iAsk with Xiaohuan Cao: An IPO Against the Market

In the past 2018, Hong Kong Stock Exchange listed over 210 new companies, raising more than 290 billion Hong Kong dollars, a record high since 2010. It surpassed the New York Stock Exchange, the Tokyo Stock Exchange and the Nasdaq, and regained the first place in the world.

In the past year, Jun Lei rang the bell for Xiaomi at the Hong Kong Stock Exchange; Xing Wang listed Meituan Dianping at the Hong Kong Stock Exchange; Mingzhe Ma initiated the IPO of Ping An Good Doctor at Hong Kong Stock Exchange. An increasing number of star companies incorporated the Hong Kong stock market into their own business layout, including Mobvista – the “Leading Stock of the Global New Economy Smart Mobile Advertising”.

On December 12, 2018, Mobvista was officially listed on the Hong Kong Stock Exchange, allowing the market to re-recognize the domestically top and globally top-ten third-party mobile advertising platform.

On the company website of Mobvista, it says: "Since the foundation of Mobvista, we have been committed to providing business partners with full-stack products and services to help them maximize the value of their achievements."

In the past five years, Mobvista has realized reaching a daily number of 950 million devices, covering users in more than 200 countries. According to the data from iResearch Consulting Group, among the top 50 most-downloaded Chinese mobile apps released overseas in 2017, more than 90% of advertisers used the promotional services of Mobvista.

In this issue of "iAsk Leaders", we interviewed Xiaohuan Cao, Co-founder and President of Mobvista, to explore the secret behind the new forces of Hong Kong stocks.

IPO against the market was driven by the company's internal needs

Although the Hong Kong stock market created an IPO legend in 2018, another indisputable fact is that the Hang Seng Index fell by 13.7% for the whole year. The Hang Seng Index, which was ahead of the global stock market by 36% last year, has more or less lost the worship from investors.

Xiaohuan Cao, Co-founder of Mobvista, told iAsk that the IPO was against the trend of the market. Investment banks suggested they not go against the market. However, Mobvista still took actions based on its own development pace and internal needs of the enterprise and did not follow the trend of the economic cycle.

iAsk noticed that unlike many "unicorn" companies that were under capital pressure to go public in Hong Kong, Mobvista had achieved three consecutive years of profit before listing.

Based on publicly disclosed data, in 2015-2017, Mobvista generated revenues of US$158 million, US$268 million and US$312 million respectively, with a CAGR (Compound Annual Growth Rate) of over 40%. The net profits for 2015-2017 respectively were US$8.71 million, US$19.78 million and US$27.32 million, with a CAGR of 77.1%.

Five years ago, upon the founding of Mobvista, it was positioned as a traffic aggregation platform for mobile Internet companies to go global. As Xiaohuan Cao put it, "We felt that in 2013, the accumulation of technology, talent and capital in China had reached such a phase where Chinese Internet companies were able to compete with the overseas ones in the global arena. Thus, when we were making our strategic choices, we set this direction as our only target. We didn't focus on other things but this."

Within the past five years, Mobvista has established strategic partnerships with the world's top Internet platforms such as Google, Twitter and Facebook, serving advertisers in more than 60 countries including Baidu, Alibaba, Uber, Flipkart and 360. The mobile traffic system covers more than 200 countries and regions around the world.

Nowadays, five years later, the market is still extremely broad. Based on the data of iResearch, the global mobile app promotion expenditure is increasing year by year, with a CAGR of 16.2% in 2017-2022. The scale of the programmed advertising market reached US$27.3 billion in 2017 and is expected to rise to US$69 billion in 2022. The CAGR for 2017-2022 is 20.4%.

Taking advantage of the trend and rising against it, Mobvista has made both unexpected and reasonable choices.

Gloria Ai VS Xiaohuan Cao

Gloria Ai: Investors have reached several conclusions about 2018, claiming that the current economic cycle is at the bottom, that the policy is at its lowest point and the same for market funds. However, Mobvista decided to brave it out against the trend?

Xiaohuan Cao: We consider the IPO against the trend of the market. Investment banks suggested we not go against the market. However, Mobvista still took actions based on its own development pace and internal needs of the enterprise and did not follow the trend of the economic cycle.

Gloria Ai: This is a really confident move!

Xiaohuan Cao: It is nothing more than keeping a low profile and making less profits while taking a step forward at this time. For international business, there’s a fundamental difference whether a Chinese brand in an overseas market is a listed company or not. It involves the investors’ perception of the company and the transparency of the company. So eventually we decided to go public no matter how bad the market condition was.

