The number of connected devices (excluding smartphones and laptops) on Xiaomi’s IoT platform reached approximately 150.9 million units in 2018, a year-on-year increase of 193.2%. Xiaomi AI assistant Xiaoai had been installed and activated on more than 100 million smart devices as of December 31, 2018, and had over 38.8 million monthly active users in December 2018. 

Xiaomi recorded 174.9 billion yuan (US$26.04bn) in revenue for the year ended December 31, 2018, a year-on-year increase of 52.6%. Revenue from international markets grew 118.1% year-on-year to 70.0 billion yuan (US$10.42bn), accounting for 40.0% of the total.

• 65.1% of revenues were from smartphones (US$16.94bn),  an increase of 41.3% year-on-year;
• 25.1% of revenues were from IoT and lifestyle products (US$6.52bn), an increase of 86.9% year-on-year;
• 9.1% of revenues were from internet services (US$2.38bn), an increase of 61.2% year-on-year.

For the fourth quarter of 2018, revenue increased by 26.5% to 44.4 billion yuan (US$6.61bn) on a year-on-year basis.

Revenue from the smartphones segment increased by 7.0% year-on-year to 25.1 billion yuan, driven by growth in the ASP of smartphones.

Revenue from IoT and lifestyle products segment increased by 75.4% year-on-year to 14.9 billion yuan, primarily due to the rapid growth in demand of smart TVs and several sought-after ecosystem products such as Mi Band, Mi Electric Scooter, and Mi Robot Vacuum Cleaner.

Revenue from internet services segment increased by 39.3% year-on-year to 4.0 billion yuan, primarily due to growth in the advertising business.

For the year ended December 31, 2018, Xiaomi’s gross profit increased by 46.4% to 22.2 billion yuan (US$3.31bn) from 15.2 billion yuan for the prior year. Overall, Xiaomi’s gross margin decreased from 13.2% to 12.7%.

• The gross profit margin from the smartphones segment decreased from 8.8% to 6.2%.
• The gross profit margin fromIoT and lifestyle products segment increased from 8.3% to 10.3%, mainly due to the improvement of gross margin in smart TVs.
• The gross profit margin from internet services segment increased from 60.2% to 64.4% as the percentage of revenue from higher margin advertising business was larger.

For the fourth quarter of 2018, gross profit increased by 55.5% to 5.7 billion yuan. The overall gross margin increased from 10.4% to 12.7%.

• The gross profit margin from the smartphones segment decreased from 7.3% to 6.1%.
• The gross profit margin from IoT and lifestyle products segment increased from 3.6% to 10.6%.
• The gross profit margin from internet services segment increased from 57.4% to 62.9%.

Smartphones

Smartphones segment generated approximately 113.8 billion yuan (US$16.94bn) in revenue, an increase of 41.3% year-on-year. Compared with the 4.1% year-on-year decline of shipments in the global smartphone market, according to IDC, Xiaomi smartphone sales volume reached 118.7 million units, an increase of 29.8% over the prior year period.

To strengthen its market position in the mid- to the high-end range smartphone market in mainland China, Xiaomi launched several flagship smartphones such as Mi 8 and Mi MIX 3, which enjoyed widespread popularity. The average selling price (ASP) of Xiaomi smartphones in mainland China increased by 17.0% year-on-year.

In the fourth quarter of 2018, the revenue generated by smartphones sold for 2,000 yuan or more accounted for 31.8% of the total revenue of the smartphones segment. As Xiaomi shipped increasingly more smartphones in developed markets, the ASP of smartphones in international markets also recorded a year-on-year 9.7% growth.

Xiaomi continued to focus on innovation with increasing investment in smartphone R&D and achieved great progress. Taking the smartphone camera as an example, the new flagship smartphone Mi 9, launched in February 2019, achieved a DxOMark score of 107 for its rear camera, ranking top three globally at the time of launch.

It also achieved a DxOMark score of 99 for the video category, which is the highest among all smartphones at the time of launch. Xiaomi is also one of the early movers in 5G, launching our first 5G smartphone, Mi MIX3 5G, at World Mobile Congress in February 2019.

