Momo (MOMO) started its operations in July 2011 when its founders established Beijing Momo in China. In order to facilitate foreign investment in its company, the company incorporated its holding company under the name of Momo Technology Company Limited in the British Virgin Islands in November 2011. In July 2014, Momo Technology Company Limited was redomiciled in the Cayman Islands as an exempted company registered under the laws of the Cayman Islands, and was renamed Momo Inc. The following outlines other major changes to its corporate structure in the past years.
- In December 2011, the company established Momo HK, a wholly-owned subsidiary, in Hong Kong.
- In March 2012, Beijing Momo IT was established as a wholly-owned subsidiary of Momo HK.
- In April 2012, the company underwent a corporate restructuring, whereby the company obtained effective control over Beijing Momo through a series of contractual arrangements among Beijing Momo, Beijing Momo IT and the shareholders of Beijing Momo IT.
- In May 2013, the company established Chengdu Momo as a wholly-owned subsidiary of Beijing Momo.
- In March 2014, the company formed Momo Technology Overseas Holding Company Limited and its Delaware subsidiary, Momo Information Technologies Corp.
- In January 2015, the company established Shanghai Momo Technology Co., Ltd. as a wholly-owned subsidiary of Beijing Momo.
- In October 2015, the company established Chengdu Biyou Technology Co., Ltd., or Chengdu Biyou, as a wholly-owned subsidiary of Chengdu Momo.
- In March 2016, the company established Tianjin Heer as a wholly-owned subsidiary of Beijing Momo.
- In November 2016, the company established Momo Pictures Co., Ltd., as a wholly-owned subsidiary of Beijing Momo, and QOOL Media (Tianjin) Co., Ltd., as a joint venture which is 70% owned by Beijing Momo.
- In March 2017, the company acquired 100% equity interest of Zhejiang Shengdian, upon which it became a subsidiary of Beijing Momo. Zhejiang Shengdian now holds its internet audio/video program transmission license.
In December 2014, the company completed its initial public offering and listed its ADSs on the NASDAQ Global Select Market under the symbol MOMO.
The company's principal executive offices are located at 20th Floor, Block B, Tower 2, Wangjing SOHO, No.1 Futongdong Street, Chaoyang District, Beijing 100102, People's Republic of China. The company's telephone number at this address is +86-10-5731-0567. The company's registered office in the Cayman Islands is located at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. The company's agent for service of process in the United States is Law Debenture Corporate Services Inc., of 801 2nd Avenue, Suite 403, New York, NY 10017.
Withdrawal of Proposed Going Private Transaction
The company's board of directors received a preliminary non-binding proposal letter dated June 23, 2015 from Mr. Yan Tang, its chairman and chief executive officer, Matrix Partners China II Hong Kong Limited, Sequoia Capital China Investment Management L.P. and Huatai Ruilian Fund Management Co., Ltd., or collectively the Buyer Group, to acquire all of its outstanding Class A ordinary shares not already owned by the Buyer Group in a going private transaction for US$18.90 per ADS, or US$9.45 per Class A ordinary share, in cash. The company's board of directors formed a special committee consisting of two of its independent directors, namely, Dr. Dave Daqing Qi and Mr. Benson Bing Chung Tam, on June 23, 2015 to consider and evaluate the proposal and any other alternative proposals or other strategic alternatives that may be available to its company, and to negotiate the terms of any potential definitive agreement. On April 5, 2016, Alibaba Investment Limited and Rich Moon Limited joined the Buyer Group for the proposed going private transaction.
On April 5, 2016, the Buyer Group (including Alibaba Investment Limited and Rich Moon Limited) executed an amendment to the consortium agreement dated July 6, 2015 among themselves to extend the exclusivity period, pursuant to which the Buyer Group agreed that during the period beginning on July 6, 2015 and ending on the earlier of April 5, 2017 and (ii) the termination of the consortium agreement by mutual written agreement of the members of the Buyer Group, members of the Buyer Group will work exclusively with each other with respect to the going private transaction.
