Prospectus Summary
PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to buy our ADSs. In addition, this prospectus contains information from a report prepared by Analysys International, a third-party market research firm, or the Analysys Report. The Analysys Report was commissioned by us to provide information on the mobile social networking market in China.Our Business
Momo connects people in a personal and lively way.
Momo is a revolutionary mobile-based social networking platform. We enable users to establish and expand social relationships based on location and interests. Our platform includes our Momo mobile application and a variety of related features, functionalities, tools and services that we provide to users, customers and platform partners. We have established Momo as one of China’s leading mobile social networking platforms in less than three years since our inception.
Momo has become an integral part of the daily lives of many people in China, where the increasing proliferation of smartphones and network enhancement allow more people to be connected anytime and anywhere. With powerful and precise location-based features, we enable our users to connect with each other and expand relationships from online to offline, thereby making their social networking experience more real, personal and multi-dimensional.
We aim to offer our users an authentic social experience by encouraging them to provide detailed personal information on Momo. Leveraging our social interest graph engine and our analysis of user behavior data, we are able to provide users a customized experience based on their social preferences and needs. Momo users can maintain and strengthen their relationships through our private and group communication tools, content creation and sharing functions, as well as the offline social activities promoted on our platform.
Our user base has grown rapidly since we launched Momo in August 2011, as evidenced by the following:
Our large, growing and engaged user base creates a powerful network effect and a high barrier to entry.
Amid the fast evolving mobile internet market in China, we have focused on building and growing our user base and improving user experience. Our Momo mobile application is free of charge. We began to generate revenues in July 2013 from our membership subscription package, which provides members with additional functions and privileges. We generated 63.0% of our net revenues from membership subscription fees in the first half of 2014. We also began to generate revenues from mobile games, paid emoticons and mobile marketing services in the second half of 2013. We believe our large, engaged user base makes Momo attractive to mobile marketing customers and our platform partners. Our revenues more than quadrupled from US$3.1 million in the second half of 2013 to US$13.9 million in the first half of 2014. We had net losses of US$3.8 million, US$9.3 million and US$8.3 million in 2012, 2013 and the first half of 2014, respectively.
Our Industry
The mobile internet population in China has grown substantially due to rapid technological development, network enhancement and increasing affordability of smartphones. According to eMarketer, a third-party market research firm, the number of mobile internet users in China grew from 375.6 million in 2011 to 556.1 million in 2013, representing a compound annual growth rate, or CAGR, of 21.7%, and is expected to further increase to 712.4 million in 2017.
In recent years, mobile social networking applications began to proliferate in China with the further development of the mobile internet. As social networking applications started to integrate with the advanced features of smartphones in 2011, they underwent a transformation with more diverse content offerings in various formats, such as voice and video. In 2012, location-based services began to gain popularity in China. These developments have led to the rapid development of new mobile social networking applications based on location and interests, including Momo.
In China, mobile games and mobile marketing are common monetization methods for mobile social networking platforms. According to Analysys, the mobile game market in China has expanded rapidly and reached a total market size of RMB13.9 billion (US$2.3 billion) in 2013. The market is expected to further grow at a CAGR of 39.6% to RMB52.8 billion (US$8.7 billion) in 2017. In addition, according to Analysys, the size of the mobile marketing market in China reached RMB13.4 billion (US$2.2 billion) in 2013, and is expected to further grow at a CAGR of 69.5% to RMB110.8 billion (US$18.3 billion) in 2017. Location-based mobile applications allow mobile marketing customers to target more specific audiences or geographic regions, thus improving the effectiveness of marketing.
Our Strengths
We believe our success to date is largely attributable to the following key competitive strengths:
Our Strategies
We believe that we have a significant opportunity to further enhance the value we deliver to our users, customers and platform partners. We intend to pursue the following growth strategies to achieve our goal:
Our Challenges
Our ability to achieve our goal and execute our strategies is subject to risks and uncertainties, including those relating to our ability to:
In addition, we face risks and uncertainties related to our compliance with applicable PRC regulations and policies, particularly those risks and uncertainties associated with our control over Beijing Momo and its subsidiary, which is based on contractual arrangements rather than equity ownership.
Please see “Risk Factors” and other information included in this prospectus for a detailed discussion of the above and other challenges and risks.
Corporate History and Structure
We are a holding company incorporated in the Cayman Islands. We conduct our business through our subsidiary and our consolidated affiliated entity and its subsidiary in China. We started our operations in July 2011 when our founders established our consolidated affiliated entity Beijing Momo Technology Co., Ltd., or Beijing Momo, in China. In order to facilitate foreign investment in our company, we incorporated our holding company under the name of Momo Technology Company Limited in the British Virgin Islands in November 2011. In July 2014, Momo Technology Company Limited was redomiciled in the Cayman Islands as an exempted company registered under the laws of the Cayman Islands, and was renamed Momo Inc. In December 2011, we established Momo Technology HK Company Limited, or Momo HK, a wholly owned subsidiary, in Hong Kong. Subsequently, Momo HK established a wholly-owned PRC subsidiary, Beijing Momo Information Technology Co., Ltd., or Beijing Momo IT, in March 2012. In May 2013, we established Chengdu Momo Technology Co., Ltd., or Chengdu Momo, as a wholly owned subsidiary of Beijing Momo. In addition, we recently formed a Delaware subsidiary, which is currently conducting market research on the U.S. market and new product development.
