Momo, one of China’s top mobile social networking platform, announced total net revenues of RMB4,152.6 million (US$604.9 million) in the second quarter of 2019, an increase of 32% from RMB3,152.5 million in Q2 2018.

Monthly Active Users (“MAU”) on Momo application were 113.5 million in June 2019, compared to 108.0 million in June 2018.

Compare: Weibo MAU – 486 mm, WeChat – 1.13 bn, QQ – 808 mm

Total paying users of its live video service and value-added service, without double counting the overlap, including 3.2 million paying users of Tantan, were 11.8 million for Q2 2019, compared to 11.6 million for Q2 2018, which included 3.1 million paying users of Tantan in June 2018.

As of August 25, 2019, the number of paying users of Tantan was 4.1 million.

Its live video service revenues were RMB3,099.9 million (US$451.5 million) in Q2 2019, an increase of 18% from RMB2,620.9 million during Q2 2018. The growth in live video revenues was contributed by the increase in quarterly paying users, as well as the increase in average revenues per paying user per quarter.

Value-added service revenues mainly include virtual gift revenues and membership subscription revenues. The total value-added service revenues were RMB948.4 million (US$138.1 million) in Q2 2019, an increase of 169% from RMB352.6 million during the same period of 2018.

The year-over-year increase was primarily attributable to the continued growth of the virtual gift business on the Momo application driven by more paying scenarios introduced to enhance the social experience of Momo users, and the consolidation of Tantan’s membership subscription revenues for the whole second quarter of 2019, compared to the single month of June 2018 in Q2 2018.

Mobile marketing revenues were RMB76.2 million (US$11.1 million) in Q2 2019, a decrease of 46% from RMB142.0 million during the same period of 2018. The decrease in mobile marketing revenues was due to the decrease in advertisement properties on Momo’s platform resulting from the suspension of certain user posting functions.

Mobile games revenues were RMB23.2 million (US$3.4 million) in Q2 2019, a decrease of 33% from RMB34.8 million in Q2 2018. The decrease in mobile game revenues was mainly due to the continued decrease in quarterly paying users of mobile games.

Net income attributable to Momo Inc. decreased to RMB731.8 million (US$106.6 million) in Q2 2019 from RMB750.2 million in the same period of 2018. Momo recognized a total share-based compensation expense of RMB482.5 million (US$70.3 million) in Q2 2019 including a share-based compensation expense of RMB323.7 million (US$47.1 million) regarding certain share options granted to the founders of Tantan Limited (“Tantan”), while the total share-based compensation expense recognized in the same period of 2018 was only RMB134.2 million.

In August 2018, Tantan Limited granted 3,578,205 share options to its founders. The share options included a performance condition in which the founders have the right to receive fully vested options immediately upon achieving certain performance condition. During Q2 2019, the performance condition was met and accordingly, Momo recognized a share-based compensation expense of RMB323.7 million (US$47.1 million) related to those options.

Non-GAAP net income attributable to Momo Inc. (note 1) increased to RMB1,242.5 million (US$181.0 million) in Q2 2019, from RMB893.2 million in the same period of 2018. Diluted net income per American Depositary Share (“ADS”) was RMB3.33 (US$0.49) in Q2 2019, compared to RMB3.55 in the same period of 2018.

Non-GAAP diluted net income per ADS (note 1) was RMB5.60 (US$0.82) in Q2 2019, compared to RMB4.22 in the same period of 2018.

For the third quarter of 2019, Momo expects total net revenues to be between RMB4.25 billion to RMB4.35 billion, representing an increase of 17% to 19% year over year.

China social e-commerce market to reach 1.3 tn yuan in 2019 and 2.86 tn in 2021

Weibo’s monthly active users (“MAUs”) reached 486 million in June 2019, a net addition of approximately 55 million users year-over-year. Mobile MAUs represented approximately 94% of MAUs.
Weibo average daily active users (“DAUs”) were 211 million in June 2019, a net addition of about 21 million users year-over-year according to Weibo’s official finance results.

Weibo net revenues increased 1% year-over-year to $431.8 million, representing an increase of 7% on a constant currency basis.

• Advertising and marketing revenues were $370.7 million, flattish year-over-year.
• Value-added service (“VAS”) revenues increased 8% year-over-year to $61.2 million.

Net income attributable to Weibo was $103.0 million, compared to $140.9 for the same period last year, and diluted net income per share was $0.46, compared to $0.62 for the same period last year. Non-GAAP net income attributable to Weibo was $156.4 million, and non-GAAP diluted net income per share was $0.68, both flat year-over-year.

Weibo Financial Results in Q2 2019

For Q2 2019, Weibo’s total net revenues were $431.8 million, an increase of 1% compared to $426.6 million for the same period last year.

Advertising and marketing revenues for the second quarter of 2019 were $370.7 million, compared to $369.9 million for the same period last year. Advertising and marketing revenues from small & medium-sized enterprises (“SMEs”) and key accounts (“KAs”) were $346.5 million, representing an increase of 2% compared to $338.7 million for Q2 2018.

VAS revenues for Q2 2019 were $61.2 million, an increase of 8% year-over-year compared to $56.6 million for the same period last year. The increase was mainly attributable to the revenues derived from the live streaming business acquired in Q4 2018, and was partially offset by the decrease in gaming revenues.

Costs and expenses totaled $280.6 million in Q2 2019, compared to $271.7 million for the same period last year. Non-GAAP costs and expenses were $265.6 million, compared to $259.3 million for the same period last year.

Income from operations for Q2 2019 was $151.3 million, compared to $154.9 million for Q2 2018. Non-GAAP income from operations was $166.2 million, compared to $167.3 million in Q2 2018.

Non-operating loss for Q2 2019 was $24.0 million, compared to an income of $10.9 million for the same period last year. The non-operating loss included investment-related impairment of $31.7 million, which is excluded under non-GAAP measures.