On August 18, 2016, the special committee of its board of directors received a letter from the Buyer Group, stating that the Buyer Group would like to withdraw the non-binding going private proposal with immediate effect.
The company operate Momo, one of Chinas leading mobile-based social networking platforms. The company enable users to establish and expand social relationships based on location and interests. The company's platform includes its Momo mobile application and a variety of related features, functionalities, tools and services that the company provide to users, customers and platform partners. The company also operate a stand-alone video application called Hani, which features the live video content on its core Momo mobile application.
The company aim to offer its users an authentic social experience by encouraging them to provide detailed personal information on Momo. Leveraging its social interest graph engine and its analysis of user behavior data, Momo is able to provide users a customized experience based on their social preferences and needs. Momo users can maintain and strengthen their relationships through its private and group communication tools, content creation and sharing functions, recreational activities such as gaming, as well as the offline social activities promoted on its platform. Enabled by technological development, the company believe video creation and sharing is becoming an important way for users to socialize and have fun via the internet. In order to capture the opportunities created by such social trend, in 2016 the company introduced various video features and services including live streaming, short video as well as video chat in peer-to-peer and group chatting environment. The various video features and functionalities not only enrich the ways in which its users can express themselves and interact but also provide entertaining contents to its users and help them build more social and recreational activities around it.
Momo has built a large user base on Momo since its launch in 2011. The company's MAUs increased 16.2% to 81.1 million in December 2016 from 69.8 million in December 2015. The company's MAUs were 69.3 million in December 2014. The growth rate of its MAUs slowed down in 2015 primarily due to the reduced growth of number of smartphone users in China, and upgrades to its platform during 2015 that took time for users to adapt to.
The company's Momo mobile application can be downloaded and used free of charge, and the company generate its revenues from the various services the company offer on the Momo platform. The company's revenues increased significantly from US$44.8 million in 2014 to US$134.0 million in 2015 and further to US$553.1 million in 2016. The company currently generate its revenues from live video service, value-added service, mobile marketing, mobile games and other services. The company's live video service, which was launched in September 2015 and allows users to purchase and send in-show virtual gifts to other users hosting live shows, currently contributes to the largest share of its revenues, generating 68.1% of its net revenues in 2016. The company generated 66.5%, 43.6% and 12.2% of its net revenues from value-added service in 2014, 2015 and 2016, respectively, in relation to its membership subscription package that provides members with additional functions and privileges on its platform and, starting in the fourth quarter of 2016, virtual gift service, which allows its users to purchase and send virtual gifts to other users outside of the live video service. Mobile marketing services, mobile games and other services contributed 4.4%, 25.1% and 4.0%, respectively, of its revenues in 2014, 29.0%, 23.2% and 3.3%, respectively, of its revenues in 2015, and 12.0%, 6.4% and 1.3%, respectively, of its revenues in 2016. The company had a net loss of US$25.4 million in 2014, and a net income of US$13.7 million and US$145.3 million in 2015 and 2016, respectively.
The Momo Platform
The company's Momo platform includes its Momo mobile application and a variety of related features, functionalities, tools and services that the company provide to users, customers and platform partners. The Momo mobile application, which is available on Android, iOS and Windows platforms, enables users to establish and expand their social relationships based on locations and interests. Momo offers a personal and lively way for users to discover people nearby, and facilitates the connecting, communicating, interacting, and content sharing with others. Momo features various location and interest-based features, including Nearby functions, live broadcast and others. Communications within its platform are supported by multi-media instant messaging tools. Momos social features are increasingly integrated with video functions to offer more fun and entertaining contents and to enhance and encourage social interaction between users.
