Unless you are on the Chinese internet and read Mandarin, you probably have not heard of MOMO. And it is no Disney character!
MOMO (the symbol is also ‘MOMO’) is a popular Chinese social media mobile app that, 1) has been steadily growing in popularity, and 2) migrating into mainstream commerce from the “dark side of the internet”. It is not the leader among Chinese mobile apps, and in fact has only 2.5% of the marketplace behind WeChat and QQ.
Until recently, MOMO has primarily been used as a “hook-up” site similar to those in the U.S. like Tinder and Grindr, which connects strangers based on “interests” and location …essentially for “intimate” encounters. However, unlike Tinder and Grindr, MOMO did not set out to create “intimate” encounters but, had a goal of connected people with similar interest in close proximity. Through migration of shaking off the stigma of a “dating/hookup” app, MOMO has made use of the same low level beacon technology that connects user, to connect businesses with people based upon the business offerings and the location of the user. For example, a bar/restaurant may wish to initiate specials at the last minute. Through MOMO it can broadcast to interested users within a five mile (or any set distance) radius to advertise the immediate event. Based on 2014 figures, MOMO had 180 million registered users, 60.2 million monthly users and 25.5 million daily users.
Only in 2014 did MOMO begin to monetize its offering, so the PE is high at 45+, but the earnings are projected to grow 90% this year, so the leading PE is about 25. Unlike WeChat, MOMO does not yet have an English version and has decided to stay focused on the Chinese domestic market for now. The sources of revenue have been emotional connection, social gaming and now advertising. In 2017, MOMO began offering an advertising platform for businesses not unlike Shopify, where businesses can customize and configure their own usage packages. With such an enormous user base, MOMO will continue to add services and advertisers, which will in turn spur more users. It also does not hurt that the Chinese government continues to shut down foreign-based messaging apps, funneling their citizens into a few homegrown options like MOMO.
Both WeChat and QQ are focused on user-to-user or person-to-person interfaces with features similar to Apple Wallet or Samsung pay. MOMO is the only major app which also promotes business-to-user interaction through location based direct advertising using beacon technology. Revenues will only increase as MOMO adds data source information on its users, allowing it to target the advertisement at only those historically interested in a certain product or service and only when they are in a position to act on them.
Beware! This stock is super volatile and speculative, so if you choose to purchase MOMO, we would suggest a smaller than normal allocation. It has also risen from about $9 to about $35 this year. However, its market cap is still only $6 billion. When Facebook had 12 million users and no revenues, it was valued at $12 billion for a large private placement with Microsoft.
This is not a recommendation to buy the stock just to point out that there may be a good opportunity for suitable investors. And, certainly one could lose money should they invest. There are no guarantees. Also, we need to disclose that many of our clients own the stock as does my family.