PRC laws and regulations place certain restrictions on foreign investment in and ownership of internet-based businesses. Accordingly, we conduct our operations in China principally through Beijing Momo and its subsidiary, Chengdu Momo, over which we exercise effective control through contractual arrangements among Beijing Momo IT, Beijing Momo and its shareholders.
The following diagram illustrates our corporate structure, including our principal subsidiaries and consolidated affiliated entity and its subsidiary, as of the date of this prospectus:
Notes:Corporate Information
Our principal executive offices are located at 20th Floor, Block B, Tower 2, Wangjing SOHO, No.1 Futongdong Street, Chaoyang District, Beijing 100102, People’s Republic of China. Our telephone number at this address is +86-10-5731-0567. Our registered office in the Cayman Islands is located at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.
Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.immomo.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue 4th Floor, New York, New York 10017.
Implications of Being an Emerging Growth Company
As a company with less than US$1.0 billion in revenue for the last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of our internal control over financial reporting. Under the JOBS Act we also do not need to comply with any new or revised financial accounting standards until the date that private companies are required to do so. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
We will remain an emerging growth company until the earliest of (i) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.0 billion; (ii) the last day of our fiscal year following the fifth anniversary of completion of this offering; (iii) the date on which we have, during the previous three year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
Conventions that Apply to this Prospectus
Unless otherwise indicated or the context otherwise requires, references in this prospectus to:
Our reporting and functional currency is U.S. dollar. This prospectus contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations of Renminbi into U.S. dollars were made at the rate at the end of the applicable period, that is, RMB6.0537 to US$1.00, the noon buying rate on December 31, 2013, or RMB6.2036 to US$1.00, the noon buying rate on June 30, 2014, in each case as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. We make no representation that the Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. On October 31, 2014, the noon buying rate for Renminbi was RMB6.1124 to US$1.00.
Unless the context indicates otherwise, all share and per share data in this prospectus give effect to a share split effected on September 12, 2012 in which each of the previously issued ordinary shares and preferred shares were split into 10 ordinary shares and preferred shares, respectively. In addition, unless the context indicates otherwise, all information in this prospectus assumes no exercise by the underwriters of their over-allotment option.
The Offering
The depositary will hold Class A ordinary shares underlying your ADSs. You will have rights as provided in the deposit agreement among us, the depositary and holders and beneficial owners of ADSs from time to time. We do not expect to pay dividends in the foreseeable future. If, however, we declare dividends on our ordinary shares, the depositary will pay you the cash dividends and other distributions it receives on our Class A ordinary shares after deducting its fees and expenses in accordance with the terms set forth in the deposit agreement. You may surrender your ADSs to the depositary in exchange for our Class A ordinary shares. The depositary will charge you fees for any exchange.We may amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended.
To better understand the terms of the ADSs, you should carefully read the “Description of American Depositary Shares” section of this prospectus. You should also read the deposit agreement, which is filed as an exhibit to the registration statement that includes this prospectus. We intend to use the net proceeds from this offering primarily for general corporate purposes, which may include research and development, sales and marketing activities, technology infrastructure, capital expenditures and other general and administrative matters. We may also use a portion of these proceeds for the acquisitions of, or investments in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments. See “Use of Proceeds” for more information. [We will not receive any of the proceeds from the sale of ADSs by the selling shareholders.]Depositary
Summary Consolidated Financial and Operating Data
The following summary consolidated income and comprehensive income data for the years ended December 31, 2012 and 2013, summary consolidated balance sheet data as of December 31, 2012 and 2013 and summary consolidated cash flow data for the years ended December 31, 2012 and 2013 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated income and comprehensive income data for the six months ended June 30, 2013 and 2014, summary consolidated balance sheet data as of June 30, 2014 and summary consolidated cash flow data for the six months ended June 30, 2013 and 2014 have been derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus and have been prepared on the same basis as our audited consolidated financial statements and include all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the periods presented.
Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods. You should read this Summary Consolidated Financial Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.
The following table presents our summary consolidated balance sheet data as of December 31, 2012, 2013 and June 30, 2014.
Notes:
The following table presents our summary consolidated cash flow data for the years ended December 31, 2012 and 2013, as well as the six months ended June 30, 2013 and 2014.
Summary Operating Data
The following charts show our MAUs and average DAUs (as defined below) for each of the months indicated. “MAUs” refers to monthly active users. Prior to June 2014, we defined MAUs during a given calendar month as Momo users who were DAUs for at least one day during the 28-day period counting back from the last day of such calendar month. Beginning from June 2014, we define MAUs during a given calendar month as Momo users who were DAUs for at least one day during the 30-day period counting back from the last day of such calendar month. “DAUs” refers to daily active users, which are Momo users who accessed our platform through Momo mobile application and utilized any of the functions on our platform on a given day. Average DAUs for a particular period is the average of the DAUs on each day during that period.
The following chart shows the total number of our members as of the end of each of the quarters indicated. Members are Momo users who have paid the subscription fees for our membership services. The number of members as of a given date refers to the number of users whose membership subscriptions are in their service period as of such date.