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Shares of China’s main competitor ByteDance fell as a result of signs that the country’s users are spending less on its live services after increased losses for the company.
Kuaishou’s short video app has a tougher competition from ByteDance’s Douyin, Chinese version of TikTok, and online shopping groups such as Alibaba and Pinduoduo.
Shares of the company fell to 11.3 percent in Hong Kong on Tuesday, removing Kuaishou’s market capitalization by $ 14 billion. Kuaishou’s initial public offering, sponsored by the Chinese internet group Tencent. It has raised more than $ 5.4 billion in February.
Kuaishou’s results came when Beijing stepped up its study of the country’s technology sector. The company is one of nearly three dozen technology groups that have been counted to solve the anti-competitive practices. Regulators have also expanded new control rules live playback and limit some suggestions from video hosts.
Kuaishou earns a large portion of its revenue by giving users of live streaming hosts to shower small gifts such as virtual beer stickers (Rmb1.5) or “golden dragons” (Rmb1.400).
519.8m
Monthly users of Kuaishou
Four years ago, it earned 95 percent of revenue that way, but in the three months to March, that user spending fell 20 percent year-over-year. Sales of virtual gifts accounted for just 42.6% of total quarter-on-quarter revenue, according to a earnings report released by Kuaishou on Monday.
The growth of the company’s advertising business helped offset the decline, as revenue in this segment rose 161% year-on-year. Advertising accounted for 50.3% of total revenue during the quarter.
Kuaishour’s total revenue rose 36.6% year-on-year to Rmb17bn, but sales of all its business lines fell below the Bernstein research group’s estimates. Miss was especially great for Kuaishou’s e-commerce business line.
The company’s operating loss grew to Rmb7.3bn ($ 1.14bn) in the quarter, up from Rmb5bn a year earlier.
Profit figures Wall Street banks, including Morgan Stanley, called for a reduction in Kuaishou’s share prices. Analysts at Morgan Stanley say Kuaishou’s growing investment, higher expected annual losses and weaker direct income have contributed to the target price reduction.
Livestreaming e-commerce, where online hosts provide products to users, is growing in China as the Covid-19 pandemic stopped buyers from staying home and shopping on smartphones.
But the competition with Douyin, Alibaba, Pinduoduo and JD.com is fierce.
“We are more cautious about Kuaishou’s e-commerce growth,” Bernstein analysts wrote.
Bernstein also noted an increase in Kuaishou’s sales and marketing expenses, which is 69 percent of revenue. The research team estimated that the amount Kuaishou paid to acquire each new user rose to Rmb65 per user over the period in the fourth quarter to Rmb55 from.
Kuaishou said he was making investments to increase the user base and engagement. Over the three months, users of its apps had a population of 519.8 million, up from 495.0m a year earlier.
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