Income tax expenses for Q2 were $26.1million, compared to $25.1 million for the same period last year.

Net income attributable to Weibo for Q2 2019 was $103.0 million, compared to $140.9 million for the same period last year.

Diluted net income per share attributable to Weibo for the second quarter of 2019 was $0.46, compared to $0.62 for the same period last year. Non-GAAP net income attributable to Weibo for the second quarter of 2019 was $156.4 million, compared to $156.1 million for the same period last year. Non-GAAP diluted net income per share attributable to Weibo for Q2 2019 was $0.68, compared to $0.68 for Q2 2018.

As of June 30, 2019, Weibo’s cash, cash equivalents, and short-term investments totaled $1.56 billion. For the second quarter of 2019, cash provided by operating activities was $132.8 million, capital expenditures totaled $3.2 million, and depreciation and amortization expenses amounted to $6.7 million.

For the third quarter of 2019, Weibo estimates its net revenues to increase 6% year-over-year to 9% year over year on a constant currency basis. This forecast reflects Weibo’s current and preliminary view, which is subject to change.

WeChat MAU up 7% to 1.13 million in Q2 2019; QQ MAU 808 mn

Xiaomi’s monthly active users (“MAU”) of MIUI reached 278.7 million, an increase of 34.7% YoY. AI assistant “ Xiao’ai ” had 49.9 million MAU; Xiaomi ranked 4th globally in terms of smartphone shipments; and, global shipments of its smart TVs reached 2.7 million units.

Xiaomi financial performance

In the second quarter of 2019, Xiaomi recorded RMB52.0 billion in revenue, representing an increase of 14.8% over the corresponding period of 2018. Gross profit margin increased to 14.0% from the 12.5% achieved in the corresponding period of 2018. Adjusted Net Profit increased by 71.7% to RMB3.6 billion. As of June 30, 2019, its total cash resources amounted to RMB51.1 billion.

The “Smartphone + AIoT” dual-engine strategy that Xiaomi adopted at the beginning of the year has borne fruit. Its user base has continued to expand and the number of devices connected to its platform has continued to grow.

In June, 2019, monthly active users (“MAU”) of MIUI reached 278.7 million, an increase of 34.7% over the corresponding period of 2018. The number of connected IoT devices (excluding smartphones and laptops) on its IoT platform reached approximately 196 million units as of June 30, 2019, representing year-over-year growth of 69.5%.

Meanwhile, its AI assistant “ Xiao’ai ” had 49.9 million MAU in June 2019, representing a year-over-year increase of 88.3%.

Xiaomi has won a number of international recognitions in 2019 to date. It took Xiaomi only 9 years to debut on the Fortune Global 500 list of 2019, becoming the youngest company on the list this year. Furthermore, Xiaomi made it into the 2019 BrandZ Top 100 Most Valuable Global Brands ranking for the first time, ranking 74th with a brand value of US$19.8 billion. Xiaomi has also been recognized as one of the 2019 Forbes China’s 50 Most Innovative Companies.

Xiaomi Smartphones

Its smartphone segment recorded RMB32.0 billion in revenue in the second quarter of 2019, representing an increase of 5.0% over the corresponding period of 2018. Its smartphone sales volume in the second quarter of 2019 reached 32.1 million units.

According to Canalys, Xiaomi ranked 4th globally in terms of smartphone shipments during the second quarter of 2019 and its market share in terms of global smartphone shipments increased from 9.5% in the second quarter of 2018 to 9.7% in Q2 2019.

Both its Xiaomi brand, which focuses on pioneering advanced technologies, establishing itself in the mid- to high-end markets, and building online and offline new retail channels, and its Redmi brand, which is positioned to pursue the ultimate price-performance ratio and focus on online channels have performed well.

After the launch of the new flagship model K20 series under the Redmi brand, Xiaomi has established a comprehensive Redmi smartphone product portfolio that covers a wide price range. In particular, the global sales volume of the Redmi Note 7 series reached 20 million units as of the date of this announcement, achieving this milestone in only around 7 months since its launch on January 10, 2019.

In addition, the global shipments of the K20 series already recorded more than 1 million units within the first month of its launch.

On July 2, 2019, Xiaomi launched the CC series under the Xiaomi brand, which includes Mi CC9, Mi CCe9, and Mi CC9 Meitu Edition. The CC series is positioned as a fashionable series targeting younger customers. The CC series places an emphasis on being visually appealing in terms of both form and function, offering stylish product design and enhanced photography experience.

Mi CC9 Meitu Edition is a joint development with Meitu Inc. which specifically targets the female user market. Leveraging its product development and supply chain management capabilities, as well as Meitu’s image-related algorithms and its deep understanding of female users, the Mi CC9 Meitu Edition offers outstanding photographic experiences and builds a solid foundation for its ongoing expansion into more diversified user markets.

Its products have been strongly recognized by the market as a result of the successful implementation of its multi-brand strategy. The average selling price (“ASP”) of its smartphones has continued to increase, achieving year-over-year growths of 13.3% and 6.7% in mainland China and overseas markets, respectively. In Q2 2019, the revenue generated by smartphones sold for RMB2,000 or more accounted for 32.3% of the total revenue of the smartphones segment.

Following the granting of 5G business licenses in mainland China, 5G technology has officially started to be implemented for commercial use. The commercialization of 5G technology could potentially lead to a new smartphone replacement cycle and boost the overall demand of the domestic market.

Xiaomi established a research and development team back in 2016 for advanced research on 5G technology and are now well-prepared for the commercialization of 5G. The Mi MIX 3 5G, its first 5G model was already available in various European countries, and its second 5G smartphone model will also be launched in China in the second half of the year.

The gross profit margin of its smartphone segment increased from 3.3% in the first quarter of 2019 to 8.1% in Q2 2019. During the early transition period from 4G to 5G technology, Xiaomi will continue to invest in research and development of relevant technologies while remaining prudent with its cash flows and profitability.