Key features and functionalities offered by the Momo platform include the following:
Nearby People. This function allows users to find out their approximate distance from each other in real time and is the primary tool through which users can establish and expand their social relationships. Nearby People is organized under its default tab and presents a curated list of nearby users with their profile pictures, relative distances and the time they last checked-in on Momo. The list of nearby people is by default ordered by proximity to the application users. All users can customize the list by viewing nearby people by gender, age and some other attributes. Users can initiate contact with nearby users by sending greeting messages and selecting to follow their accounts in order to receive notifications on their status updates. A user who receives a greeting message may then reply and choose to become a Momo friend of the initiator by also following such user. Users can adjust their privacy settings to avoid being seen by strangers or to appear invisible. The company's application also allows users to block other users and report inappropriate behaviors.
The company also offer Diandian, which appears as a small virtual button overlaid on the Nearby People list. When activated, its recommendation engine will push potential matches to a user based on profile and behavioral data such as interesting places the recommended user has travelled to, favorite books and movies and what interest groups he or she participates in. The user may then swipe left or right to show if he or she is interested in the recommendation. Only users who have mutually shown interests to each other may become Momo friends and message each other.
If a user is interested in finding out more about another user on its platform, he or she can review the User Profile page, which is a function that the company offer to provide a quick snapshot of a user. Information featured on this page includes profile pictures, detailed personal information such as name, age, hometown, horoscope, occupation, relationship status, groups joined, interests and favorite books and movies, the users historical posts and videos shared as well as the broadcasters that the user follows. Members can also post a voice recording as part of their profile. The profile page also contains a summary providing insights to a users behavioral characteristics.
Nearby Video. This is an interactive short video service which allows users to create and share short videos, which can be seen by both nearby users and their followers. Supported by face recognition technology, its short video service also allows users to add fun lenses in the videos, in addition to emoticons, on-screen messages and doodles. Viewers are able to interact with the creator by leaving messages, liking the content, sending virtual gifts, redistributing the content or following the creator.
Message Board. Message Board is an important entry point for users to interact with and learn about other users nearby. It contains a stream of feeds, including status updates, micro-blogs, locations, photos, videos, music and commentaries posted by nearby users, facilitating connections between people in the same neighborhoods. The order of feeds is defined by its algorithm which computes both physical proximity of the content creator and how recent that post is shared. For each feed they create, users can control whether the feed may be viewed by all Momo users, only their friends or only themselves. Users can interact with each other by leaving comments, liking the post or following the creator.
Live Video Functions
The Live Video function allows users to live stream a variety of content and activities including talent shows such as singing, dancing and talk shows, as well as casual chatting between broadcasters and viewers. Unlike traditional on-demand video experiences, live video allows the viewers to interact with the broadcasters on a real-time basis and thus facilitates a much more dynamic social experience. For example, a user can request a song from the live broadcaster and a broadcaster can connect a viewer to his or her live video channel through video calls. To provide fun, interactive experience between live broadcasters and viewers, the Live Video function offers interesting features such as customized filters and lenses as well as virtual gifts and associated special effects, some of which are enabled by face recognition and augmented reality technology. For example, a user can pay to put virtual animated cat ears over a broadcasters head. Viewers of live video shows may interact with broadcasters using online messages for free or by sending virtual gifts purchased with virtual currency. The live video tab currently consists of Recommended Live Broadcasts, which features a curated list of popular performers with certain entertaining talents, Nearby Live Broadcasts, which allows users to browse videos streamed by broadcasters nearby, and New Live Broadcasts, which presents new broadcasters on the platform.
The Follow tab was introduced in March 2017 to aggregate content that a user chooses to follow and video content its algorithm thinks the user might want to follow based his or her interest graph. There are two subsections within the tab. The Follow section under the Follow tab contains a stream of feeds created by people followed by the user while the Recommended section features premium video content that its recommendation engine, based on the interest graph, believes the user might like or suggests the user to follow.
Other key features and functionalities include the following:
Groups. The company's application allows users to create and/or participate in location-based groups created across points of interest and based on residential complexes, educational institutions and commercial buildings. Location-based groups are generally established around a certain topic of interest. Each group is given a shared Momo discussion page on which group members can discuss their common interests, post their photos and exchange messages.
