While property brokerage platforms like Beike are laying off staff amid slowing home sales (see last week’s Talking Point China’s plans to introduce a property tax), Kuaishou is charging headlong into the real estate brokerage business.
Last week, 36Kr, a tech news portal, reported that the short-video platform is gearing up to launch its own home sales service. In fact, Kuaishou has already sold over 250 properties in cities like Shenyang, Dalian, Guilin and Harbin, generating as much as Rmb285 million in gross transaction value in an initial phase of the plan this summer.
While Kuaishou is looking to diversify into new areas, a smaller rival in the short-video sector is filing for an initial public offering.
Huafang Group recently submitted its prospectus for a listing on the Hong Kong Stock Exchange. The timing and valuation of the offering, however, were not disclosed.
Huafang isn’t as well known as its competitors in the space, despite its flagship platform Huajiao, which has been operating for some time. “If Huafang Group hadn’t submitted the prospectus in Hong Kong, few people in the internet circle would have paid any attention to the company,” Beijing Business Today scoffed, rather unfairly.
Huafang is an investment holding company that controls a portfolio of livestreaming platforms and social network products and services. Its main offerings include 6.cn, a YouTube-like platform, and the video chat app HOLLA. But its livestreaming platform Huajiao is the biggest money-maker, accounting for three quarters of its revenues in the first eight months of this year.
In its prospectus, Huafang announced rather vaguely that it plans to use the proceeds from the IPO to beef up its current products, content and services. A refresh might be beneficial. Huajiao was launched back in June 2015 as a pure-play livestreaming product – and as the brainchild of tech tycoon Zhou Hongyi, who is best known for his flagship antivirus software developer Qihoo 360.
At launch it was one of the country’s first livestreaming platforms. To drum up interest Zhou championed it frequently on his social media accounts, as well as hiring actress Fan Bingbing (probably the biggest of China’s entertainment stars back then) as a ‘Chief Experience Officer’ (aka leading spokesperson) for the app.
Competition in livestreaming quickly intensified, however. Rivals like YY, Momo and Inke grabbed market share. To keep hold of its top streamers, Huajiao offered a higher cut of their earnings from virtual gifts sent by fans than other platforms. While rivals offered streamers 30–45% of the value of the gifts, Huajiao offered a whopping 70% for the most popular talent, eating heavily into margins.
As of the end of August this year, Huajiao boasted 29.5 million monthly active users, putting it in fourth place locally (the leader is Bytedance’s Douyin). However, even though its revenues doubled between 2018 and 2020, going from Rmb2 billion to Rmb4 billion, sales were only a quarter of Momo’s in 2020 and 7% of Hong Kong-listed Kuaishou’s Rmb59 billion during the same period.
At least investors will be happy to note that the company is profitable. Huafang has been in the black since 2019, primarily on the sales of virtual gifts.
Livestreaming bosses believe there is still a lot of room for sales to grow in their sector. According to iResearch, a consultancy, China’s social media livestreaming could reach Rmb415 billion in sales in 2021. Many young people now express a preference for online contact over in-person interaction. One survey from Kugo in 2018 was alrready claiming that more than 85% of respondents born after 1995 saw online socialising as the main attraction of surfing the internet, ahead of playing mobile games, watching videos and listening to music.
As for Zhou Hongyi of Qihoo 360 fame, Huafang will be the fourth company that he has taken to market. “The IPO is certainly a good move for Zhou and it is also a good thing for all the employees of Huajiao and 6.cn. As for whether it can seize the next trend and incubate a ground-breaking application after its listing, we can only wait and see,” the blogger hlkaiba concluded.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.