IoT and lifestyle products

In Q2 2019, the revenue of the IoT and lifestyle products segment rose by 44.0% to RMB14.9 billion over the corresponding period of 2018. Its smart TV business continues to have a leading edge in both mainland China and overseas markets.

Global shipments of its smart TVs reached 2.7 million units, representing year-over-year growth of 41.1%. According to AVC, Xiaomi ranked 1st in terms of TV shipments in mainland China for the six months ended June 30, 2019.

Xiaomi ranked 1st in terms of smart TV shipments in India for five consecutive quarters as of the second quarter of 2019. With its efforts in expanding its smart TVs globally, Xiaomi achieved a top 5 position in terms of global TV shipments for the six months ended June 30, 2019, according to AVC.

Xiaomi has positioned large home appliances as an important element of its AIoT strategy. Xiaomi will focus on innovation and product design, offering intelligent user experiences and promoting the enhanced connectivity and compatibility of its smart home appliances.

For the six months ended June 30, 2019, the shipments of its air conditioners amounted to approximately 1 million units. At the same time, Xiaomi has also entered the smart kitchen appliances market.

In Q2 2019, Xiaomi continued to enrich its IoT product portfolio. The market share of its laptops has been steadily increasing following the launch of its new products. On May 28, 2019, the Redmi brand introduced its first 14” slim notebook and enjoyed widespread popularity.

According to IDC Consulting (Beijing), the market share of its laptops in mainland China in terms of shipments increased from 5.5% in the second quarter of 2018 to 8.7% in Q2 2019. Its Mi Band ranked 1st in the global wearables market in terms of shipments in the first quarter of 2019.

Meanwhile, the Mi Band 4 recorded shipments of more than 1 million units within 8 days of its launch on June 14, 2019. In addition, Xiaomi has also launched several new products, including its AI Translator “Xiao’Ai Teacher”, Mi Smart Door Lock and Mi Smart Combo Wash and Dryer Pro, which are supported by its AI assistant “Xiao’Ai”. These product launches illustrated its continuous
the pursuit of excellent product design and quality.

Xiaomi has continued to improve the device-to-device interaction and enhance its users’ smart home experience. For example, when a user opens the door through a Mi Smart Door Lock, its
AI assistant will welcome him/her home. At the same time, the Mi Air Purifier, Mi Air Conditioner, and other smart devices could be switched on automatically. The Mi Smart Combo Wash Dryer Pro can be operated by the voice control function through its AI assistant

Xiaomi Internet services

In the second quarter of 2019, its user base continued to expand. The MAU of MIUI rose by 34.7% year-over-year from 206.9 million in June 2018 to 278.7 million in June 2019. The MAU of MIUI in mainland China was 115.1 million in June 2019. The MAU of its smart TVs and Mi Box achieved 53.8% year-over-year growth, reaching 22.6 million in June 2019.

Revenue from its internet services segment grew by 15.7% year-over-year to RMB4.6 billion in Q2 2019. Advertising revenue slightly decreased by 0.6% year-over-year to RMB2.5 billion due to a soft mainland China advertising market, particularly due to reduced advertising spending from other internet companies which contributed a meaningful portion of its advertising revenue.

Over the course of the last few quarters, Xiaomi has continued executing its strategy to diversify its advertising customer base. Through expanding into more vertical industries, such as finance and small and medium-sized enterprises, Xiaomi is developing a more robust and healthy advertising business to capture more future growth.

Revenue from gaming decreased by 4.1% year-over-year to RMB675.1 million. However, its gaming gross profit increased to RMB408.2 million in Q2 2019 from RMB212.5 million in Q2 2018, representing an increase of 92.1%. Its gaming gross profit margin increased from 30.2% in Q2 2018 to 60.5% in Q2 2019 as Xiaomi optimized its gaming distribution and had higher gaming revenue growth from content providers with a high gross profit margin. Its other internet value-added services grew by 89.9% year-over-year to RMB1.4 billion, primarily due to the strong growth in revenue from its fintech business and Youpin e-commerce platform.

Introduction to Xiaomi’s e-commerce platform Youpin

Xiaomi has been focusing on enriching its internet services and content to strengthen its advertising business. Many of its internet services are leading on its smartphones, its Mi App Store, Mi Browser, Mi Security, and Mi Music ranked 1st and Mi Video ranked 2nd in their respective categories in mainland China in terms of MAU on its smartphones in June 2019.

Furthermore, its news feed service ranked 1st in terms of MAU on its smartphones in mainland China, reaching 71.0 million MAU in June 2019, representing a year-over-year increase of 31.0%. Its search service also ranked 1st on its smartphones in mainland China in terms of search query volume in the second quarter of 2019.

Xiaomi developed various entry points for its search function, including browser, negative one screen, launcher searchbox, and its AI assistant. Leveraging its increasingly diversified services and
multi-dimensional data, Xiaomi is able to further improve its algorithm and enhance its users’ experience. Services like news feed and search allow Xiaomi to diversify its advertising customer base.

Internet service revenue outside of advertising and gaming from mainland China smartphones, including those generated from the Youpin e-commerce platform, fintech business, TV internet services and overseas internet services, increased by 108.8% over the corresponding quarter in 2018, accounting for 36.0% of the total internet service revenue in the second quarter of 2019.

For the six months ended June 30, 2019, the gross merchandise volume (“GMV”) of its Youpin e-commerce platform grew to RMB3.8 billion, an increase of 113.9% YoY. In June 2019, more than 65% of Youpin’s GMV came from non-Xiaomi smartphone users.

Revenue from its fintech business increased to RMB792.0 million in Q2 2019, representing year-over-year growth of 62.7%. Its current fintech business focuses on consumer loans and supply chain financing. With its sophisticated risk management model and technology capability, and extensive user base and supply chain partners, Xiaomi had a solid business foundation and potential to grow. In the meanwhile, Xiaomi is also actively exploring other fintech business opportunities.

