28 February 2024

Wall Street Links Up With China's Tinder

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Shares of dating app Momo rose more than 10% in their market debut on the Nasdaq Thursday. This is the first Chinese tech initial public offering in the U.S. since Alibaba's blockbuster stock sale in September. Momo has more than 180 million registered users and it's catering to the most populous nation on the planet. The site already grew 160% from a year ago.

On top of that, Momo has some very good pals. Alibaba is a big investor. Jack Ma's company owns a 20% stake and plan to buy more shares as part of the IPO. 58.com a company often referred to as China's Craigslist, is also purchasing a stake. Momo raised $216 million from the stock sale.

Red flags: But Momo is still in the early stages of trying to figure out how to make money from them. The company only started to post revenue last year by selling membership subscriptions. Momo has 2.3 million paying customers so far. And the company is still not profitable.

What's more, only a small percentage of the people signed up for the app actually use it regularly. Momo said that it has only 60.2 million monthly active users and 25.5 million average daily users.

It's also not clear if an app like Momo can thrive on its own. Tinder, the wildly popular dating app in the United States that lets people swipe through a series of pictures to find someone they want to contact, is majority owned by Barry Diller's online media conglomerate IAC.

Bitter divorce: Chinese online gaming company Netease issued a statement Wednesday accusing Momo chairman and CEO Yan Tang, who had worked for Netease prior to starting Momo, of unethical conduct. Netease claims that Tang co-founded Momo while still working for Netease and that violated his employment agreement.

There have also been multiple reports in Chinese media outlets about how Momo is being used by prostitutes to find clients. At a bare minimum, it sounds like Momo has a reputation as something to be used for casual romantic entanglements as opposed to finding true love.

Still, investors brushed those concerns aside Thursday. With the backing of Alibaba's Jack Ma, it shouldn't be a huge surprise. But Momo needs to find a way to boost its revenue and actually earn a profit one day if it wants to live up to its name and become a true momentum (or momo) darling on Wall Street.

Click here to access the full article on CNNMoney.


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