China smartphone brand loyalty compared for Q4 2018: iPhone, Huawei, Oppo, Vivo, Xiaomi

IoT and lifestyle products

Revenue of the IoT and lifestyle products segment increased by 86.9% to 43.8 billion yuan (US$6.52bn) over the previous year. 2018 was the year when Xiaomi’s large home appliances emerged from a nascent vertical to a robust business unit. The global shipments of Xiaomi smart TVs were 8.4 million units, representing a 225.5% year-on-year growth. Xiaomi also entered the white goods market, launching the Mi Air Conditioner and the Mi Washing Machine in July and December 2018, respectively.

In addition to smart TVs and laptops, Xiaomi ecosystem products such as Mi Band, Mi Electric Scooter, and Mi Robot Vacuum Cleaner experienced robust sales growth. Xiaomi Mi Robot Vacuum Cleaner ranked second in terms of shipments in mainland China in 2018. Xiaomi was ranked second in terms of wearables shipments across the world in the fourth quarter of 2018 according to IDC.

Xiaomi received 43 international industrial design awards in 2018, including iF Design Awards, Red Dot Awards, International Design Excellence Awards, Good Design Awards, and Design for Asia Awards. Two such accolades went to Mi Sphere Camera which was awarded the iF Gold Award and Mi Rearview Mirror which was awarded the Red Dot: Best of the Best award.

2018 marked the commencement of its overseas IoT business expansion. Xiaomi launched smart TVs in India in February 2018 and were ranked first in terms of online TV shipments in this market.

As of December 31, 2018, there were about 2.3 million users who own more than five Xiaomi IoT devices (excluding smartphones and laptops), representing a 16.2% quarter-on-quarter growth and a 109.5% year-on-year growth.

Related: Xiaomi sold 100 million power banks as of Jan 2019

Internet services

Revenue from internet services segment grew by 61.2% year-on-year to 16.0 billion yuan (US$2.38bn).

• Advertising revenue grew by 79.9% year-on-year to 10.1 billion yuan.
• Revenue from value-added internet services also grew 36.7% year-on-year to 5.9 billion yuan, of which revenue from gaming accounted for 2.7 billion yuan, a 7.3% year-on-year increase. Revenue from other internet value-added services grew 79.9% year-on-year to 3.2 billion yuan, primarily due to an increase in revenue contribution from internet finance business and Youpin e-commerce platform.

In the fourth quarter of 2018, over 30% of internet services revenue was from internet
services outside of advertising and gaming from China smartphones. Xiaomi overseas internet services revenue accounted for 6.3% of all internet services revenue in the fourth quarter of 2018, growing 1,295.6% year-on-year.

Xiaomi continued to enhance its overseas internet services and launched popular internet services in international markets.

For example, it launched video, app store, and news feed services in India and Indonesia. The MAU of Xiaomi smart TVs and Mi Box achieved 55.3% year-on-year growth, reaching 18.6 million in December 2018.

TV internet services revenue accounted for 8.2% of the total internet services revenue in the fourth quarter of 2018, a 119.1% year-on-year increase.

The revenue from internet finance business and the Youpin e-commerce platform accounted for 11.9% and 4.1% of total revenue of internet services in the fourth quarter of 2018, with year-on-year growth rates of 80.5% and 427.6%, respectively.

The MAU of MIUI increased 41.7% from 170.8 million in December 2017 to 242.1 million in December 2018. ARPU for internet services increased from 57.9 yuan for the year ended December 31, 2017, to 65.9 yuan for the year ended December 31, 2018.

International markets

Revenue from international markets grew 118.1% year-on-year to 70.0 billion yuan (US$10.42bn), accounting for 40.0% of the total, compared with 28.0% for the prior year.

According to Canalys, Xiaomi smartphones achieved the number one market share position by shipments for six consecutive quarters in India, with year-on-year growth of 59.6%. In Indonesia, Xiaomi was ranked second in terms of smartphone shipments, with year-on-year growth of 299.6%.

Xiaomi smartphone shipments for Western Europe grew 415.2% year-on-year and ranked fourth. Xiaomi IoT business also achieved good progress in its expansion in international markets.

