Tian Ge Interactive Holdings Ltd., the parent company of online video broadcasting platform9158.com, files for IPO on the Hong Kong Stock Exchange to raise up to HK$1.6 billion (US$210mn). It will begin trading on July 9. It will be the second Chinese online show platform, after YY, to go public.
The company was founded in 2008 by Fu Zhengjun. Before Tian Ge, Fu developed an online video chatting room service that allowed up to ten people in one session.
In November 2008 Tian Ge launched a real-time video broadcasting site, 9158.com, which would become an online amusement park comprised of online show performers, third parties - performer agents, show room/channel owners and show distributors, and audiences. A mobile version was launched in 2012.
Unlike the brick-and-mortar amusement park who sells tickets or other physical goods to make revenues, 9158′s revenues are primarily from virtual gift sales. As of the end of 2013, 910 items, from virtual rose to virtual island, had been created for users to purchase to reward performers. An average of 5.7 billion gifts were sent out monthly in the year.
Users can either purchase items on 9158 sites through online payment services such as Alipay, 99bill or 19Pay, or from third-party resellers. 9158 the platform, performers, and third parties share the total revenues.
In 2010 Sina, one of the largest online news portals in China and former owner of Weibo, invested US$10 million in Tian Ge and transferred the unsuccessful UC, the instant messaging service developed by Sina, to the latter. Tian Ge would then launch Sina Show, the same with 9158.com.
As Tian Ge is based in Zhejiang Province in the eastern coastal area of China, the audiences of 9158 are from second- or lower- tier cities in Central and Southeast China. The addition of Sina Show brought Tian Ge users from North China who would turn out to contribute a larger percentage of revenues to the company than their peers on 9158 from 2012 - Tian Ge concludes that users on Sina Show make higher monthly salaries. In 2013 Sina Show contributed 42.4% of the total revenue while 9158 accounted for 35.3%.
The company made RMB384 million, RMB456 million and RMB548 million (US$88mn) in 2011, 2012 and 2013, respectively. 11.5% users spent
In November 2013, total users on Tian Ge platforms reached 200 million. There were 577,000 performers with 26, 000 show rooms and 10.8 million monthly active users, as of December 2013. Active users spent an average of 20 hours each month.
paying users reached 270,000 as of the end of 2013. 11.5% of them spent more than 1200 yuan (about US$200) in 2013 and 3.1% spent more than 6000 yuan (US$1000) with Tian Ge!
The business model would then be adopted by many Chinese Internet companies, from traditional online video site 6.cn, digital music provider Kuwo, to video chatting service YY. All of them began with singing performance. YY went public on the NASDAQ in late 2012 and its largest revenue source has been virtual item through YY Music. China's Ministry of Cultures counted the online music show as a monetization approach for digital music and concluded that it accounted for about half of the total revenues generated from Chinese Web-based music services in 2013.
Both YY and Tian Ge, however, have been expanding to other forms of entertainment performance, gameplay broadcasting and online education.
Tian Ge claims, citing a report by research company iResearch, that it has the largest market share, 33.9%, in China' s online video broadcasting market. Before 2013, Tian Ge made way more money from it than YY, but the the latter would far surpass it in 2013 that made US$141 million in online video broadcasting, 60% higher than Tian Ge's.
YY also moved earlier that introduced gaming to monetize user base. In 2013 the company made US$99.5 million from gaming, higher than Tian Ge's total annual revenue.
Tian Ge added a mobile game San Guo Zhi, licensed from a third party, in 2013. 6 to 8 licensed mobile games will be launched in 2014, Tian Ge said. Tian Ge also established a joint venture, Tian Hu, with Qihoo's subsidiary for web game (or browser game) in 2013 - Tian Ge has 51% stake in it. The company said that 10% of the funds raised through IPO will be used for gaming business including developing games in house.
The company expects more monetization approaches, such as monthly premium service subscriptions, will work too. We heard that it was also working on revolutionizing traditional Karaoke bars with the Internet-based business model.
The founder of Tian Ge once said the company would go for IPO in the U.S. Commenting on the change in the place, the management said that the online show business will be better understood by Asian investors, as reported by NetEast (report in Chinese). It's true there're similar services in other Asian countries such as South Korea and Japan.
Apart from the investment from Sina, the company previously raised funding from Squared Venture Capital and IDG-ACCEL China. Sina now is the second largest shareholder in the company.
It originally appeared on TechNode.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.