Its TV internet services are also fast-growing and increasingly diversified. TV internet services revenue is mainly generated from advertising, paid subscription, and app distribution. In June 2019, Xiaomi had over 3 million paid subscribers, representing a year-over-year increase of 83.1%. Xiaomi offers a variety of membership services, including video membership, sports memberships, and children membership. Its subscription services have expanded to other non- Xiaomi TVs to serve a wider user base.

Xiaomi’s Overseas markets

With the overseas expansion of its smartphone business, its overseas internet service revenue also increased significantly. Xiaomi continued to build and strengthen its service offerings in overseas markets. In June 2019, its browser ranked 1st among all browsers in India in terms of MAU on its smartphones. In the second quarter of 2019, the average revenue per user (“ARPU”) in overseas markets recorded a year-over-year increase of 133.0%.

Xiaomi has maintained strong growth in the overseas markets in the second quarter of 2019. Its revenue from the overseas markets grew 33.1% year-over-year to RMB21.9 billion in the second quarter of 2019.

Xiaomi will continue to build and expand its new retail channels in the overseas markets. As of June 30, 2019, there were a total of 520 Mi Home stores overseas, representing a 92.6% year-over-year growth, of which 79 stores were located in India. Furthermore, in India, Xiaomi had more than 1,790 Mi Stores that cater to tier two and rural areas of India as of June 30, 2019.

According to Canalys, in the second quarter of 2019, Xiaomi ranked among the top five in over 40 countries and regions in terms of smartphone shipments. According to IDC, its smartphones have ranked 1st in India in terms of shipments for eight consecutive quarters. In addition, according to Canalys, in Q2 2019, Xiaomi ranked 4th in terms of smartphone shipments for Western Europe, representing a year-over-year increase of 53.2%.

Xiaomi ranked 2nd in open market channels in Spain in terms of smartphone shipments in Q2 2019. Xiaomi has been developing operator channels in Europe. Its flagship smartphones, such as Mi MIX 3 and Mi 9 series, have been launched in operator channels in the United Kingdom, France, Spain, Italy, and Switzerland.

AIoT

In Q2 2019, Xiaomi continued the implementation of its “Smartphone + AIoT” dual-engine strategy and its AIoT platform continued to maintain its leading position. As of June 30, 2019, the number of connected IoT devices (excluding smartphones and laptops) on its IoT platform reached approximately 196 million units, representing a year-over-year increase of 69.5%.

The number of users who have five or more devices connected to Xiaomi’s IoT platform (excluding smartphones and laptops) increased to approximate 3 million, representing a year-over-year increase of 78.7%. In the six months ended June 30, 2019, the shipments of its AI speakers exceeded 4 million units.

In June 2019, its AI assistant had 49.9 million MAU, making it one of the most used AI voice interactive platforms in China. In June 2019, 45% of its AI speaker MAU used voice control to interact with their IoT devices at least once that month.

Xiaomi continued to open up its AIoT platform to build a more vibrant AIoT ecosystem. Its Mi Home app had 30.4 million MAU in the second quarter of 2019 and more than half of the MAU in mainland China were from non-Xiaomi smartphone users. Xiaomi will continue to invest in the development of its open AIoT platform to attract more third parties and users to join this AIoT platform.

The Group’s AIoT Strategy committee will further enhance the development of its AIoT technology, by building a comprehensive AIoT ecosystem, strengthening its research and development, and realizing synergies across business units to improve its smart devices’ connectivity and user experiences.

For example, Xiaomi continues to develop technologies for files to be seamlessly transferred between its smartphones and laptops, as well as for intelligent projection to be enabled between its smartphones and smart TVs.

Xiaomi’s Investments

As of June 30, 2019, Xiaomi invested in a total of over 270 companies with an aggregated book value of RMB28.7 billion, representing year-over-year growth of 20.8%. Xiaomi also expanded its investment into supply chain companies to strengthen its partnership with key component suppliers and to enhance its abilities in advanced technology sourcing and manufacturing.

As of the date of this announcement, Xiaomi invested in 12 supply chain companies. Among those, three of the investee companies were listed on the STAR Market in China. Xiaomi believes its investments not only allowed Xiaomi to establish close partnerships with the investee companies but also provided Xiaomi with recurring investment income.

In the second quarter of 2019, Xiaomi generated net gains on disposal of investments (after tax) of RMB551.8 million.

China e-commerce platform Pinduoduo reported total revenues in the second quarter of RMB7,290.0 million (US$1,061.9 million), an increase of 169% from RMB2,709.0 million in Q2 2018 according to its official announced financial results.

How is Pinduoduo a valuable e-commerce platform for top tier cities in China?

Pinduoduo’s GMV in the 12-month period ended June 30, 2019 was RMB709.1 billion (US$2103.3 billion), an increase of 171% from RMB262.1 billion in the twelve-month period ended June 30, 2018.

Pinduoduo’s average monthly active users in Q2 2019 reached 366.0 million, an increase of 88% from 195.0 million in Q2 2018. And, its total number of active buyers in the 12-month period ended June 30, 2019 was 483.2 million, an increase of 41% from 343.6 million in the 12-month period ended June 30, 2018.

Compared with other e-commerce platforms in Q2 2019:

• Alibaba marketplace: 674 million
• JD: 321.3 million
•  Vipshop: 33 million

The annual spending per active buyer in the twelve-month period ended June 30, 2019 was RMB1,467.5(US$213.8), an increase of 92% from RMB762.8 in the twelve-month period ended June 30, 2018.

Its sales and marketing expenses for the same period grew by 105% year-over-year to RMB6,103.7 million, or 84% of its total revenues.