Xiaomi Business Strategy update

AIoT

As of December 31, 2018, the number of connected IoT devices (excluding smartphones and laptops) on Xiaomi IoT platform reached approximately 150.9 million units, a quarter-on-quarter increase of 14.7% and a year-on-year increase of 193.2%.

Xiaomi is encouraging more third-parties to join its open IoT platform. In December 2018, Xiaomi entered into a strategic partnership with IKEA, under which IKEA’s full range of smart lighting products will be connected to Xiaomi IoT platform.

Xiaomi IoT user base is diversified across smartphone platforms. Xiaomi Mi Home app had 20.3 million MAU in December 2018 and over 50% of the users are from non-Xiaomi smartphones.

Through the empowerment of AI, Xiaomi greatly enhanced the user experience of IoT devices.

As of December 31, 2018, Xiaomi AI assistant Xiaoai had been installed and activated on more than 100 million smart devices and had more than 38.8 million MAU, making it one of the most used AI voice interactive platforms in mainland China. Xiaomi AI speakers have accumulated shipment of over 9 million units.

Multi-brand Strategy

Xiaomi adopted a multi-brand strategy for its smartphones in 2018. Xiaomi and Redmi have become independent brands since January 2019. The Xiaomi brand will focus on pioneering advanced technologies, establishing itself in the mid- to high-end markets, and building online and offline new retail channels.

The Redmi brand will pursue the final price-performance ratio and focus on online channels. Also, XIaomi Black Shark, Meitu, and POCO brands will target games users, female users, and tech enthusiasts, respectively.

Efficiency

As of December 31, 2018, Xiaomi had 586 Mi Homes in mainland China, mainly in first-, second- and third-tier cities. Moreover, to establish its offline new retail presence in lower-tier cities and rural areas of China, Xiaomi has built a sizable authorized store network. As of December 31, 2018, Xiaomi had 1,378 authorized stores in total, comparing to 62 as of December 31, 2017.

Quality

Xiaomi won the Top Prize of “China Quality Technical Award” awarded by the China Association for Quality. Xiaomi received further prestigious awards including the “2018 People’s Ingenuity Product Award” and the “2018 China Quality Benchmark Prize”.

Xiaomi’s mainland China smartphone fault feedback ratio decreased by 43.7% year-on-year. Xiaomi redefined the quality standards of smartphones by providing an 18-month long warranty for its Redmi Note 7 series, 50% higher than the industry standard.

Xiaomi officially launched the “smartphones + AIoT” dual-engine strategy in 2019. It expects to invest over 10.0 billion yuan (US$1.49bn) in the development in AIoT in the next five years.

Read more: China’s smart speaker market insights

Pinduoduo generated 471.6 billion yuan (US$268.6 billion) in GMV in the twelve-month period ended December 31, 2018, an increase of 234% year-on-year. This was driven by the rapid growth in the annual active buyer base and a near doubling in the annual spending per active buyer. Average monthly active users in the fourth quarter were 272.6 million, an increase of 93% year-on-year.

CIW Dossier: Pinduoduo

In the twelve-month period ended December 31, 2018, the number of Pinduoduo’s active buyers was 418.5 million, an increase of 71% year-on-year. Annual spending per active buyer was 1,126.9 yuan (US$163.9), an increase of 95% year-on-year.

Total revenues were 13,120.0 million yuan (US$1,908.2 million), a 652% increase year-on-year.

• revenues from online marketing services grew by 852% year-on-year to 11,515.6 million yuan (US$1,674.9 million);
• revenues from transaction services grew by 202% to 1,604.4 million yuan (US$233.4 million);
• revenues from merchandise sale were nil, a decrease of 100% year-on-year.

Non-GAAP operating loss was 3,958.2 million yuan (US$575.7 million), compared with 469.2 million yuan in 2017.

In the fourth quarter, revenues went up by 379% year-on-year or 68% quarter-on-quarter to 5,653.9 million (US$822.3 million).

• revenues from online marketing services increased by 470% year-on-year or 70% quarter-on-quarter to 5,062.4 million yuan (US$736.3 million);
• revenues from transaction services increased by 103% year-on-year or 49% quarter-on-quarter to  591.5 million yuan (US$86.0 million).

