intensified authorities regulation of the short video, are residing streaming and e-commerce industries in China might well moreover restrict our capacity to retain or enlarge our person inappropriate or the person web page traffic to our platform, that can well fair materially and negatively impact our industry operations and financial outcomes,” Kuaishou warned in its IPO prospectus.

The corporate is moreover a competitor to Douyin, the Chinese version of short video sharing app TikTok, bound by web monumental ByteDance. Douyin has 600 million daily active customers versus Kuaishou’s 262.4 million customers.

Tencent, a critical investor in Kuaishou, has moreover launched its ranking short video feature inner its WeChat messaging app. Opponents is moreover ramping up.

“The markets wherein we honest are highly competitive, and we face critical competition from web companies that honest deliver-primarily based social platforms, web online affiliate marketing companies and e-commerce platforms in China,” Kuaishou mentioned. 

“If we fail to compete successfully, our industry, financial condition, outcomes of operations and prospects might well fair be materially and adversely affected.” 

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