Momo, the Nasdaq-listed mobile social networking company, is acquiring Tantan, China’s Tinder-like app, for a combination of USD600.9 million in cash and 5.3 million newly issued shares, according to a press release by Momo. The move came as Momo looks to entrench its position in Chinese online-dating landscape and diversify its revenue sources.
Founded in 2015, Tantan models on Tinder and is a leading social and dating app among young Chinese female. It has raised an aggregated USD120 million from investors including Nasdaq-listed live-streaming platform YY Inc., Genesis Capital, and SAIF Partners. In its latest round in June 2017, Tantan was valued at USD320 million.
The 3-year-old company has a decent user base. Tantan CEO WANG Yu claimed that the app has over 60 million validated users and 6 million daily active users as of June 2017.
According to Chinese market researcher Yiguan, female users account for almost half of its total users, significantly higher than that of Momo’s 23%. The deal will enable Momo to balance the gender ratio across its products by tapping into Tantan’s user base.
Tantan’s large pool of female users was recognized by Momo, as the latter’s CEO TAN Yan said in the release that “we also respect Tantan’s product strategy that focuses on the customer experience of female users.” He also said Momo will continue to center on social networking and the acquisition enriches the company’s product line in the social space.
Mr. Yu WANG, chairman and CEO of Tantan, added that “Momo and Tantan have their own strengths in their respective markets and among targeted customers. The acquisition is a critical strategic upgrade to cover a greater range of user demographics and needs, and build up a larger social networking market through complementary businesses and strategic synergy. We are very confident in our future development.”
Momo, starting as a social app for strangers, similar to Tantan, has successfully pivoted to become a live streaming and video-based social networking platform. The pivot was so successful that now live streaming business is churning out most of its revenue. According to its quarterly report, live streaming contributed to 85% of its total revenue in Q3 2017.
To some investors, being too reliant on a single revenue source is a dangerous sign especially when the Chinese live streaming market is seeing increasingly fierce competition.
Tantan appears to have a clear vision for monetization, thanks to Tinder’s exploration in the field of stranger social networking. Tinder launched a Gold subscription plan last August that sent its parent Match Group’s share price to a record high in 2 years. Taking a page from the success, Tantan also rolled out a membership service last year to provide paid users with premium features.