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Billion Dollar Unicorns: Cheetah Mobile Part Of Chinese Contingent

Posted on Wednesday, Apr 29th 2015

Market research reports project the mobile app market to be a $77 billion industry worldwide. The number of mobile downloads is projected to increase from 50 billion by July 2013 to 268 billion app downloads by 2017. Billion Dollar Unicorn club member Cheetah Mobile is China’s answer to this rapidly growing mobile-focused industry.

Cheetah Mobile’s Offerings

Chaoyang, China-based Cheetah Mobile (NYSE: CMCM) was founded by Sheng Fu and Ming Xu with a mission to make the Internet and mobile experience faster, safer, and easier for users worldwide. Today, they serve the company as the CEO and CTO, respectively. The company came into being when security technology player Kingsoft Security and Internet company Conew Image merged to form Kingsoft Internet Software in November 2010. Soon, the new entity changed its name to Cheetah Mobile.

Their leading products include Clean Master, a junk file cleaning, memory boosting, and privacy protection application; CM Security, a top-rated mobile antivirus engine certified by AV-TEST; Battery Doctor, a power optimization application; Duba Anti-virus, an Internet security application; Cheetah Browser and Photo Grid, a popular photo collage application. Their products are available on the three major platforms of Windows, iOS, and Android.

Cheetah Mobile also has a very active game distribution business segment. They recently announced that they have become the worldwide distributor of mobile game Tap Titans on Google Play.

They are also expanding their successful online marketing services. Recently, they entered into a commercial agreement with Nanigans, Inc., a leading worldwide provider of social and mobile advertising software. Through the agreement, Cheetah Mobile will be the exclusive partner of Nanigans in the Greater China region to manage campaigns for advertisers. In return, Nanigans will be the exclusive third-party advertising automation software provider used by Cheetah Mobile for advertising.

Last month, they acquired France-based mobile ad company MobPartner for an estimated $58 million. MobPartner has worked on over 1,500 campaigns in 200 countries and has tied up with more than 10,000 publishers to reach over 200 million mobile users worldwide. The acquisition will be able to help Cheetah Mobile push their advertising network globally.

Today, Cheetah Mobile is the leading mobile application developer all over the world. According to iResearch, Cheetah Mobile is the second largest Internet security software provider in China. Back in June 2014, App Annie ranked them second on Google Plays’ global non-game Apps developers’ rankings. Reports reveal that their apps have been downloaded over 860 million times by a mobile Monthly Active User base of 340 million. Cheetah Mobile’s prowess does not just lie in China—65% of their mobile app user population is based outside of China.

Cheetah Mobile’s Financials

All of Cheetah Mobile’s applications are available for free to their users. But their expanding user base has helped create enough monetization opportunities. They earn revenues from their online marketing services by referring traffic from their platform to e-commerce companies and search engine providers and by selling advertisements. While a major portion of their revenues is earned from online marketing services, they are also generating revenues by providing Internet value-added services from online games.

Revenues have grown significantly over the years. Last month, they announced impressive fiscal 2014 results. Total revenues grew 135.2% over the year to RMB 1,763.6 million (~US$284 million) with mobile revenues growing 741.3% to RMB 465 million (~US$75 million).

By segment, revenues from online marketing services increased 115.9% to RMB 1,322.6 million (~US$213 million). Revenues from internet value added services increased 381.8% to RMB 400.7 million (~US$64.6 million) and revenues from Internet security services and others fell 25.6% to RMB 40.3 million (~US$6.5 million).

Fourth quarter revenues increased 118.8% to RMB 588.9 million (~US$95 million) with revenues from online marketing services growing 109.9% to RMB 446.1 million (~US$72 million) and revenues from Internet value added services increasing 226.1% to RMB 137 million (~US$22 million). Revenues from Internet security services and others fell 60.4% to RMB 5.8 million (~US$1 million) as the company is moving away from subscriptions services.

Last May, Cheetah Mobile went public and sold 12 million ADSs at $14 each. The company raised $168 million through the IPO. Today, their stock is trading at $24.10 with a market capitalization of $3.43 billion. It touched a high of $30.77 in September last year.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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