After IPO, Liulishuo CEO says marketing expenses are necessary | Digital Asia
Shanghai Liulishuo Information Technology Co., Ltd, a spoken English learning app, went public in NYSE under LAIX on September 27.
The trading opened at $16.00 per share, 28% up the initial offering price $12.5. The stock price settled to $12.65 after the first trading day ended. This would boost Liulishuo’s market cap to around $600 million.
“I am very satisfied with the good opening performance of the stock, given the recent [capital] market turbulence. Short-term fluctuations are normal, but it’s all about the long-term, ” Wang Yi, CEO at Liuliushuo, told to TechNode soon after the trading began.
Established by Wang, a Princeton Computer Science Ph.D. and also an expert in advertising, in 2013, Liulishuo aims to tackle the shortage of high-quality teachers as well as time-and-space limitations traditional English learning, particularly oral English learning. The company offers voice recognition and phonetics detection AI platform to allow a user to read English content on portable devices and receive real-time feedback generated by machine algorithms.
Liulishuo far away from profiting, however. The company reported a net loss of RMB 182.3 million ($27.5 million) for the first half of 2018 (ended June 30), despite a net revenue of $232.3 million recorded for the same time period.
Liulishuo is also in the high marketing expenses trap which usually brings private education institutions market attention and temporary strong market share. For the first half of this year, the company recorded an RMB 259.8 million sales and marketing expenses, whereas the research and development expenses were RMB 60.9 million.
“R&D is the engine, and marketing is the wing [of a plane]. Over the past decades, China has seen internet and tech companies that have changed the country’s ways of living, and the habit development process requires essential marketing input, ” Wang explained. He believes that since learning with a virtual mentor is still new, as long as Liulishuo’s long-term fiscal prospects are healthy, marketing investment is necessary.
The company reported an average monthly active user of 7.2 million for the first half of this year. Paid users increased to around 1 million, for the same time period. In the past 6 years since the business started, according to Liulishuo, the company has served 83.8 million cumulative registered users.