Pinduoduo Unaudited Financial Results in Q2 2019

Total revenues were RMB7,290.0 million (US$1,061.9 million), an increase of 169% from RMB2,709.0 million in the same quarter of 2018. The increase was primarily due to an increase in revenues from online marketing services.

• Revenues from online marketing services were RMB6,467.1 million (US$942.0 million), an increase of 173% from RMB2,371.0 million in the same quarter of 2018.
• Revenues from transaction services were RMB822.9 million (US$119.9 million), an increase of 143% from RMB338.1 million in the same quarter of 2018.

Total costs of revenues were RMB1,594.7 million (US$232.3 million), an increase of 311% from RMB387.8 million in the same quarter of 2018. The increase was mainly due to higher costs for cloud services, call center, and merchant support services.

• Total operating expenses were RMB7,185.7 million (US$1,046.7 million), compared with RMB8,957.4 million in the same quarter of 2018.
• Sales and marketing expenses were RMB6,103.7 million (US$889.1 million), an increase of 105% from RMB2,970.7 million in the same quarter of 2018, mainly due to an increase in online and offline advertisement and promotions.
• General and administrative expenses were RMB278.3 million (US$40.5 million), a significant decrease from RMB5,800.7 million in the same quarter of 2018, primarily due to a one-time share-based compensation expense recorded in April, 2018.
• Research and development expenses were RMB803.7 million (US$117.1 million), an increase of 332% from RMB186.0 million in the same quarter of 2018. The increase was primarily due to an increase in headcount and the recruitment of more experienced R&D personnel, and an increase in R&D-related cloud services expenses and share-based compensation expenses.

Operating loss was RMB1,490.4 million (US$217.1 million), compared with operating loss of RMB6,636.2 million in the same quarter of 2018. Non-GAAP operating loss6 was RMB898.4 million (US$130.9 million), compared with RMB815.7 million in the same quarter of 2018.

Net loss attributable to ordinary shareholders was RMB1,003.3 million (US$146.1 million), compared with a net loss of RMB6,493.9 million in the same quarter of 2018. Non-GAAP net loss attributable to ordinary shareholders7 was RMB411.3 million (US$59.9 million), compared with a non-GAAP net loss attributable to ordinary shareholders of RMB673.4 million in the same quarter of 2018.

Basic and diluted net loss per ADS were RMB0.88(US$0.12), compared with a net loss per ADS of RMB13.40 in the same quarter of 2018. Non-GAAP basic and diluted net loss per ADS were RMB0.36(US$0.04), compared with non-GAAP basic and diluted net loss per ADS of RMB1.40 in the same quarter of 2018.

Net cash provided by operating activities was RMB4,148.0 million (US$604.2 million), compared with RMB1,087.6 million in the same quarter of 2018, primarily due to an increase in online marketing services revenues.

Cash, cash equivalents and restricted cash were RMB40.7 billion (US$5.9 billion) as of June 30, 2019, compared with RMB30.5 billion as of December 31, 2018.

Top mini programs in H1 2019; WeChat vs. Alipay vs. Baidu

The revenues of China’s short video market grew by over 7 times to 46.7 billion yuan (US$6.6 bn) in 2018. It’s expected to continue the fast growth and exceed 100 billion yuan (US$14.16 bn) in 2019 and 211 billion yuan (US$29.87 bn) by 2021.

The advertising revenues of China’s short video market reached 18.8 billion yuan in 2018 with an increase of 733% YoY, accounting for over 40% of total revenues in this market. It’s expected to exceed 100 billion yuan (US$14.6 bn) by 2021.

Short video apps are among the most accessed daily apps in China. Its growth in MAU remains strong. As of Jun 2019, this market saw 95.44 million new MAU, compared to 72.12 million MAU in Jun 2018. New user growth was driven by tier-3, tier-4 35 y-o and above users. Learn how Kwai (Kuaishou) grew its DAU by 50 million in 4 months here.
Log in below or subscribe here to see the top short-video mobile apps.

Top short video apps compared: Tik Tok vs. Kwai – Part 1 Platforms, Part 2

The monthly active users of WeChat (Weixin) reached 1,133 million during the second quarter of 2019, up 7% year-on-year according to Tencent’s announced financial results. Smart device MAU of QQ was 707 million.

WeChat Mini Programs ecosystem has become more vibrant, attracting more developers and service providers in Q2 2019. The number of medium-to-long-tail Mini Programs has more than doubled year-on-year while the nature of Mini Programs has become more diversified.

For example, content Mini Programs allow users to conveniently create, upload and share interesting videos, music, and news within WeChat. More than a dozen content Mini Programs have attained over 1 million DAU.

Key user metrics including time spent per user, daily messages and video uploads sustained solid year-on-year growth during the second quarter.

QQ active users in Q2 2019

QQ MAU grew slightly by 0.6% to 807.9 million in Q2 2019 while mobile QQ reached 706.7 million, down 0.3%. And, smart device MAU of social networking app QZone grew by 2% to 553.5 million.

Tencent launched a major version upgrade for Mobile QQ, which contributed to an increase in the number of daily messages and strengthened user engagement. To enrich the core chat experience, Tencent enhanced functionalities for messages in voice and video. To broaden user connections, Tencent upgraded algorithms to recommend new friends based on common interests and shared contacts.

Tencent also introduced QQ Mini Programs, with entertainment and games-related Mini Programs attaining particular popularity among QQ users.

Tencent’s social advertising revenues were RMB12.0 billion in Q2 2019, up 28% year-on-year, driven by increased inventories and impressions for products such as WeChat Moments and QQ KanDian. See Tencent performance summary here.

The monthly active users of China mobile internet dropped to 1.136 billion in June 2019 from 1.138 billion in March 2019 according to data from QuestMobile.

