David Li and the YY team
YY Inc., a China-based social communications service, has filed for an initial public offering of $100 million as it attempts to thaw the frozen market for China IPOs in the U.S.
YY, which I profiled in July, provides group voice and video sessions for a wide range of uses in a kind of Skype-meets-YouTube-meets-Zynga format. People create sessions for concerts, language classes, fashion or sports and up to tens of thousands of people participate in the sessions. I think of it as user-generated virtual stadiums.
YY would be the first China company to IPO since March, according to Renaissance Capital. The China IPO market has been languishing since a spate of accounting scandals involving China companies. Currently just two of the 13 China IPOs since the beginning of 2011 are trading above their offering prices, Renaissance reports.
As of September 2012, YY has a remarkable 400.5 million registered users. In August, the company had about 70 million monthly active users, and reached 10 million concurrent users, its highest level yet.
For the first six months of 2012 the company generated RMB324.5 million ($51.1 million), up from RMB118.8 million in the year-ago period. The company had a net loss of RMB105.8 million ($16.7 million), down from a loss RMB226.5 million in the year-ago period. As I noted in my profile of the company, YY has a diverse mix of business lines which are: online gaming(46.4% of revenue in the first half of 2012), music (28.6%), online advertising, primarily on the company?s Duowan gaming portal (15.5%) and other (9.5%).
The company originally launched in 2008 as YY, a voice-based communications service that enabled gamers to voice-chat over the Internet and text-chat in real-time while playing online games. The company has since expanded beyond gaming into a larger social communication platform and added video streaming.
YY generates a significant portion of its revenue from virtual goods, which are listed under ?music? above. Users buy virtual roses and other virtual goods to give to performers. For example, singers, teachers or others can get these roses from audience members who like them. Some top performers make as much as?$20,o00 monthly, the company previously told me. The performers get to keep a portion of the cash that is used to purchase the roses, while YY keeps the rest.
YY could help ?rejuvenate a lot of industries,? Li told me in my previous story on YY.??As many know it?s very difficult to make real money on the music business because of rampant piracy.?But if you?re a talented singer or performer, and you have YY, a webcam and an Internet connection, then you can perform (and make money).?
As for competition, YY in its SEC filing lists iSpeak, Tencent?s QQtalk, and Dudu in China as well as Skype, in the voice communication space. In gaming, YY competes with 17173.com in its Duowan.com property. Other larger platforms that have gaming include QQ, Renren and Qihoo 360.
Li told me in an interview earlier this year that he sees the company moving beyond China and becoming a global company, but that it?s just a matter of time.
Major institutional shareholders of YY are Morningside China with 12.6%, Steamboat Ventures, with 12.2%, GGV Capital, with 8.8%, Tiger Global with 8.5%, and Favor Star Ltd. The CEO of YY is David Li and a major investor in YY is Lei Jun, the CEO of phone company Xaiomi.
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