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The stocks of ByteDance’s main competitor in China fell because more and more signs showed that users in the country spent less on its live broadcast services, the company’s losses expanded, and the company’s losses increased.
Kuaishou’s short video application faces fierce competition from Douyin from ByteDance, Chinese version TikTok, and online shopping groups such as Alibaba and Pinduoduo, which are also selling through live broadcasts.
On Tuesday, the company’s share price in Hong Kong fell by as much as 11.3%, evaporating $14 billion in market value from the fast closing market. The “Kaishou” IPO backed by the Chinese internet group Tencent, Raised more than $5.4 billion In February.
As the results of Kuaishou came out, Beijing stepped up its scrutiny of the country’s science and technology sector.The company is one of the nearly three dozen technology groups that have been told Solve anti-competitive issues practice.Regulators have also introduced new rules to control Live content And limit the tip of the video host.
Kuaishou earns a large part of its income by reducing the income that users receive from small gifts on live hosts, such as virtual beer stickers (1.5 yuan) or “Golden Dragon” (1,400 yuan).
519.8m
Kuaishou monthly users
Four years ago, it received 95% of its revenue in this way, but in the three months ending in March, users’ such expenditures fell by 20% year-on-year. The Kuaishou financial report released on Monday evening showed that the sales of virtual gifts only accounted for 42.6% of the total revenue for the quarter.
The growth of the company’s advertising business helped to make up for this decline, and the division’s revenue increased 161% year-on-year. Advertising business accounted for 50.3% of total revenue this quarter.
Kuaishou’s total revenue increased 36.6% year-on-year to RMB 17 billion, but sales of all three business lines were lower than the research firm Bernstein’s estimate. For business lines with fast-hand e-commerce business, this kind of miss is particularly great.
The company’s operating loss for the quarter expanded to RMB 7.3 billion (US$1.14 billion) from RMB 5 billion in the same period last year.
Earnings data prompted Wall Street banks, including Morgan Stanley, to lower Kuaishou’s stock price target. Analysts at Morgan Stanley said that Kuaishou’s increased investment, increased expected losses for the whole year and weak live broadcast revenue have led to a lower target price.
Since the Covid-19 pandemic means shoppers stay at home and make purchases on their smartphones, online streaming e-commerce, where products are sold live online to users, is booming in China.
However, competition with Douyin, Alibaba, Pinduoduo and JD is extremely fierce.
Bernstein analyst wrote: “We are more cautious about the growth of Kuaishou’s real-time streaming e-commerce.”
Bernstein also pointed out that Kuaishou’s sales and marketing expenses have surged, accounting for 69% of total revenue. The research team estimates that Kuaishou’s cost of acquiring each new user increased from RMB 55 in the fourth quarter to RMB 65 per user.
Kuaishou said it is investing to expand its user base and engagement. The monthly users of its apps reached 519.8 million in the quarter, up from 495 million in the same period last year.
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