Another social networking platform is seeking an initial public offering in the United States.
Chinese dating and chat app Momo, developed by Beijing Momo Technology, has finished its latest round of fundraising. It plans to go public later this year with an estimated valuation of US$2 billion.
Momo has finished two rounds of fundraising since it was launched, with tech behemoth Alibaba investing US$40 million in the group during its first round of fundraising, the Wall Street Journal reported.
Using location-based technology, Momo allows users to get in touch with people in nearby areas and view each other’s profile, including nickname, age and hobbies. Users can exchange instant messages and share pictures and audio notes.
The app, launched in 2011, claims to have nearly 120 million registered users, with monthly active users reaching 40 million this February, according to its website.
Momo said it started making profits last November. Income mainly comes from social games, stickers, membership fees and advertisements.
The question is, is it worth US$2 billion?
Some industry insiders doubt if its business model, which is to serve as a site for meeting like-minded strangers, is sustainable at all.
However, Momo is addressing such concerns and the group has been transforming itself to become a platform to help people with shared interests connect in their communities in China.
The strategy might work, but its rival Weiju is already offering the same thing.
Also, the government’s ongoing crackdown on pornographic content online may affect Momo’s IPO process. A recent investigative report by Xinhua News Agency showed that the app is being used for prostitution. The group denied having any role in such illegal trade and welcomed an official investigation.
Still, the risk that it may be restricted, or worse, closed down in view of such unsavory reputation remains.
The tech industry has been undergoing a broad correction phase since April, so it might not be a good timing for firms in the sector to go public. Last year, 63 percent of the US IPOs stayed above their offering price on the first day of trading, according to IPO tracking firm Syndicate Pro. As of April, however, the ratio was down to just 33 percent.
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