How Becky built its e-commerce success on WeChat

Netease net revenues and net income attributable to the company’s shareholders increased by 15% and 46% year-over-year in the second quarter of 2019, according to its announced financial results.
Netease launched several new games in China and abroad in Q2 2019, further enriching their strong game portfolio that spans a variety of genres. In addition to Knives Out and Identity V, a number of new games have gained user recognition in Japan, including Life-After and Cyber Hunter.

Netease Q2 2019 Financial Highlights

• Net revenues were RMB18,769.0 million (US$2,734.0 million), an increase of 15.3% compared to the second quarter of 2018.
  • Online game services net revenues were RMB11,433.4 million (US$1,665.5 million), an increase of 13.6% compared to the second quarter of 2018.
  • E-commerce net revenues were RMB5,246.9 million (US$764.3 million), an increase of 20.2% compared to the second quarter of 2018.
  • Advertising services net revenues were RMB581.6 million (US$84.7 million), a decrease of 8.3% compared to the second quarter of 2018.
  • Innovative businesses and others net revenues were RMB1,507.2 million (US$219.5 million), an increase of 23.2% compared to the second quarter of 2018.
• Gross profit was RMB8,125.8 million (US$1,183.7 million), an increase of 12.2% compared to the second quarter of 2018.
• Total operating expenses were RMB4,639.6 million (US$675.8 million), a decrease of 5.5% compared to the second quarter of 2018.
• Net income attributable to the Company’s shareholders was RMB3,071.4 million (US$447.4 million). Non-GAAP net income attributable to the Company’s shareholders was RMB3,645.4 million (US$531.0 million).^[1]
• Basic earnings per ADS were US$3.47; non-GAAP basic earnings per ADS were US$4.12.^[1]

Netease Q2 2019 and Recent Operational Highlights

• Launched exciting titles in China including BuildTopia, Love is Justice, Sky and an updated version of Tom and Jerry.
• Strengthened global presence with NetEase’s games receiving international recognition:
  – Knives Out remained popular in Japan and topped the iOS grossing chart several times in May and June.
  – Identity V reached Japan’s top 3 iOS grossing chart for the first time in July.
  – Introduced new popular titles in Japan and the U.S. including Life-After (previously known as Night Falls: Survival), Cyber Hunter and Super Mecha Champions.
• Launched a new video game studio in Montréal, with plans to hire local and international talent to further enhance NetEase’s research and development capabilities.
• Acquired a minority stake in Behaviour Interactive Inc., Canada’s largest independent game studio.
• Announced strategic collaborations with world-famous IP owners including Marvel Entertainment and The Pokémon Company.
• Advanced pipeline with upcoming titles including Fantasy Westward Journey 3D, Xuan Yuan Sword: Dragon Upon the Cloud, Pokémon Quest and Bloom & Blade.
• NetEase Cloud Music launched its community module known as “Cloud Village,” which influences the way users experience music.

Chinese search engine Sogou’s search-related revenues totaled $276 million in Q2 2019, accounting for 91% of total revenues according to its announced financial results.

Sogou Performance Highlights in Q2 2019

• Total revenues were $303.6 million, a 1% increase year-over-year, or an 8% increase in RMB terms.
• Net income attributable to Sogou Inc. was $21.3 million. Non-GAAP net income attributable to Sogou Inc. was $27.8 million.
• Sogou Mobile Keyboard had 453 million DAUs (daily average users), up 17% year-over-year. As China’s largest voice app, it processed up to 680 million daily voice requests.

During the second quarter, our business maintained steady growth and we made important progress in key areas,” said Xiaochuan Wang, CEO of Sogou. “Search revenues continued to grow faster than the industry average. At the same time, by leveraging the large user bases for both Search and Mobile Keyboard, we have gradually built up our big data and recommendation service at a company level and are focusing on unlocking its commercial value.”

Mr. Wang added,

We also geared up our efforts to drive innovation in language-centric AI technologies and continued to advance our leadership in voice and computer vision. Moreover, leveraging our core AI capabilities, we made significant progress in upgrading the smart hardware business, with new AI-enabled products launched and more in the pipeline. Going forward, we believe the steady growth in our core search business, coupled with the solid progress in the big data and recommendation service and smart hardware, will support sustainable expansion across our businesses.

Joe Zhou, CFO of Sogou, said, “We continued to drive top-line growth during the second quarter. Notably, revenues generated from the big data and recommendation service ramped up quickly year-over-year. Although we anticipate the external environment will remain challenging in the second half of 2019, we expect to experience positive momentum from our new growth drivers.”

Financial Results in Q2 2019

Total revenues were $303.6 million, a 1% increase year-over-year.

Search and search-related revenues were $276.2 million, a 2% increase year-over-year. The increase was primarily due to growth in auction-based pay-per-click services. Auction-based pay-for-click services accounted for 88.2% of search and search-related revenues, compared to 84.7% in the corresponding period in 2018.

Other revenues were $27.5 million, an 11% decrease year-over-year. The decrease was primarily due to lower sales of smart hardware products as a result of Sogou’s continued efforts to upgrade its smart hardware strategy.

Cost of revenues was $195.9 million, a 9% increase year-over-year. Traffic acquisition cost, a primary driver of the cost of revenues, was $146.3 million, an 8% increase year-over-year, representing 48.2% of total revenues, compared to 45.0% in the corresponding period in 2018. The increase was driven by price inflation.

Gross profit was $107.8 million, an 11% decrease year-over-year. Non-GAAP gross profit was $107.9 million, a 12% decrease year-over-year.

Total operating expenses were $96.1 million, largely flat year-over-year.

