On the evening of September 30th, Beijing time, Yalla Group Limited (hereinafter referred to as “Yalla”), the operating entity of Yalla, a well-known voice social platform in the Middle East, was officially listed on the New York Stock Exchange with the stock code “YALA”. The opening price was US$9.75/ADS, and the opening price rose by 30%.
The lead underwriters of this IPO are Morgan Stanley and Haitong International, and the co-underwriter is Tiger Securities. The final price of the IPO is US$7.5/ADS. 18.6 million shares are issued without the green shoe mechanism, and the financing amount is US$139.5 million.
Focus on developing the rich mine of the Arabic social market
Exploring the investment opportunities in the Arabic social market is an important reason why Yalla was able to successfully land on the New York Stock Exchange in just over four years.
It is understood that there is a serious imbalance between the supply and demand of the online social and online entertainment markets in the Middle East and North Africa. According to a report by Frost & Sullivan, in 2019, there were 137 million active online social and entertainment users in the Middle East and North Africa, spending an average of 230 minutes per person per day, far more than many other regions. However, the selection of online social and entertainment applications in Arabic is relatively limited, and few large online social and online entertainment companies will localize their Arabic user interfaces according to local cultural characteristics.
At the same time, the Middle East and North Africa region has a relatively high level of economic development, a high penetration rate of mobile Internet, and a high level of social welfare, making business opportunities in this region more attractive. According to a report by Frost & Sullivan, many countries in the region are relatively wealthy in terms of per capita nominal GDP, such as Qatar, the United Arab Emirates, Kuwait, and Saudi Arabia, with per capita nominal GDPs of $66,060, $39,806, $28,664, and $23,187 in 2019, respectively, far exceeding the global average of $11,319 in 2019.
Yalla has seized this unique market opportunity. Founded in 2016, this social software company is headquartered in the UAE and is a local company that is very familiar with the culture and social customs of the Middle East. Yalla is positioned to develop free voice social applications for stranger interaction, real-time chat, and game entertainment. It replicates the daily life of people in the Middle East on social networks, allowing them to chat at any time and anywhere, while respecting the culture and user behavior of the Middle East and conducting localized product design.
It is understood that the reason why Yalla chose voice as a breakthrough for social products is that, on the one hand, compared with other online communication methods such as text, pictures, and videos, voice communication is more convenient and easier. On the other hand, compared with video chat, voice chat is more suitable for the cultural norms of the Middle East and North Africa. Voice-centricity is one of the key reasons for Yalla’s success in the Middle East and North Africa.
The largest voice social and entertainment platform in the Middle East and North Africa
At present, Yalla has created two successful products-Yalla Voice Chat Room and Yalla Ludo Online Casual Game Platform. Yalla currently supports 8 languages. In addition to the Arabic market, which is the most concerned, it also takes into account the Turkish, Spanish and Portuguese markets. There is currently no Chinese version.
From the perspective of product concept, Yalla creates the ultimate user experience through three aspects. First, Yalla’s products pay great attention to detail design, and based on localization capabilities to echo user habits, they can better meet users’ daily needs; second, Yalla tends to maintain the equal identity of users, pay attention to the regional culture of each language area, encourage users to boldly share and participate, and hold activities on every traditional festival to bring users a high sense of cultural belonging and identity. At present, it has formed an active, highly sticky and healthy community atmosphere and differentiated product competitiveness; third, all Yalla’s current products do not have any advertisements, follow the principle of optimal user experience, and revenue mainly comes from users’ consumption of virtual items and upgrade services.
Because the product design meets the needs of users in the Middle East, the number of Yalla users has shown explosive growth in recent years. The average number of monthly active users (MAUs) in the fourth quarter of 2018 was 2.2 million, which increased to 4.2 million in the fourth quarter of 2019, a year-on-year increase of 90.9%. By the second quarter of 2020, the average number of monthly active users had increased to 12.5 million, and the number of paying users was 5.4 million. In the second quarter of 2020 alone, these users spent a total of 309.5 million hours online in Yalla’s voice chat room and played 407.2 million rounds of casual games on Yalla Ludo’s game platform. Active users of Yalla chat rooms and Yalla Ludo game platforms spent an average of approximately 4.5 hours and 1.4 hours on Yalla’s platform each day, respectively.
It is worth mentioning that according to data from APP Annie, an APP data analysis platform, as of September 27, 2020, Yalla’s Yalla – Free Voice Chat Rooms, a voice social software, ranked first in the best-selling entertainment apps in six countries, including Bahrain, Turkey, Oman, Qatar, Kuwait, and Jordan, according to the download ranking of the Google App Store. Yalla Ludo, a game social software, ranked first in the best-selling board game apps in nine countries, including Saudi Arabia, Oman, Kuwait, the United Arab Emirates, Qatar, Bahrain, India, Tanzania, and Finland, according to the download ranking of the Apple App Store.
According to a report by Frost & Sullivan, Yalla is already the largest voice-centric social network and entertainment platform in the Middle East and North Africa, based on revenue in 2019.
In terms of financial data, Yalla’s revenue has grown strongly in recent years. In 2018, Yalla’s operating income was US$42.4 million, which increased to US$63.5 million in 2019, an increase of 49.8%. In 2020, it continued to maintain rapid growth, with operating income of US$52.8 million in the first half of the year, a year-on-year increase of 99.6% over the first half of 2019. Since its establishment, Yalla has maintained good profitability, with net profits of US$20.2 million and US$28.9 million in 2018 and 2019 respectively, and net profit of US$25.2 million in the first half of 2020.
The funds raised from Yalla’s IPO will be used for Yalla’s brand promotion, user acquisition, technology research and development, user experience improvement, and general corporate purposes. The Yalla board of directors believes that as the Middle East and North Africa region becomes more affluent, mobile Internet becomes more popular, and the size of the younger generation continues to expand, the demand for online social and online entertainment in the Middle East and North Africa will continue to grow, which will be an online social network and entertainment market with great market potential.
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