The company's users can create groups by first selecting a specific location around which the group is centered, which must be associated with a specific residential complex, educational institution or commercial building, and second, selecting a topic of interest for the group. The company's application displays nearby groups created by users as ranked by proximity. A user must apply to join a group, and admission is determined by the creator and managers of the group. In addition to its default distance-based listing of nearby groups, users are also able to search for groups using keywords pertaining to certain points of interest. To further enhance interaction, the company also display who among the people that a user has followed are members of a particular group.
Users can propose and organize offline events for the location-based groups. A separate page will be created for an event containing information about the activity such as type, venue and time, based on which group members can decide whether to join the event and confirm attendance. A list of confirmed attendees will be shown on the activity page as well.
Circles. Circles are themed discussion forums that allow users to share feelings and ideas over certain topics. Unlike the Group function, no applications or pre-approvals are needed to participate in discussions in the Circles. Within each of the Circles, a user can create a post or interact with a post by liking it, leaving a comment or redistributing it.
The company's application is supported by instant messaging function, which allows users to communicate with each other using various forms of messages and expressions including text, emoticons, voice recordings, pictures and video messages, or to engage in real-time communication through a video chat function. Many of its fun and trendy emoticons are inspired by characters in popular culture. One of the key features of its instant messaging function is that the dialogue window presents the distance between the two parties in real time. Senders can see whether their messages have been delivered to or read by the recipient, and can choose to have their messages removed immediately after being read. The company's instant messaging feature also allows users to turn voice messages into text, share their location information, invite other users to games, and send virtual gifts and red envelopes to each other.
The company's application offers games primarily developed by third-party developers, some of which are customized for its platform and user profile. The company started to publish games on its platform for third-party developers in 2013, and the company launched its first self-developed game in February 2015. As of December 31, 2016, the company operated 19 non-exclusive licensed games, six exclusive licensed games and six self-developed games. Games on its platform are designed with a variety of themes, cultural characteristics and features to appeal to different segments of the game player community. Some of the games on its platform have social features and are developed to be enjoyed, shared and played among Momo friends. The company's users log into and play its games with their Momo accounts. Such social features contribute to the high player stickiness of mobile games offered on its platform.
The company started monetization in July 2013. The company currently generate revenues primarily from live video service, value-added service, mobile marketing services, mobile games, and other services.
Live Video Service
The company launched its live video service in September 2015. Initially, the service adopted an online live concert format whereby certain talented performers were invited to put on live music shows in a professional studio environment. Such shows were broadcasted live in one to four sessions on a daily basis and at pre-announced times. In the fourth quarter of 2015, the company opened more live channels in order to enable more performers to put on talent shows to entertain and interact with their audience. The broadcasters can go live and connect with their audience via their mobile phones instead of through professional devices. Their audience will be able to interact on a real time basis with the broadcasters and other fellow viewers by texting for free or purchasing and sending virtual gifts, for which the company shared a portion of the revenues generated with the broadcasters. Until April 2016, the company only offered the service to a limited number of talented performers pre-selected carefully by it. In April 2016, the company opened up the service to all the users of its platform so that each one of them can become a broadcaster if they wish.
The company provide enhanced membership privileges to users who subscribe to its membership package by paying membership fees. The company's memberships are currently divided into two tiers, basic and premium. Enhanced privileges for all members include VIP logos, higher limits on the maximum number of users group and the number of users that the member can follow, access to certain special emoticons, the ability to add a short video and a voice recording to the profile page and to see a list of recent visitors to their profile page, and certain other special features unavailable to the non-members. Additional privileges for its premium members include the abilities to check out visitors to their message boards and to remove advertisements from their feeds.
Virtual Gift Service
The company launched its virtual gift service on the Momo platform in the fourth quarter of 2016 to enhance users interaction and social networking with each other. Users simultaneously purchase and send the virtual gifts to other users, and the company generate revenue from the sales of the virtual gifts.
