Positive Profits Expected To Double In 2020, Revealing The Growth 'secret' Behind Joy Spreader's Outstanding Performance

On February 8, Joy Spreader published an announcement to alert that its results in 2020 would achieve substantial growth over 2019.

According to the announcement, the Company's revenue in 2020 is expected to range from approximately HK$880 million to HK$920 million, an increase ranging from around 63.6% to 71.0% as compared to 2019. The gross profit is expected to range from roughly HK$260 million to HK$300 million, an increase ranging from approximately 95.5% to 125.6% as compared to 2019. The profit before exchange gains and losses is expected to range from roughly HK$170 million to HK$200 million, representing an increase ranging from about 123.7% to 163.2% year on year, equivalent to 2.2 times to 2.6 times compared to the same period in 2019.

As disclosed in the prospectus, Joy Spreader's revenue reached a CGAR of 87% and the net profit reached a CGAR of 63% between 2017 and 2019. In the first half of 2020, the revenue and net profit increased by 66.2% and 123.3% year on year, respectively.

Since before listing, Joy Spreader has maintained a strong momentum of continuous rapid growth in performance. The growth "secret" behind the outstanding performance is worthy of attention.

01 The track of mobile-new-media, represented by short videos, has grown rapidly, bringing significant historical opportunities to the performance-based marketing industry

With the rapid development of mobile Internet applications in China, text-based we-media, represented by WeChat official accounts, are flourishing and still in the ascendant. In terms of the number of users, activity level and other dimensions, the fact that short-video mobile-new-media platforms represented by DouYin and KuaiShou have emerged rapidly and gained increasing acceptance by Internet users, is becoming the core driver leading the growth of Internet industry in China. While platforms are competing for user growth, retention, and activity level, the ways to refine the business model and helping PGC and UGC users in the platform ecology to achieve value conversion have become the focuses. Platforms continue to open up traffic monetization channels, allowing content publishers to monetize traffic through advertising, games, online reading, e-commerce, and other products, which undoubtedly enlarges the market opportunity for mobile-new-media marketing.

As the pioneer and leading company of performance-based mobile-new-media marketing market in China, Joy Spreader sufficiently benefits from opportunities brought by the development of the industry. In June 2013, soon after the launch of the WeChat official accounts, the Company took the lead in using marketing-SaaS services to provide commercial monetization services for publishers of text-based content on the official accounts. In January 2019, the Company was among the first to provide commercial monetization services for short-video content publishers from the beginning of DouYin's commercialization. While consolidating the original business position, the Company seized historical opportunities to enter into new areas on time, reflecting Joy Spreader's farsightedness and sensitivity in strategy and also providing the Company with first-mover advantages in the industry.

The opportunities of the short-video track are also reflected in the popularity of KuaiShou's listing recently. The result of its IPO subscription showed that KuaiShou's IPO had received approximately 1.423 million applications for subscription from retail investors, with oversubscription by more than 1,200 times, and had frozen retail investors' funds of approximately HK$1.28 trillion, making KuaiShou achieve the greatest amount of frozen capital in the Hong Kong Stock Market. On the first day of listing, KuaiShou's share price soared 161%, with a market value of HK$1.23 trillion.

Revaluation of the short-video industry chain has been made by the capital markets in the listing of KuaiShou and will further promote the commercialization of short-video platforms. The short-video marketing market will continue to maintain rapid growth in the next few years, which is undoubtedly an excellent period of historical opportunity for Joy Spreader.

02 As a stabilizer of business growth, SaaS services provide high-quality media resources, data accumulation and analytical capabilities for performance-based marketing

It is worth noting that Joy Spreader pointed out in the positive profit alert that one of the important reasons for the performance growth came from the steady increase of the number of users of we-media monetization services (realized by SaaS services). SaaS is the abbreviation of Software-as-a-Service. SaaS companies uniformly deploy application software on cloud servers, so that clients can choose software services provided by SaaS companies online based on their needs of work.

Joy Spreader's main business model is to provide performance-based marketing for clients' products including online cultural products and consumer goods on we-media (or mobile-new-media) platforms such as DouYin and WeChat official accounts. The distribution of online cultural products, including Html5 games and online reading, is mainly achieved through marketing-SaaS services. With the help of the marketing-SaaS service tools provided by Joy Spreader, we-media publishers can directly access its product catalog. The intelligent algorithm engine enables publishers to choose products that best meet the interests and needs of their fans with the highest monetization efficiency, while being legitimate and in compliance with the law.

The application of the SaaS platform in the field of online marketing has completely subverted the traditional online marketing model of traffic trade. The great significance of providing marketing-SaaS services to we-media publishers is that the company can automatically obtain stable high-quality content resources from the traffic platform. While allowing content publishers to monetize efficiently, it can also analyze marketing effects in real-time, providing strong support for Joy Spreader's data accumulation and algorithm iteration.

The accumulation of content-publisher resources is also inseparable from marketing-SaaS services. According to Joy Spreader's Voluntary Announcement of Business Update on December 6, 2020, as of the end of October 2020, the Company provided content monetization services to an aggregate of 36,612 WeChat official accounts, representing an increase of 63.5% as compared to the number as of 31 December 2019. The number of cooperating DouYin accounts, with e-commerce sales and product placement, exceeded 3,000. The number of we-media user traffic access points increased to 366,120, a significant increase compared to the previous year.

