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Mobvista President Xiaohuan Cao: Completing a Successful IPO Against the Currents

This is more than the New York Stock Exchange, the Tokyo Stock Exchange and the Nasdaq, making the HKEX the leading venue for companies to make their market debut.

iAsk
    Jan 11, 2019 1:42 PM  PT
Mobvista President Xiaohuan Cao: Completing a Successful IPO Against the Currents

Last year over 210 new companies listed on the Hong Kong Stock Exchange, raising more than 290 billion Hong Kong dollars - a record high since 2010. This is more than the New York Stock Exchange, the Tokyo Stock Exchange and the Nasdaq, making the HKEX the leading venue for companies to make their market debut. 

Just in the past year on the HKEX Jun Lei rang the bell for Xiaomi, Xing Wang listed Meituan Dianping and Mingzhe Ma initiated the IPO of Ping An Good Doctor. An increasing number of star companies incorporated the Hong Kong stock market into their own business plans, including Mobvista – named by some as the "Leading Stock of the Global New Economy Smart Mobile Advertising." 

On Dec. 12, 2018, Mobvista was officially listed on the Hong Kong Stock Exchange, bringing more market attention to this third-party mobile advertising platform that's ranking top 10 in the world and 1st in China. 

On Mobvista's website it says: "Since the inception of Mobvista, Our belief has always been to offer a complete suite of products that can unlock the full potential of our partners and customers." 

In the past five years, Mobvista has reached 950 million mobile devices each day in more than 200 countries. According to the data from iResearch Consulting Group, among the top 50 most-downloaded Chinese mobile apps released overseas in 2017, more than 90% of advertisers used Mobvista's mobile advertising service. 

In this issue of "iAsk Leaders", we interviewed Xiaohuan Cao, Co-founder and President of Mobvista, to explore the secret behind the new forces of Hong Kong stocks. 

The decision to IPO against the current market trends was driven by the company's internal needs. 

Although the Hong Kong stock market set an IPO record in 2018, another indisputable fact is that the Hang Seng Index fell by 13.7% for the whole year. The Hang Seng Index, which was ahead of the global stock market by 36% last year, has fallen out of investors favour. 

Xiaohuan Cao, Co-founder of Mobvista, told iAsk that the decision to IPO was against current market trends.  Indeed, several investment banks suggested they not go against the market and hold off the IPO. However, Mobvista took action based on its own development pace and internal needs of the enterprise and did not follow the trend of the economic cycle. 

iAsk noticed that unlike many companies that were under capital pressure to go public in Hong Kong, Mobvista had achieved three consecutive years of profit before listing. 

Based on publicly disclosed data, in 2015-2017 Mobvista generated revenues of US$158 million, US$268 million and US$312 million respectively, with a CAGR (Compound Annual Growth Rate) of over 40%. The net profits for 2015-2017 respectively were US$8.71 million, US$19.78 million and US$27.32 million, with a CAGR of 77.1%. 

Five years ago when Mobvista was founded it was positioned as a traffic aggregation platform for mobile Internet companies to go global. As Xiaohuan Cao put it, "We felt that in 2013 the accumulation of technology, talent and capital in China had reached such a phase where Chinese Internet companies were able to compete with the overseas ones in the global arena. Therefore, when we were making our strategic choices, we set this direction as our only target. We didn't focus on anything else." 

Since then Mobvista has established strategic partnerships with the world's top Internet platforms such as Google, Twitter and Facebook, serving advertisers in more than 60 countries including Baidu, Alibaba, Uber, Flipkart and 360. Theses mobile traffic systems covers more than 200 countries and regions around the world. 

Five years later, the market is still extremely broad. Based on data from iResearch the global mobile app promotion expenditure is increasing year by year, with a CAGR of 16.2% in 2017-2022. The scale of the programmatic advertising market reached US$27.3 billion in 2017 and is expected to rise to US$69 billion in 2022. The CAGR for 2017-2022 is 20.4%. 

In order to take advantage of this trend, Mobvista has had to make both unexpected and understandable choices.

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Gloria Ai vs. Xiaohuan Cao 

Gloria Ai: Investors have reached several conclusions about 2018, claiming that the current economic cycle is at the bottom, that the policy is at its lowest point and the same for market funds. However, Mobvista decided to go against this trend? 

Xiaohuan Cao: Yes, the decision to IPO was against current market trends.  Indeed, several investment banks suggested they not go against the market and hold off the IPO. However, Mobvista took action based on its own development pace and internal needs of the enterprise and did not follow the trend of the economic cycle. 

Gloria Ai: This is a really confident move! 