Mobile Marketing Services
The company seek to provide advertising and marketing solutions to enable its customers to promote their brands and conduct effective marketing activities. The company provide its customers with analytical tools to enable them to track and improve the effectiveness of their marketing campaigns on its platform. The company's advertising and marketing customers include brand marketers, local merchants, application developers and publishers as well as other small and medium-sized businesses and individuals. The company's mobile marketing services currently include the following:
In-feed and other marketing solutions. The company offer advertising units that appear as feeds on Message Board, Nearby People and Follow. Powered by a proprietary self-serve advertising system with a real-time bidding mechanism, its in-feed marketing solutions are performance-based and serve a wide range of marketers including application developers, local businesses, brand owners, as well as other small and medium-sized businesses and individuals. The company offer advertising units in various formats, including text-based content, pictures and video clips. In addition, its advertising system also allows customers to target certain cohorts of users based on their geographic locations, gender, age, type of devices and some other parameters. The company's customers can use a combination of the various formats and targeting capabilities to create their marketing campaigns more effectively.
Brand-oriented display ads. The company provide brand marketers with various ad formats for them to drive brand awareness through its platform. The forms of advertisements the company offer to brand marketers currently include full screen banner ads that appear before the application is loaded and banners on frequently visited pages on its platform.
As the features and functionalities of its platform continue to evolve, the company may offer integrated marketing packages that include multiple advertising units such as feeds, banners, video ads and sponsorships in the future.
As a social networking platform, the company intend to offer games that have strong features which the company believe will not only increase the interactions between users and communication within groups, but also broaden its revenue sources. Such games may be developed by third parties, where the company share revenues generated by in-game purchases of virtual items with such developers, or developed in-house. Momo has recently started to scale back from licensed mobile game services and instead focus on self-developed games in order to better align the games offered on its platform with the positioning and strength of Momo as a location-based social platform.
The company's other services primarily include paid emoticons, gift mall sales and Duobao service, which allows the users to purchase a right to participate in quasi-lucky draw games, in which they have the opportunity of winning physical goods. The company generate revenues from Duobao service both through sales of its own inventory and sales of third-party products. The company ceased to provide gift mall services and paid emoticons in November 2016 and Duobao service in January 2017, due to the adjustment of its strategic priorities. The company's users can still use its emoticons for free, except for certain special emoticons, which only its members can use.
The company's proprietary networking protocols ensure fast, reliable and stable mobile communications under different network environments in China. The company's architecture focus on providing consistent user experience across different mobile devices, operating systems and network environments, which is particularly necessary in China given the wide variety of choices of mobile devices, operating systems and mobile networks.
Social Interest Graph Recommendation Engine
Momo has developed a comprehensive database of user social interests from the activities on its platform. The company create a social interest profile for each user account based on user actions, such as group and topics memberships, social relationships, as well as demographic data such as age, gender and location. Based on these social interest profiles, its recommendation engine allows it to push content to Momo users who are more likely to find such content interesting and relevant. The company believe that social context can improve the relevance of advertisements and make them a more integral part of the user experience, rather than an interruption of it. Therefore, Momo is continually refining its recommendation engine to improve the relevance of information the company push to users.
Scalable Distributed Storage
The company's proprietary model optimizes and facilitates cost-effective data storage by building memory on solid state drives. This distributed storage model allows it to efficiently and securely manage a large amount of data while storing data on servers that are easily scalable.
Service Oriented Architecture
The company's platform adopts service-oriented architecture that allows efficient software development and frequent upgrading of its services. The company's platform is built on technologies that can facilitate cost-effective learning and joint research and development across different coding languages.
Precision in Locating Users
Location is a key attribute of its social networking platform. The company's rich experience in location-based technology has allowed it to develop technology capable of precisely locating static or mobile users within units of five meters horizontally. The company believe its ability to locate users with this precision is unique in its industry.
