Duiba Group (Hong Kong) Ltd, the well-known platform provider of management software, and interactive advertising platform operator founded by Xiao Liang Chen in 2014 and headquartered in Hong Kong, released its interim financial report on August 27, for the First Half 2021.
According to the report, Duiba (HKG:01753) recorded total revenues of RMB720 million, representing an increase of 53.82% from a year earlier, with profit attributable to owners of RMB62.804 million, representing a significant increase from a loss of RMB47.839 million in the First Half of 2020.
Significantly, Duiba recorded revenues on Software as a Service (SaaS) user management processes of RMB68.56 million, representing a sharp increase of 142%. We could guess from the report that Duiba achieved strong First Half 2021 financial results with its existing strategies. But what of Duiba’s potential future development?
Getting through tough times to turn around poor profitability
Founded in May 2014, Duiba is a SaaS user management systems provider and interactive advertising platform operator committed to providing enterprise customers with user acquisition, user activation and retention: realization covering the entire user lifetime.
With consideration to the COVID-19 situation, advances in digital technology and the influence of geopolitics have expedited the development of service companies in China, and the rapid growth of high-quality SaaS user management operators such as Duiba, and talk of an emerging SaaS unicorn:
On the one hand, for Chinese SaaS companies, the biggest pain point is the long profit-making cycle. Duiba acquired lots of customers by launching the free-of-charge SaaS user management platform in the early days, and began to offer paid services in April 2018 which led to a significant increase in its business performance.
From 2017 to 2019, Duiba recorded revenue of RMB650 million, RMB1.14 billion and RMB 1.65 billion and an adjusted net profit of RMB120 million, RMB210 million and RMB340 million, respectively, and achieved a three-year profit compound growth rate up to 69.4%.
The above data could tell that Duiba has gone through its no-profit period, and the financial data in the first half of 2021 could also tell that Duiba has come to the performance growth period. On the other hand, what many Chinese companies need from the SaaS industry are integrated solutions, instead of services for any single segment.
The user management services provided by Duiba are full-cycle management services and integrated solutions which cover user acquisition, user activation and retention, realization and other several aspects. Besides, in 2015, Duiba took the lead in conducting the interactive advertising business to reach target customers in non-first-tier cities, and achieved a win-win situation for advertisers, media providers and users through ad realization.
Support for banks with breakthrough offline strategies
The SaaS field is a big market. For SaaS service providers, whether or not they can seize market opportunities has nothing to do with their own strength, but their ability to take the best advantage when opportunity knocks. We find in a careful analysis of Duiba’s source of new customers that the increase in Duiba’s unit price and customer base mostly comes from offline sources, such as typical banking institutions.
For Duiba, providing SaaS services to banks is a great choice with vast potential opportunities:
First of all, banks are driven by the current trend to move their businesses online. According to a McKinsey survey, 40% of Chinese respondents expressed their preference for mobile banking, and 20% of Chinese respondents expressed their intention to use offline banking outlets less. In the context of the 5G technology and the coming era of 5G, banks will face great difficulties in acquiring new customers in the future and even lose their existing customers if they do not move their businesses online as soon as possible.
Furthermore, banks face challenges in moving their businesses online. Being accustomed to the comfortable days in the past, banks have no idea of Internet, and are too weak to confront Internet giants and fintech companies. Therefore, from the perspective of input-output ratio, banks desperately need outsiders such as SaaS service providers to help them move their businesses online.
Moreover, more and more customers prefer digital banking channels to traditional banking outlets in the context of COVID-19. According to a BCG survey, after COVID-19, the utilization rate of mobile banking is expected to further increase by 19%, and that of traditional banking outlets is expected to further decrease by 26%.
Duiba’s advantages in giving professional support to banks are described as below:
On the one hand, Duiba has run online since the beginning and has unique advantages online, and therefore, it can help banks to gradually convert customers who get banking services at offline banking outlets into online customers and include them in banks’ systems and to retain existing customers in face of the fierce horizontal competition.
On the other hand, Duiba focuses on user management and is familiar with “Gen Z”, and therefore can help banks acquire new customers including “Gen Z”.
In Duiba’s experience, Gen Z is more likely to participate in discussions on online social platforms and to focus on pan-entertainment information. In terms of daily consumption habits, Gen Z prefers to share membership to watch movies, place group orders for takeaways, search “price-cutting”, “coupons” and other discount information before shopping online, and the joy of “bargain hunting” in sales and shopping festivals.
Therefore, in view of Gen Z’s consumption habits, Duiba has helped banks to come up with many operation modes centring on user habits, such as IP pets, interactive games and mystery boxes.
According to the feedback from Duiba’s partners, with the help of Duiba, one out of four active users of bank cards can be converted on average to apply for instalment credit, with an event participation rate of 72.74% and a sharing rate of 53.8%. It can be seen that the SaaS services provided by Duiba can efficiently support banks in conducting their businesses.
In return, Duiba’s professional support to banks has also laid a foundation for its steady long-term business performance. On the one hand, key customers such as banks are very resilient to risks and are less likely to lose due to insolvency, and they are financially strong and have a strong willingness to renew.
On the other hand, key customers face high replacement costs. For banks, they will not change a SaaS service provider they have selected unless in unavoidable circumstances. This is because if they change, they will not only have to pay high costs of data transfer involving several divisions and businesses but also face the risk of data loss.
Generally speaking, key customers such as banks have a positive, long-term and sustainable impact on the growth of Duiba’s business performance. But in addition, Duiba has expanded its business since April 2018 to include offline companies with strong latent demand for user management solutions, a nimble strategy that led exactly to Duiba’s business outperformance.