According to a report by UBS, Pinduoduo’s user retention rate is higher than any other e-commerce platforms in China. It also estimated startup Pinduoduo’s annual gross merchandise volume is expected to maintain compound annual growth of over 60 percent in the next three years to surpass the country’s second-largest e-commerce platform JD.Com in 2021.

Pinduoduo launched a program last December to support about 1,000 OEMs with traffic and brand exposure. These factories also offer live streaming to tackle concerns of Chinese consumers about product quality.

Pinduoduo has risen to be the second largest e-commerce platform by total annual active users, following Alibaba (636 million). JD.com’s annual active users totaled 305 million in 2018. Pinduoduo’s AAU is to reach 628 million in 2021. Read more here why Pinduoduo is not another Taobao or Tmall.

Momo, a popular mobile social networking platform in China, saw 113.3 million monthly active users in December 2018, compared with 99.1 million in December 2017. Its total paying users of live video service and value-added service, excluding the overlapping and including 3.9 million paying users of Tantan, were 13.0 million for the fourth quarter of 2018, compared with 7.8 million in Q4 2017.

Related: Weibo monthly active users grew to 462 million in Dec 2018, 93% on mobile

In 2018, Momo’s net revenues increased by 51% year-on-year to 13,408.4 million yuan (US$1,950.2 million), primarily driven by the significant increase in net revenues from live video service and value-added service. Non-GAAP net income was 3,462.1 million yuan (US$503.5 million), compared with 2,483.1 million yuan in the prior year period.

In the fourth quarter of 2018, its net revenues were 3,843.9 million yuan (US$559.1 million), an increase of 50% year-on-year.

• live video service revenues were 2,959.2 million yuan (US$430.4 million), an increase of 36% year-on-year;
• value-added service revenues that mainly include membership subscription revenues and virtual gift revenues surged by 272% year-on-year to 722.4 million yuan (US$105.1 million);
• mobile marketing revenues were 122.1 million yuan (US$17.8 million), a decrease of 15% year-on-year.
• mobile games revenues were 25.5 million yuan (US$3.7 million), a decrease of 44% year-on-year;
• revenues from other services primarily consisted of revenues from Phanta City, a TV variety show co-produced by Momo.

Cost and expenses were 3,195.7 million yuan (US$464.8 million), an increase of 65% year-on-year.

China’s top mobile apps in social media

Huya, a leading game live streaming platform in China, delivered non-GAAP net income for five consecutive quarters, reaching a record high of US$67.0 million for the fiscal year of 2018. The average mobile MAUs and MAUs reached 50.7 million and 116.6 million, respectively. Total paying users increased by 73.1% year-on-year to 4.8 million.

In the fourth quarter of 2018, the average mobile MAUs of Huya reached 50.7 million, an increase of 30.7% year-on-year. Average MAUs totaled 116.6 million, an increase of 34.5% year-on-year. The total number of paying users increased by 73.1% year-on-year to 4.8 million.

Related: China’s video cloud market to grow by 37.5% in 2019

Huya generated more than 1.6 billion viewership from over 400 e-sports events broadcasted in 2018. Furthermore, Huya has acquired more than 10 million active monthly overseas users in less than a year.

As the first domestic game live streaming platform being published, Huya’s total net revenues increased by 113.4% year-on-year to 4,663.4 million yuan (US$678.3 million) in 2018. Net revenues reached 1,504.9 million yuan (US$218.9 million) for the fourth quarter, a 103.1% increase compared with the prior year period.

For the fourth quarter of 2018, Non-GAAP net income attributable to Huya grew by 486.8% year-on-year to 166.9 million (US$24.3 million) yuan. The non-GAAP net margin went up by 160 basis points quarter-over-quarter to 11.1%.

The high rise of 34.5% in average MAUs was mainly driven by the improved desktop viewing experience, the launch of a series of eSports competitions in the fourth quarter, and its major competitor Douyu being removed from app stores.

On the other hand, the rising number of paying users also played a part in it. Noteworthy, mobile MAUs exceeded 50 million with a 30-day retention rate of over 70%. With a higher monetization capacity and conversion rate, this part contributed over 80% of live streaming revenues, which increased by 108.15 year-on-year to 1,441.8 million (US$209.7 million) in the fourth quarter.