Marketing-SaaS services have significantly promoted the increase in the number of mobile-new-media resources and the level of activity, to simulate the effect of performance-based marketing, as well as the increase in the number of marketing clients and product categories.

The marketing-SaaS service platform is expected to help Joy Spreader enhance its ability to quickly accumulate mobile-new-media resources, further stabilize and expand the traffic pool, and ultimately achieve better marketing efficiency and effectiveness.

03 Gross margin improvement verifies Joy Spreader's business model, and data- and-algorithm advantages

According to the forecast of the positive profit alert, the gross profit margin of Joy Spreader in 2020 is expected to be between 29.5% to 32.6%, which is significantly higher than that of 27.1% in the first half of 2020 and 24.7% in 2019.

To a certain extent, the improvement of profitability verifies Joy Spreader's business model of performance-based revenue and the leading edge of the data algorithm. Under the data-driven performance-based marketing, service providers can achieve efficient and accurate data matching by establishing massive databases and tagging. With the increasing number of marketing services, massive data feedback will further optimize the matching efficiency of the algorithm and continuously improve the ROI of marketing services for the Company.

Data and algorithms are key elements and core competitiveness of Joy Spreader's performance-based marketing business. As disclosed in the listing prospectus of Joy Spreader, during the track record period, Joy Spreader has accumulated a large amount of anonymous user behavior data through its services of approximately 1.5 billion online clicks. The Company has established a tag library with thousands of fields for content publishers, including 1) demographic information of fans (such as age range, gender, geographical area, and predicted education level); 2) browsing interest and preference; and 3) nature of we-media content (such as format and category), to improve the accuracy of matching and achieve the expected marketing results.

The improvement of the expected gross profit level in 2020 reflects the success of Joy Spreader's business model, the high efficiency of marketing-SaaS service, and the value and bargaining power of its data algorithm in the business chain. With the gradual emergence of the Matthew effect in the field of online marketing, more client resources and content-publisher resources are expected to be further integrated into the leading players, which will be further conducive to the performance-based marketing effectiveness and SaaS service capability of Joy Spreader in the future.

04 NCO (Network Culture Operation) license supports the ability of distribution and joint-operation of online cultural products such as games and online reading

It is known that as one of the few enterprises in the industry with the qualification of network culture operation license, Joy Spreader possesses the capabilities of distribution and joint-operation of cultural products such as Html5 games and online literature in China.

As a data-and-algorithm driven technology company, Joy Spreader has used its efficient and easy-to-use marketing-SaaS services to provide convenient tools for we-media content publishers for many years, helping them to monetize their traffic from distribution and joint-operation of games, online reading, and other online cultural products.

In 2020, the number of games and literary distributed and joint-operated by Joy Spreader increase significantly. According to the Voluntary Announcement on Business Update published by Joy Spreader on 6 December 2020, by the end of October 2020, the number of online game products promoted by Joy Spreader has reached 205, representing an addition of 61 game products compared with the whole year of 2019; the number of online literary works reached 858, covering 77 categories, representing an addition of 276 new literary works, and 10 new categories compared to the end of 2019. Compared with other online cultural products, the gross profit margin of Html5 game products is relatively high, by allowing the Company to share commissions from the in-game sales from game developers. It has also become a contributing factor to the expected performance growth in 2020.

05 The rapid development of e-commerce sales marketing business indicates higher growth in the future

In the field of short-video e-commerce sales marketing, Joy Spreader is also expected to achieve remarkable results in 2020. Although the details of sales are yet to be disclosed in the positive profit alert announcement, the strong growth of this business sector has been revealed in its past performance announcement. According to the data disclosed in the 2020 interim report, from January to June 2020, the revenue from consumer goods marketing of Joy Spreader increased by 147.76% compared with that in the same period in 2019. The so-called consumer goods marketing business refers to the short-video e-commerce sales marketing business. Compared with online cultural products marketing, consumer goods marketing has a much higher gross profit margin.

In the Voluntary Announcement on the latest performance progress on 6 December 2020, the Company further disclosed the progress of its e-commerce sales marketing business: the number of the category has reached 156, developing from electronic products to full consumer product lines such as daily necessities and cosmetics.

According to the public information, the Company's gross profits from performance-based marketing in the field of e-commerce sales marketing accounted for approximately 16% in 2019, and this proportion increased to 26% in the first half of 2020. Base on the forecast of this trend, it is estimated that the gross profit contribution will exceed 30% in the full year 2020 and beyond. The development of short-video e-commerce sales marketing business has become one of the biggest drivers for the business growth of Joy Spreader.

"Yesterday belongs to social e-commerce, today belongs to live streaming e-commerce, and tomorrow belongs to short-video e-commerce" is a widely spread assertion regarding the development trend of mobile-new-media e-commerce in the industry. As one of the first companies to promote short-video e-commerce sales marketing on DouYin platform, Joy Spreader, a performance-based marketing service company, has commenced its short-video e-commerce sales marketing business from the very beginning and has accumulated a large amount of data and technical experiences. With the continuous in-depth development of the industry, the future development of the Company in the field of short-video e-commerce will be worth looking forward to.

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