Momo, A Flirting App With 180M Users, Is Latest Chinese Tech Firm To File For A U.S. IPO

This year’s been notable for Chinese tech IPOs in the U.S.. Alibaba, close rival and Weibo — China’s Twitter equivalent — have listed on North American soil, but there’s another incoming. Momo, China’s top hook-up app, has filed for a $300 million public listing, as Technode first noted.

The company intends to list on the Nasdaq. Earlier this year it was speculated to be considering a U.S. IPO at a valuation of around $2 billion. It’s valuation isn’t clear at this point.

Momo claims 180.3 million users in China and 60.2 million monthly active users, which puts it second to behemoth WeChat in terms of Chinese mobile social apps. The service’s particular strength is location and it allows users to connect with others based on their proximity to each other, the idea being that you can find people who are in the same pub, club, party etc. So, in terms of Western comparisons, it is more of a Grindr for all genders and sexual orientations, than a Tinder.

The three-year-old service, which clocked 25.5 million daily active users on average in September, is free to use, but makes money via a membership subscription and, as of the second half of 2013, it also sells digital content. That latter category includes in-app purchases in third-party games, premium stickers/emoticons, and mobile marketing services — companies set up business accounts which users can opt-in to follow for information and promotions.

Still early days for its money-making, Momo says it recorded $13.9 million in revenue during the first half of this year — of which 63% came from its 2.3 million membership subscriptions — but incurred a net loss of $8.3 million over the six-month period. That said, revenue was up from $3.1 million in the second half of 2013. The company says it recorded a $3.8 million net loss in 2012, and a $9.3 million net loss in 2013.

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Image via Technode

The app is Chinese-only after an English language version of its service closed down earlier this year. Momo teased plans for a new service focused on non-Chinese folks back in the summer, and its IPO documents make mention of such an app but the main focus is on China and Chinese users overseas, according to its IPO prospectus:

The most critical element in our growth strategy is to rapidly expand our user community. China has the world’s largest smartphone population and is currently our biggest market….

We will continue to build our presence among Chinese speaking populations around the world and seek to foster a broader and more engaged user community. We also plan to launch a new mobile application designed to attract English speakers.

Momo isn’t being particular specific about how it will use the capital raised. It intends to invest in research and development to improve product, sales and marketing to increase its userbase and widen the number of developers on its games platform, and to potentially make acquisitions. Essentially, this seems to be about riding the messaging wave that has propelled WeChat close to 500 million active users (mostly in China) and U.S. confidence in Chinese tech firms.

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One thing to note may be China’s current crackdown on messaging apps. Viber, Kakao Talk and Line are among the overseas services to have been banned this year, while Chinese apps have been forced to crackdown on ‘unsuitable’ content. Momo was slammed by state media over apparent links to prostitutes, while WeChat removed as many as 20 million accounts related to pornography, prostitution and fraud.

From the Momo prospectus:

Under [Chinese] regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Furthermore, internet content providers are also prohibited from displaying content that may be deemed by relevant government authorities as “socially destabilizing” or leaking “state secrets” of the PRC.

Failure to comply with these requirements may result in the revocation of licenses to provide internet content or other licenses, the closure of the concerned platforms and reputational harm.

Momo revealed that it has content censorship measures in place, but stated that it is difficult to track such a high volume of users — it says 655.2 million messages are sent per day — while it is not always clear what kind of content that the government is cracking down on and when.

Its low rates of revenue allow Momo to take advantage of the Jobs act and hide some of its financial figures for now, so we will need to wait on further details, such as its proposed valuation.

Momo raised a $40 million Series B round in August 2012, with Alibaba reportedly among the list of undisclosed investors. Prior to that it raised $2.5 million, according to data from Crunchbase.