Nasdaq-listed Chinese live streaming social media giant, YY Inc. has bought Singapore-based rival Bigo for $1.4 billion in a move that chief executive Li Xueling says represents the group's intentions to focus internationally.
The transaction is made up of $343 million in cash with the remainder in the equivalent of YY’s shares.
YY has been the biggest shareholder of Bigo since its Series D funding round in June last year. It held a 31.7% stake while Li himself, as an early-stage investor, also held an undisclosed share.
Founded in 2014, Bigo owns its eponymous live streaming site and a social app called LIKE. Bigo was ranked tenth among all non-game apps by revenue last year, while LIKE was ranked the ninth of world’s most downloaded apps in Q4 2018, according to third-party researcher SenseTower.
Most of Bigo’s investors are Chinese, including Ping An Overseas Holding, Morningside Venture Capital, Gaorong Capital and Engage Capital. Bertelsmann Asia Investments was also an investor.
Chinese short video sites are expanding overseas as growth in the domestic market slows down. But instead of setting up overseas branches, companies have tended towards mergers and acquisitions.
Chinese consumers are not as wild about short videos as they used to be. The growth of monthly active users among all short video apps slowed down to only 1.9% in the third quarter of last year, down from 24.6% a year previously. Tightening regulation has also dampened enthusiasm with two new regulations passed last month to scrutinise every comment made on video streaming sites.
No wonder that companies are looking abroad. But they have realised that they can't simple copy-and-paste Chinese apps into other markets. TikTok, the most successful Chinese international short video app, has grown its market share via multiple investments and acquisitions. TikTok’s parent company Toutiao has bought or invested in several overseas platforms including Indian news feed Dailyhunt, Indonesian news feed BABE, US short video app Flipagram, news distributor News Republic and - in late 2017 - music streaming site Musical.ly.
TikTok’s acquisitions have also been impressively successful. With a better algorithm for local customers, TikTok always ranks first among all free download apps in India. It is top of the list of downloaded Indonesian apps too. Its expansion in the US was a little bumpy following a $5.7 million fine from the Federal Trade Commission after illegally collecting personal information from children. But while this showed the company’s lack of understanding of local regulations, as the second most downloaded app in the US, TikTok showed the huge potential of the market.
YY and Bigo are trying to do the same thing. As one of the top short video and live streaming platforms in Southeast Asia, YY wants to generate revenue from Bigo’s 69 million monthly active users. YY reached 90.4 monthly active users in the fourth quarter of last year. It needs momentum from overseas to help it catch up with other players in the market.