Gloria Ai: I am quite optimistic about your company. Although the economy has cycles, if you are doing something worthwhile, the short-term lower pricing and valuation will not impact the long-term development of the company.

Xiaohuan Cao: Yes, let the investors fish the bottom. We voluntarily offer a bottom-fishing opportunity.

Since June 2018, there has been insufficient subscription of shares in the Hong Kong stock market. Among the IPO of new shares, eight firms encountered insufficient subscription in July, 4 in October and 6 in December, with a total of 22 in the whole year.

In sharp contrast, the company's IPO result showed that they attracted an oversubscription of 1.83 times. Apparently the market that doesn’t lie chose to believe in Mobvista. For any listed company, investors care more about the future prospects. For Mobvista, the listing in Hong Kong is just a beginning.

Globalization is the biggest benefit for China Mobile Internet companies in the next five years

Mobvista serves as an aggregation platform in between advertisers and providers of service traffic.

After the peak of user growth and the disappearance of demographic dividends in the Internet industry in the past years, the trillion-scale ToB market is considered to be the next major opportunity. Since the foundation of the company, Mobvista, which dedicates itself to serving the Chinese companies to go global, has already proven the huge potential of the ToB market.

As a big data and AI technology-driven company, Mobvista publishes advertisers' ads on the global in-app advertising spaces within reach, and delivers interesting advertising content to app users based on an accurate grasp of user appetites. Through the AI system, Mobvista is extending its reach in the upstream and downstream of the mobile marketing industry, linking advertisers, developers and users in the mobile ecosystem to build a large-scale business closed loop.

Equipped with the technology, channels and patterns, Mobvista gained traction as expected.

Xiaohuan Cao said that the average customer retention rate in the past three years has remained above 85%, which means that among the 100 customers who cooperate with Mobvista in the first year, at least 85 of them would continue to cooperate in the second year. Customers are full-category app developers, covering games, tools, e-commerce, social content and so on.

In order to improve its own traffic ecosystem, Mobvista has also acquired NativeX, a native advertising platform from the United States, and GameAnalytics, a Danish mobile game data analysis company, to further strengthen the market position of Mobvista in the field of overseas mobile advertising.

But all this is still not enough, Xiaohuan Cao said, "We have spent five years building a service network covering more than 200 countries around the world. We hope in the coming five years, that is, at the tenth anniversary of the foundation of Mobvista, we can truly become such a partner that has significant influence in this industry and is irreplaceable to our customers."

Gloria Ai VS Xiaohuan Cao

Gloria Ai: Through the “iAsk Mobvista” today, I felt strongly that you have a very clear strategy, such as conducting research and development at all costs. Also, your strategy are both global and local, as we call it "think globally, act locally”, meaning that you localize the operation in every segment of the market while upholding a global vision. I noticed that Mobvista merged and acquired a lot of quality targets, which surprised me a lot. Why would Mobvista grow through mergers and acquisitions in terms of capital as a young startup company?

Xiaohuan Cao: In fact, the two companies acquired are located in the United States and Europe respectively, which implies our strategy for the US and the European market. The US company we acquired now represents us in the entire US market, which is our largest single market outside of China. The European company we acquired is actually a statistics platform, but it demonstrates the broadest coverage of the entire gaming industry, because this company actually develops the most popular statistical tool in the game industry. Through the company's network, we can smoothly infiltrate our own advertising business into it.

Gloria Ai: Instead of building everything from scratch in the emerging global market, you chose to find a like-minded partner and infiltrate into this market through mergers, acquisitions and becoming a shareholder.

Xiaohuan Cao: Yes, to accelerate the process of our strategic development.

Gloria Ai: If you were to face and foresee the future, what would you wish for Mobvista in a decade?

Xiaohuan Cao: We hope in the coming five years, that is, at the tenth anniversary of the foundation of Mobvista, we can truly become such a partner that has significant influence in this industry and is irreplaceable to our customers, because I believe that globalization is the biggest benefit for China Mobile Internet companies in the next five years.

Gloria Ai Notes:

Aggregation was one of the most mentioned words by Xiaohuan Cao. Connecting the mobile Internet companies that yearn to go global on one side and the media platform with traffic on the other, Mobvista has become one of the most important axes between China and the world. Five years ago, they saw the trend of going global despite of uncertainty, but in the next five years, they will see the future of globalization along with the globalization trend. What remains unchanged is that they are always committed to helping Chinese companies go global and eliminating the boundaries of information.