The MENA region seems to be becoming a global hotspot for investment or operation.
Looking at a simple set of data, following a new record high in venture capital in the MENA region in 2021, startups in this region have raised $247 million through 46 transactions so far in 2022, an increase of 474% year-on-year, and maintained a high growth rate of 20% month-on-month. Another new study shows that the rising trend of fast e-commerce in the MENA region is attracting merchant libraries from multiple industries such as electronics, fashion, and home furnishing to enter the market across borders.
Two important signals are released, one is that the MENA market is full of potential and the track value is extremely high, and the other is that the localization wins, and the capital flows directly to local startups rather than global leading enterprises.
In the capital market, local enterprises in the MENA area have gradually emerged, and the most well-known in the market is the well-known social entertainment platform - Yalla Group (YALA.US).
In 2020, Yalla Group received high attention from the market as the first technology company in the UAE to go public in the United States and a high-growth enterprise in the MENA region. On the day of the listing, a number of UAE dignitaries and royal family members also attended the listing ceremony of Yala to express their support.
Focusing on the present, on March 15, Yalla Group just released the unaudited financial report for the fourth quarter and full year of 2021, consecutively handing over its sixth beautiful "report card" since its listing, with a clear growth trend, and revealed new business progress, making it clear that its fundamentals will continue to evolve.
Revenue maintained exponential growth, and the contribution of game services was elastic
According to the financial report, for the whole of 2021, Yalla Group achieved revenue of $273.1 million, an increase of 102.4 year-on-year, that is, exceeding the expected target and doubling the target in 2020. Among them, social and game service revenue was $208.2 million and $64.971 million, respectively; net profit was $82.594 million, net profit margin was 30.2%, and net profit in the same period last year was $3.213 million. Non-GAAP net profit increased by 97.7% year-over-year to $126.5 million and net profit margin of 46.3%.
In the fourth quarter of the single quarter, Yalla Group's revenue was $67.557 million, an increase of 39.7% year-on-year, social and gaming services contributed revenue of $48.937 million and $18.620 million, respectively, non-GAAP net profit was $27.584 million, an increase of 18.2% year-on-year, and net profit margin was 40.8%.
Combined with the previous quarterly financial reports, Yalla Group achieved year-on-year revenue growth for four consecutive quarters in 2021, driving a simultaneous increase in profitability. Specific to the business line, social services revenue performance is stable, since the first quarter of 2021 into a new level (an increase of 28.6% from the fourth quarter of 2020), each quarter to maintain a high level of $50 million in size; game service revenue broke out quarter by quarter, to the fourth quarter, has achieved 6 consecutive quarters of continuous growth since the listing, continuous contribution to performance flexibility, and the proportion of revenue in this quarter increased to about 27.6%, the same period last year this figure is only 11.9%.
Correspondingly, the Yalla Group's user base continues to expand and its monetization capabilities increase.
In terms of specific operational data, in the fourth quarter of 2021, the average monthly active users of Yalla Group reached 28.06 million, an increase of 71.0% year-on-year; the number of paid users was 8.429 million, an increase of 61.0% year-on-year, and the payment rate reached 30%; in terms of the previous quarter, these two indicators increased by 8.1% and 9.8% respectively over the previous quarter.
Then, it can be seen that the growth of Yalla Group's paying users and active users is relatively "the same frequency" (except for the financial reporting period during the Ramadan holiday), showing continuous high growth, and the paid users achieved a higher month-on-month growth in the fourth quarter, which means that there is room for further improvement in the payment rate.
In fact, the payment rate of social entertainment products reaching 30% is already a high level, and the payment rate of social platforms referring to China's head games is mostly only 5%-15%. It also shows the geographical superiority of the Middle East market and the huge potential of Yalla Group's unique business model.
At the same time, thanks to the good business conditions and effective expense control, Yalla Group's cash flow continued to be abundant, and its cash and cash equivalents reached $351.5 million by the end of 2021, further improving from $326.3 million at the end of September 2021, providing a solid guarantee for the subsequent layout and also thickening the investment safety cushion.
Based on the present, the macro environment under the epidemic and other factors is not lacking in challenges, which may accelerate the survival of the fittest in some industries, and it is even more necessary to "dance" with core assets with sufficient cash flow.
The two growth curves are clear and depict a long-term positive trend
Product dimension, since 2021, Yala Group has successively launched a number of new products, built and continuously upgraded the localized comprehensive ecosystem, and opened up a broader imagination space.
Look at social and game business lines separately.
1. Social: take the lead in layout and stand firm in the value C position
In terms of social, in addition to the flagship product , the well-known voice social platform Yala, Yalla Group has two heavy products with high potential, one is the IM product YalaChat designed for users in the MENA region, and the other is the first social metaverse application WAHA customized for the MENA region.
Recently, YallaChat launched version 0.3, targeted new group chat, personalized expression function, has been able to meet the basic social needs of users in this area. In the future, YallaChat will continue to iterate on other user-friendly features, such as adding more entertainment content, and is expected to launch the next version in the second quarter of this year.