Xiaohuan Cao: It is nothing more than keeping a low profile and making fewer profits while taking a step forward at this time. For an international business, there's a fundamental difference whether a Chinese brand in an overseas market is a listed company or not. It involves the investors' perception of the company and the transparency of the company. So eventually we decided to go public no matter how bad the market condition was. 

Gloria Ai: I am quite optimistic about your company. Although the economy has cycles, if you are doing something worthwhile, the short-term lower pricing and valuation will not impact the long-term development of the company. 

Xiaohuan Cao: Yes, let the investors fish at the bottom. We are OK with offering a bottom-fishing opportunity. 

Since June 2018, there has been under-subscription of shares in the Hong Kong stock market. Amongst the IPO of new shares, eight firms were undersubscribed in July, 4 in October and 6 in December, with a total of 22 across the whole year. 

In sharp contrast, the company's IPO result showed that they attracted an over-subscription of almost double. This shows that the market has chosen to believe in Mobvista. For any listed company, investors care more about future prospects. For Mobvista, the listing in Hong Kong is just a beginning. 

Globalization is the biggest benefit for China Mobile Internet companies in the next five years 

Mobvista serves as an aggregation platform between advertisers and providers of service traffic. 

After the peak of user growth and the disappearance of demographic dividends in the Internet industry over the past few years, the trillion-dollar B2B market is considered to be the next major opportunity for advertising companies. Mobvista, which has dedicated itself to helping Chinese companies to go global, has already proven the huge potential of this growing B2B market. 

As a big data and AI technology-driven company Mobvista publishes advertisers' ads to in-app advertising spaces and delivers interesting advertising content to app users based on an accurate grasp of user's appetites. With its AI capacities, Mobvista is extending its reach both upstream and downstream in the mobile marketing industry, linking advertisers, developers and users in the mobile ecosystem, and helping them to scale. 

So equipped with both the required technologies and access to the right advertising traffic, Mobvista has continued to gain traction in the global advertising market. 

Xiaohuan Cao said that the average customer retention rate in the past three years has remained above 85%, which means that among the 100 customers who worked with Mobvista in the first year, at least 85 of them continued into the second year. Customers cover a broad range of app developers, covering games, tools, e-commerce, social content and more. 

In order to improve its own traffic ecosystem Mobvista acquired NativeX, a native advertising platform from the United States, and GameAnalytics, a Danish mobile game data analytics company. Both of these acquisitions further strengthen Mobvista's overseas market position. 

But all this is still not enough, Xiaohuan Cao said. "We have spent five years building a service network covering more than 200 countries around the world. We hope in the coming five years, that is, at the tenth anniversary of the foundation of Mobvista, we can truly become such a partner that has significant influence in this industry and is irreplaceable to our customers." 

Gloria Ai vs. Xiaohuan Cao 

Gloria Ai: Through the "iAsk Mobvista" today, I felt strongly that you have a very clear strategy, such as conducting research and development at all costs. Also, your strategy is both global and local, as we call it "think globally, act locally". This means you localize the operation in every segment of the market while upholding a global vision. I noticed that Mobvista merged and acquired a lot of quality targets, which surprised me a lot. Why would Mobvista grow through mergers and acquisitions in terms of capital as a young startup company? 

Xiaohuan Cao: The two companies acquired are located in the United States and Europe respectively, which is important for our strategy for the US and the European market. The US company we acquired now represents us in the entire US market, which is our largest market besides China. The European company we acquired is actually a statistics platform, which gives us the broadest coverage of the entire mobile gaming industry as it has developed the most popular statistical tool. Through the company's own network, we can smoothly incorporate our own advertising business into it. 

Gloria Ai: Instead of building everything from scratch in the emerging global market, you chose to find a like-minded partner and infiltrate into this market through mergers, acquisitions and becoming a shareholder. 

Xiaohuan Cao: Yes, to accelerate the process of our strategic development. 

Gloria Ai: If you were to predict the future, what would you wish for Mobvista in a decade? 

Xiaohuan Cao: We hope in the coming five years -so for Mobvista's 10th anniversary - we can become a company with significant influence in the industry that is irreplaceable to our customers. I believe that globalization is the biggest benefit for China Mobile Internet companies over the next five years. 

Gloria Ai Notes: 

Aggregation was the most mentioned word by Xiaohuan Cao. Connecting the mobile Internet companies that yearn to go global on one side and the media platform with traffic on the other, Mobvista has become one of the most important axes between China and the world. Five years ago, they saw the trend of going global despite the uncertainty, but in the next five years, they will see the future of globalization along with the globalization trend. What remains unchanged is that they are always committed to helping Chinese companies go global.

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