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NQ Mobile Music Radar's Mission Impossible

|Includes: Link Motion Inc. (LKM)

NQ Mobile purchased 55% of Music Radar's parent company Shanghai Yinlong for approx $7.5 mil in cash and stock last year, giving this unknown company a valuation of around $15 mil. In Comparison, in July 2013, Carlos Slim invested $40 mil in Shazam for an estimated 10.1% stake through American Movil, giving this pioneer in music search a valuation of around $400 mil.

On October 10, 2013, NQ Mobile reported that Music Radar's app was downloaded 15 million times and had a run rate of 3 million search queries per day. Today, May 5, 2014 NQ announced that Music Radar has an incredible run rate of 7 million searches per day - virtually doubling searches per day within 7 months.

In comparison, in January 2014 Shazam CEO Rich Riley stated that Shazam had a user base of about 420 million and had 18 million search queries per day. Recall that Shazam is the pioneer of mobile music search, has enormous global brand equity, and has been in the music search business since 1999 vs. NQ Music Radar's May 2013 beta launch (October 2013 official launch). Furthermore, Shazam has been downloaded more than 100,000,000 times (1,066,864 reviews) on the Google Play store vs Music Radar's 100,000 times (1032 reviews). On iOS, in the United States, Shazam is ranked #8 (64,679 reviews) in music apps category vs. Music Radar's well "below the radar" ranking of #1278 (20 reviews).

Of course, one should assume the bulk of Music Radar's users are in China even if such incredible download numbers and users are to be believed, but considering Chinese consumers are prolific pirateers of music, China is likely immaterial to sales derived from revenue sharing deals with labels.

Now, going back to Music Radar's incredible numbers, how can Music Radar ramp up an astonishing 7 million queries per day, even if we were to assume a viral install base 30 million (2 x 15 million October downloads) - while Shazam generated around 18 million queries per day from their 420 million user base? This would imply an astounding conversion rate of 23.3% for little known Music Radar vs. only 4% for super Shazam.

The math simply doesn't add up. So lets look at it another way, this time with an unknown element of total downloads vs. users (which NQ mgt conveniently omitted in today's release). With 7 million searches per day, Music Radar would be encroaching 40% of Shazam's 18 million daily searches. Now, if we assume Shazam's reported conversion ratio of users:searches, Music Radar would have to possess 175 million downloads or users (.40 x 420mil) through today's press announcement - by all measures a seemingly impossible feat.

Well in summary, it appears that NQ Mobile either:

a) continues to pump it's incredible "larger than life" strategy unabated.


b) acquired a "once in a lifetime" bargain with it's investment in Shanghai Yinlong.

OT footnote: The real Music Radar is the #1 website for musicians launched in 2007 owned by Future PLC. Considering this is a music discovery site for musicians, it appears NQ Mobile may be infringing this company's brand equity as well.