You know, no company has ever tried to launch an IM product specifically designed for users in the MENA region. According to the World Bank, if turkey is added, the total population of the Middle East alone is close to 600 million people. At the same time, the penetration rate of online entertainment in this region is only 14%, which is far lower than that of China, the United States and other markets, that is, the cost of customer acquisition is much lower than that of other markets; the per capita GDP is far beyond the global average, and the user's ability to pay and willingness to pay are better than other markets.
In other words, the Internet dividend in the MENA region is still being released, and before that it was almost blank, there are conditions for cultivating super IM products and building a top-level traffic pool. In the history of the Internet, WeChat, the fastest growing IM product so far, was also born in a similar development background, which has grabbed an irreplaceable entrance for Tencent in the era of mobile Internet, making it a real public super enterprise. Yalla Group is also standing on such an outlet.
Meanwhile, WAHA was launched on the App Store and Google on March 10, where users can virtually interact with friends in their 3D social scenes and enjoy social activities consistent with real life through voice chat and gift-giving. In the next step, Yalla Group will continue to iterate and increase investment to form a brand based on the characteristics of its products.
Although there is still uncertainty about the exploration of the metaverse, whether it is technical, content or regulatory level, there is still a long way to go from the real metaverse. But it is obvious that young people urgently need a better and newer social experience, willing to actively embrace the metaverse, and based on the business logic that social products are often "one step first, step first", the metacosm has brought new competition points to the Internet social track; the social metacosmum platform is regarded as the best entrance in the metaverse, which can be described as "the place where soldiers must compete".
In general, Yalla Group has taken the lead in the social field twice, corresponding to two match points, one is brought by the unique market link of the MENA region, and the other is given by the post-Internet era, no matter which one is grasped, it has unprecedented development space.
2. Games: Continuous explosions, differentiation broadens the "circle of ability"
In terms of games, as mentioned above, Yalla Group's game service revenue has exploded quarter by quarter, and Yalla Ludo's ability to grow as a flagship product can be seen. At the same time, the new products Yalla Parchis, 101 Okey Yalla and Yalla Baloot are also progressing well.
The latest version of Yalla Parchis adds a chat room function to support voice and video chat, which is more suitable for the social habits of South American users. By the fourth quarter of 2021, Yalla Parchis had ranked in the top 5 in board game downloads in 10 countries, and in the top 10 in the revenue list of Colombia, Spain, Mexico and other countries.
101 Okey Yalla continues to be the number one in Turkish board game downloads and entered the top 10 Turkish board game revenue for the first time in December 2021. The data shows that the average daily usage time of active users of this game and the user's willingness to pay are continuing to grow, and the user stickiness is constantly improving.
Yalla Baloot was officially launched in December 2021 and was repeatedly featured on the homepage of the Saudi AppStore game category in just a few months.
Based on such achievements, on the one hand, it is seen that Yala Group has the ability to quickly incubate explosive products, which is favored by local users in MENA region; on the other hand, it confirms that Yala Group has its independent research and development strength, innovative thinking, and long-term precipitation in the local user dimension, which contains huge commercialization. In particular, the grasp of local users is a capability that is difficult for non-local players to match.
In addition, in this financial report, Yalla Group once again mentioned the development of medium and heavy games, saying that it is steadily promoting investment in medium and heavy game projects.
From the perspective of strategic development, this will not only be able to differentiate from the light games such as chess and cards and cards that Yalla Group has focused on earlier development, and meet the changing online social and entertainment needs of users in the MENA region, but also form a more complete business model and greatly improve commercialization capabilities. Medium games are easier to achieve efficient monetization than light games, and do not have to invest too much cost like heavy games to face the market monopolized by giants; heavy games have relatively richer monetization contacts and more willing audiences, and the corresponding market space is broader.
Moreover, by investing in complementary development forms, it will also accelerate the forging and upgrading of Yalla Group's localized integrated ecosystem, and further support its in-depth sharing of internet development dividends in the MENA region.
Write at the end
Overall, the online social and entertainment market in the MENA region has high potential and high barriers, providing fertile ground for development. As the "first stock of technology in the UAE", Yalla Group has taken root and grown in this soil, has seized market opportunities, and is still strengthening its competitive advantage.
Since 2021, in more than a year, Yalla Group has successfully incubated many of the above new products, synergistic with flagship products, and promoted the overall user base to continue to expand and enhance its monetization ability. This is also why it can be seen that it continues to hand over eye-catching report cards, and its revenue and net profit will increase high in 2021. Moreover, many of these new products have already shown the potential of explosive models, and with further development, it is expected to accelerate the release of growth momentum, which is reflected in future financial performance.
At the same time, as mentioned above, Yalla Group, a number of UAE dignitaries and royals have attended its listing ceremony to express their support, and it is clear that it has deep resources in both political and business circles, which also adds sustainability and certainty to its subsequent development to a certain extent.