• Research and development expenses were $50.6 million, a 10% decrease year-over-year, representing 16.7% of total revenues, compared to 18.7% in the corresponding period in 2018. The decrease was primarily due to a decrease in professional fees.
• Sales and marketing expenses were $36.7 million, an 8% increase year-over-year, representing 12.1% of total revenues, compared to 11.2% in the corresponding period in 2018. The increase was primarily attributable to an increase in personnel-related expenses.
• General and administrative expenses were $8.8 million, a 31% increase year-over-year, representing 2.9% of total revenues, compared to 2.2% in the corresponding period in 2018. The increase was primarily due to an increase in expenses related to non-core business initiatives.
• Operating income was $11.6 million, compared to operating income of $24.8 million in the corresponding period in 2018. Non-GAAP operating income was $18.1 million, compared to non-GAAP operating income of $29.9 million in the corresponding period in 2018.
• Other income $4.2 million, compared to $3.4 million in the corresponding period in 2018.

The income tax benefit was $1.4 million, compared to income tax expense of $3.0 million in the corresponding period of 2018. The income tax benefit resulted from a tax filing adjustment of income tax expense previously recognized, which was due to a reduction in taxable income related to Chinese government initiatives to encourage investment in R&D.

Net income attributable to Sogou Inc. was $21.3 million, compared to net income of $33.2 million in the corresponding period in 2018. Non-GAAP net income attributable to Sogou Inc. was $27.8 million, compared to net income of $38.2 million in the corresponding period in 2018.

Basic and diluted earnings per ADS were $0.05. Non-GAAP basic and diluted earnings per ADS were $0.07.

As of June 30, 2019, Sogou had cash and cash equivalents and short-term investments of $1.1 billion, compared with $1.0 billion as of December 31, 2018. Net operating cash inflow for the second quarter of 2019 was $56.2 million. Capital expenditures for the second quarter of 2019 were $12.1 million.

China’s mobile internet users overview for the first half of 2019

The gross domestic product (GDP) of China was 45,093.3 billion yuan (US$6,565.68 billion) in the first half of 2019, a year-on-year increase of 6.3% at comparable prices according to the preliminary estimates of National Bureau of Statistics of China. The year-on-year GDP growth for the first quarter was 6.4 percent, and 6.2% for the second quarter.

The value-added of the primary industry was 2,320.7 billion yuan, a year-on-year growth of 3.0%; the secondary industry was 17,998.4 billion yuan, a year-on-year growth of 5.8%; and the tertiary industry was 24,774.3 billion yuan, a year-on-year growth of 7.0%.

Agricultural Production

In the first half of 2019, the value-added of crop farming grew by 3.9% year on year, 0.5 percentage point slower than the first quarter. The overall output of summer grain was 141.74 million tons, an increase of 2.93 million tons over last year, up by 2.1 percent, hitting the highest record as that of 2017.

The structure of crop farming was further optimized, as planting area for cotton and soybean increased. In the first half, the output of eggs grew by 3.6% year on year, and that of milk grew by 1.7%. The output of pork, beef, mutton, and poultry was 39.11 million tons, down by 2.1 percent, among which, the output of beef, mutton and poultry grew by 2.4 percent, 1.5% and 5.6% year on year respectively, while the output of pork went down by 5.5%.

Industrial Production

In the first half, the year-on-year growth rate of total value added of the industrial enterprises above the designated size was 6.0 percent, 0.5 percentage point slower than the first quarter.

In June, the year-on-year growth rate of total value added of the industrial enterprises above the designated size was 6.3 percent, 1.3 percentage points faster than that of May, up by 0.68% month on month.

An analysis by types of ownership showed that the value-added of the state holding enterprises went up by 5.0% year on year; that of share-holding enterprises up by 7.3%; and enterprises funded by foreign investors or investors from Hong Kong, Macao, and Taiwan up by 1.4%.

In terms of sectors, the value-added of the mining grew by 3.5% year on year, the manufacturing grew by 6.4% and the production and supply of electricity, thermal power, gas, and water grew by 7.3%. The value-added of strategic emerging industries grew by 7.7 percent, 1.7 percentage points faster than that of the industrial enterprises above the designated size.

The value-added of high-tech manufacturing grew by 9.0 percent, 3.0 percentage points faster than that of the industrial enterprises above the designated size, accounting for 13.8% of the total value added of the industrial enterprises above the designated size, 0.8 percentage point higher than that of the same period last year.

The output of new energy vehicles and solar cells grew by 34.6% and 20.1% year on year.

In the first five months of 2019, the total profits made by industrial enterprises above the designated size was 2,379.0 billion yuan, down by 2.3% year on year, 1.1 percentage points less than that of the first four months. The profits of industrial enterprises above the designated size in May grew by 1.1 percent, while that for April was down by 3.7% year on year.

The profit rate of the business revenue of industrial enterprises above the designated size was 5.72 percent, 0.2 percentage point higher than that of the first four months in 2019.

Service Sector Grew Fast

In the first half, the service sector maintained good momentum. The value-added of information transmission, software, and information technology services, that of leasing and business services, that of transport, storage and postal services, and that of financial intermediation grew by 20.6 percent, 7.8 percent, 7.3% and 7.3% year on year respectively, or 13.6 percentage points, 0.8 percentage point, 0.3 percentage point and 0.3 percentage point faster than that of the tertiary industry.

In the first half of 2019, the Index of Services Production increased by 7.3% year on year, 0.1 percentage point lower than that of the first quarter; specifically, that for June grew by 7.1 percent, 0.1 percentage point faster than that of May.

In June, the Business Activity Index for services was 53.4 percent, continuing to stay above the 50-point mark separating growth from contraction. The Business Activities Expectation Index for services was 60.3 percent, staying at a high level.

In the first five months, the business revenue of service enterprises above the designated size increased by 10.1% year on year, 0.3 percentage point faster than that of the first four months; specifically, the business revenue of strategic emerging services, high-tech services and technology services demonstrated fast growth, which increased by 12.5 percent, 12.3% and 12.0% respectively, or 2.4 percentage points, 2.2 percentage points and 1.9 percentage points faster than the growth of the service enterprises above the designated size.