Exploration in emerging technological areas
As video continues to gain popularity as a primary way for the users to communicate, share, socialize and have fun on its platform, Momo is devoting a considerable amount of resources into developing its technological capabilities in areas such as augmented reality, face recognition, image processing including beatification techniques and other emerging territories to make video sharing and streaming a more enjoyable experience for its users.
Content Management and Monitoring
As of the date of this annual report, Momo has a dedicated team of over 350 personnel reviewing and handling content on its mobile platform for compliance with applicable laws and regulations. They are aided by both proprietary and third-party software and technologies to sweep its platform and the data being transmitted on a real-time basis around-the-clock. The company monitor and screen user information and user generated content against a spam list, which is a list of content and behaviors that Momo has determined are likely to be indicative of inappropriate or illegal content or illegal activities. Additionally, Momo users can also easily report fraud if they come across suspicious content, and each user complaint is processed by its content management and monitoring system.
Branding and Marketing
The company primarily attract its users through word-of-mouth and other free channels. The company's brand building activities generally comprise purchasing online advertising in the form of text, banner and video, placing TV commercials, and public relations efforts. In January 2017, the company hosted its Momo Live Broadcasting 2017 Evening of Surprise, featuring A-list celebrities and popular hosts, in Beijing in order to further promote its brand and live video service. The company also acquire users directly through online and offline marketing channels such as search engines, application stores and pre-installations.
As of the date of this annual report, Momo has a dedicated team of over 60 customer service personnel in its customer service center in Chengdu, China, who support its viewers and broadcasters of live video service, members and mobile game players. The company's dedicated customer service team is well-trained on its live video service, membership services and mobile games functionalities. For its users who subscribed to its membership services, its customer service personnel provide around-the-clock support through a members-only toll-free phone number and other online communication channels. The company's customer service team helps its members with issues they encounter on its mobile platform, gathers feedback on how to improve its services and receives member complaints and suggestions. The company's customer service team also addresses issues that its mobile game players encounter and gathers player feedback on the functionality and popularity of the mobile games the company offer.
The company rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect its intellectual property rights. As of December 31, 2016, the company had four pending patent applications filed with the State Intellectual Property Office of the PRC. The company had registered 132 trademarks and had applied for 154 trademarks with the Trademark Office of the State Administration for Industry & Commerce of the PRC. The company had registered 60 software copyrights and 56 copyrights with the PRC National Copyright Administration. The company had also registered 53 domain names, including immomo.com, wemomo.com, immomogame.com and momocdn.com.
Overall, the historical seasonality of its business has been relatively mild due to its rapid growth, but seasonality may increase in the future. Historically, there is noticeable downward trends in user activities as well as revenue growth in the weeks prior to and after the Chinese Lunar New Year. However, seasonal fluctuations have not historically posed significant operational or financial challenges to it, as such periods tend to be brief and predictable. Due to its limited operating history, the seasonal trends that Momo has experienced in the past may not apply to, or be indicative of, its future operating results.
As a mobile social networking platform that also provides live video service, Momo is subject to intense competition from providers of similar services, as well as potential new types of online services.
The company's competitors may have substantially more cash, traffic, technical, performer and other resources, as well as broader product or service offerings and can leverage their relationships based on other products or services to gain a larger share of marketing budgets from customers. The company believe that its ability to compete effectively depends upon many factors, including the size, composition and engagement of its user base, its ad targeting capabilities, its pool of popular live broadcasters, market acceptance of its mobile marketing services and online entertainment services, its marketing and selling efforts, and the strength and reputation of its brand. The market in which the company operate is fragmented and highly competitive. If Momo is unable to compete effectively for users or user engagement, its business and operating results may be materially and adversely affected. The company also experience significant competition for highly skilled personnel, including management, engineers, designers and product managers. The company's growth strategy depends in part on its ability to retain its existing personnel and add additional highly skilled employees.