The technology innovation on bandwidth utilization promoted the booming gross profit. In the fourth quarter of 2018, bandwidth costs increased by 42.1% year-on-year to 161.6 million yuan (US$23.5 million), whose presence in total cost of revenues has been declining, partially offset by improved efficiency in bandwidth utilization as a result of the deployment of new technologies in content distribution.

Apart from that, profited from a better user experience, the gross profit surged by 120.7% year-on-year to 238.6 million yuan (US$34.7 million).

Huya generated more than 1.6 billion viewership from over 400 e-sports events including LOL S8, and KPL Autumn broadcasted in 2018. Also, Huya had held nearly 20 competitions by itself, which attracted over 58 million viewership.

Holding competitions by themselves is a major part of their differentiation strategy, which not only brings traffic and users but also helps cultivate premium game hosts, according to Mr. Rongjie Dong, Chief Executive Officer of Huya. In 2019, Huya will put more to premium e-sports content.

Huya established a strategic partnership with Tencent in June 2018 to march into the South Asia market. It has acquired more than 10 million overseas active users as of December 2018. Check out top 20 Chinese video mobile apps in the overseas market.

How China’s short video app Kuaishou grew its DAU by 40M in 5 months

Weibo reported a net addition of approximately 70 million in monthly active users and reached a total of 462 million as of December 2018. Its average daily active users are 200 million in December 2019, roughly 28 million more than 2017.

Weibo Q4 2018 Highlights

• Net revenues were $481.9 million, an increase of 28% year-over-year.
  • Advertising and marketing revenues were $417.0 million, an increase of 25% year-over-year.
  • Value-added service (“VAS”) revenues were $64.9 million, an increase of 44% year-over-year.
  • VAS revenues for Q4 2018 were $64.9 million, an increase of 44% year-over-year compared to $45.1 million for the same period last year,
• Net income attributable to Weibo was $166.5 million, an increase of 27% year-over-year, and diluted net income per share was $0.73, compared to $0.58 for the same period last year.
• Non-GAAP net income attributable to Weibo was $183.6 million, an increase of 26% year-over-year, and non-GAAP diluted net income per share was $0.80, compared to $0.64 for the same period last year.
• Monthly active users (“MAUs”) were 462 million in December 2018, a net addition of approximately 70 million users on year over year basis. Mobile MAUs represented 93% of MAUs.
• Average daily active users (“DAUs”) were 200 million in December 2018, a net addition of approximately 28 million users on year over year basis.

Weibo stock falls after its quarterly earnings report.

Weibo Performance Highlights in 2018

• Net revenues totaled $1.72 billion, an increase of 49% year-over-year.
  • Advertising and marketing revenues were $1.50 billion, an increase of 50% year-over-year.
  • VAS revenues were $219.3 million, an increase of 43% year-over-year.
  • VAS revenues for 2018 were $219.3 million, an increase of 43% compared to $153.3 million for 2017
• Net income attributable to Weibo was $571.8 million, an increase of 62% year-over-year, representing a net margin of 33%, compared to 31% in 2017. Diluted net income per share was $2.52, compared to $1.56 in 2017.
• Non-GAAP net income attributable to Weibo was $624.2 million, an increase of 54% year-over-year, representing a non-GAAP net margin of 36%, compared to 35% in 2017. Non-GAAP diluted net income per share was $2.73, compared to $1.80in 2017.

Weibo Business Outlook

For the first quarter of 2019, Weibo estimates its net revenues to be between $395 million and $405 million, or an increase of 20.5% year over year to 23.5% year over year on a constant currency basis. This forecast reflects the currency translation risks and assumes an average exchange rate of RMB 6.75 to US$1.00.

In 2019, Weibo will continue to invest in platform development in multi-dimension, reinforce social content ecosystem to empower content creators, and capture higher wallet share in digital advertising budget as well as diversifying monetization opportunities in the long run, according to Gaofei Wang, CEO of Weibo.

Check out China’s digital entertainment consumption overview 2019