Market Sales Demonstrated a Stable and Rising Trend with Higher Growth Rate and Share for Online Retail Sales

Investment Witnessed Steady Growth and the Investment in High-tech Industries Grew Fast

In the first half, the investment in fixed assets (excluding rural households) reached 29,910.0 billion yuan, up by 5.8% year on year, 0.2 percentage point faster than that of the first five months, or 0.5 percentage point slower than that of the first quarter.

Specifically, the private investment reached 18,028.9 billion yuan, up by 5.7%. The investment in the primary industry went down by 0.6%; the secondary industry went up by 2.9 percent, among which, that in manufacturing went up by 3.0%; the tertiary industry went up by 7.4 percent, among which, that in infrastructure was up by 4.1%.

The investment in the high-tech manufacturing industry increased by 10.4 percent, 4.6 percentage points faster than the total investment; the investment in high-tech services went up by 13.5 percent, 7.7 percentage points faster than the total investment. In June, the investment in fixed assets (excluding rural households) grew by 0.44% month on month.

In the first half, the total investment in real estate development was 6,160.9 billion yuan, up by 10.9 percent, or 0.9 percentage point slower than that of the first quarter. The floor space of commercial buildings sold reached 757.86 million square meters, down by 1.8% year-on-year. The total sales of commercial buildings were 7,069.8 billion yuan, up by 5.6 percent, maintaining the same speed as that of the first quarter.

Imports and Exports Showed Slight Growth

In the first half, the total value of imports and exports of goods was 14,667.5 billion yuan, a year-on-year increase of 3.9 percent, 0.2 percentage point faster than the first quarter.

The total value of exports was 7,952.1 billion yuan, up by 6.1%; the total value of imports was 6,715.5 billion yuan, up by 1.4%. The trade balance was 1,236.6 billion yuan in surplus, up by 41.6% year on year.

The import and export of general trade increased by 5.5 percent, accounting for 59.9% of the total value of the imports and exports, an increase of 0.9 percentage point compared with the same period last year.

The exports of mechanical and electrical products increased by 5.3 percent, accounting for 58.2% of the total value of exports. The total value of imports and exports by private enterprises increased by 11.0 percent, accounting for 41.7% of the total value, 2.7 percentage points higher than the same period last year.

In June, the total value of imports and exports was 2,561.9 billion yuan, a year-on-year increase of 3.2%. The total value of exports was 1,453.5 billion yuan, up by 6.1 percent, and the total value of imports was 1,108.3 billion yuan, down by 0.4%.

In the first half, the export delivery value of industrial enterprises above the designated size reached 5,836.1 billion yuan, a year-on-year increase of 4.2%. In June, the export delivery value of industrial enterprises above the designated size reached 1,055.5 billion yuan, up by 1.9 percent, 1.2 percentage points faster than that of May.

Consumer Price

In the first half, the consumer price went up by 2.2% year on year, 0.4 percentage point faster than the first quarter.

Specifically, the price went up by 2.2% both in the urban and rural areas. Grouped by commodity categories, prices for food, tobacco and alcohol went up by 3.9% year on year; clothing up by 1.8%; housing up by 2.0%; articles and services for daily use up by 1.1%; transportation and communication down by 1.0%; education, culture and recreation up by 2.5%; medical services and health care up by 2.6%; other articles and services up by 2.2%.

In terms of food, tobacco and alcohol prices, prices for grain went up by 0.5 percent, pork up by 7.7 percent, fresh vegetables up by 9.2%. Core CPI excluding the price of food and energy went up by 1.8% year on year, 0.1 percentage point lower than that of the first quarter.

In June, the consumer price went up by 2.7% year on year, increasing at the same speed as last month, and down by 0.1% month on month.

In the first half of 2019, the producer prices for industrial products went up by 0.3% year on year, 0.1 percentage point faster than the first quarter. In June, the producer prices for industrial products were unchanged compared with the same period last year, down by 0.3 percentage month on month.

In the first half, the purchasing prices for industrial producers went up by 0.1% year on year, increasing at the same speed as the first quarter. In June, the prices dropped by 0.3% year on year and down by 0.1% month on month.

Employment

In the first half, the newly increased employed people in urban areas totaled 7.37 million, accounting for 67% of the whole-year target. In June, the surveyed unemployment rate in urban areas was 5.1 percent, 0.1 percentage point higher than the previous month.

Specifically, the surveyed unemployment rate of the population aged from 25 to 59 was 4.6 percent, 0.5 percentage point lower than that of the surveyed unemployment rate in urban areas. The urban surveyed unemployment rate in 31 major cities was 5.0 percent, the same as the previous month.

In June, the employees of enterprises worked averagely 45.7 hours per week. At the end of the second quarter, the number of rural migrant workers reached 182.48 million, an increase of 2.26 million over the same period last year, up by 1.3 percent, and 0.1 percentage point faster than the first quarter.

Residents Income Grew Faster than Economic Growth and Urban-Rural Income Ratio Continued to Narrow Down.

In the first half, the nationwide per capita disposable income of residents was 15,294 yuan, a nominal growth of 8.8% year on year, 0.1 percentage point faster than that of the first quarter; the real increase was 6.5% after deducting price factors, 0.2 percentage point higher than the economic growth.

In terms of permanent residence, the per capita disposable income of urban households was 21,342 yuan, real growth of 5.7%. The per capita disposable income of rural households was 7,778 yuan, real growth of 6.6%.

The per capita disposable income of urban households was 2.74 times of the rural households, 0.03 less than that of the same period last year. The median of the nationwide per capita disposable income was 13,281 yuan, a nominal increase of 9.0% year-on-year.

Views from Global Media

• Bloomberg: China’s Debt Ratio Is Growing as Its Economy Loses Steam
• Reuters: China second-quarter GDP growth slows to 27-year low as trade war bites, more stimulus seen
• FT: China’s economy grows at slowest rate in nearly 30 years