China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

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MD, Blue Lotus Research Institute

Gu Jun, CFA

Equity Bottom-Up

<ul><li>Douyin, a musical short video app, reached about 60 mn DAU in China, 10 mn overseas by Feb. 2018, according to our estimation</li><li>We assess Douyin is more likely to pose threats to Kwai, YY, and Momo, and have relatively moderate impact on Weibo, iQiyi, and Bilibili.</li><li>We suggest investors watch out for Douyin’s monetization plans.</li></ul><h2><strong>Reasons behind the success of Douyin </strong></h2><p>We see several reasons behind the rise of Douyin: 1) management’s ability to design the product and grow the user community; 2) deep understanding of core potential users, or China’s “Generation Z” born after 1990; 3) the market gap left behind by Kwai (快手); 4) aggressive marketing campaigns.</p><h2><strong>More impact to Kwai, YY, and Momo </strong></h2><p>We estimate DAU of Douyin and Kwai are likely to reach 120 mn/180 mn by the end of 2018, making these two head-to-head competitors. Douyin is actively looking for PGC agencies and performers to prepare for live streaming. We see Douyin will pose more impact on YY and Momo because of the overlap in PGC content and user base. Yet, Douyin is now focusing on user growth so its impact to YY and Momo might not be obvious in 2018.</p><h2><strong>Moderate impact to Weibo, iQiyi, and Bilibili </strong></h2><p>We see Douyin is likely to cannibalize Weibo’s female user group and some advertisers, including a few KA and SME clients. Douyin is also going to challenge other video platforms’ user time spent. Yet, at this stage, we suggest the impact will be limited for Weibo, iQiyi, and Bilibili.</p><h2><strong>Watch out Douyin’s monetization and international expansion </strong></h2><p>The focus for Douyin in 2018 is still to expand user base. We expect Douyin will cautiously promote monetization methods, including live streaming and video adv. We suggest investors watch out whether Douyin’s monetization will pose credible threats to YY, Momo, and Weibo. We also suggest investors, follow Douyin’s international expansion plans because Douyin has the potential to be agitate international social/video platforms.</p>

Douyin, a musical short video app, reached about 60 mn DAU in China, 10 mn overseas by Feb. 2018, according to our estimationWe assess Douyin is more likely to pose threats to Kwai, YY, and Momo, and have relatively moderate impact on Weibo, iQiyi, and Bilibili.We suggest investors watch out for Douyin’s monetization plans.Reasons behind the success of Douyin We see several reasons behind the rise of Douyin: 1) management’s ability to design the product and grow the user community; 2) deep understanding of core potential users, or China’s “Generation Z” born after 1990; 3) the market gap left behind by Kwai (快手); 4) aggressive marketing campaigns.More impact to Kwai, YY, and Momo We estimate DAU of Douyin and Kwai are likely to reach 120 mn/180 mn by the end of 2018, making these two head-to-head competitors. Douyin is actively looking for PGC agencies and performers to prepare for live streaming. We see Douyin will pose more impact on YY and Momo because of the overlap in PGC content and user base. Yet, Douyin is now focusing on user growth so its impact to YY and Momo might not be obvious in 2018.Moderate impact to Weibo, iQiyi, and Bilibili We see Douyin is likely to cannibalize Weibo’s female user group and some advertisers, including a few KA and SME clients. Douyin is also going to challenge other video platforms’ user time spent. Yet, at this stage, we suggest the impact will be limited for Weibo, iQiyi, and Bilibili.Watch out Douyin’s monetization and international expansion The focus for Douyin in 2018 is still to expand user base. We expect Douyin will cautiously promote monetization methods, including live streaming and video adv. We suggest investors watch out whether Douyin’s monetization will pose credible threats to YY, Momo, and Weibo. We also suggest investors, follow Douyin’s international expansion plans because Douyin has the potential to be agitate international social/video platforms.

Douyin (抖音): The New Challenger for YY and Momo

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Douyin (抖音): The New Challenger for YY and Momo