Yalla Holds Out 2025 As Its 'Year Of The Game' As Growth Picks Up

Key Takeaways:

• Yalla is nearing the testing phase for two of its self-developed mid-core games, with wide-scale launches possible sometime next year
• The company’s revenue grew 4.4% in the third quarter, but analysts expect that pace to pick up next year as it ramps up initiatives aimed at mid- and hardcore gamers

By Doug Young

After establishing itself as a social media powerhouse in the Middle East and North Africa (MENA), Yalla Group Ltd. YALA is looking to take its act to the next level in 2025 by building on its strong foundation in the region’s gaming sector.

It began its journey eight years ago, and over that period has built up a base of mostly casual gamers and social app users that crossed the 40 million threshold in the third quarter, according to its latest results released on Monday. Now, it’s strengthening its position by building up a pipeline of mid- and hardcore games, while also teaming with local organizations across the region to stage live tournaments to further boost its brand among serious gamers.

On the financial side, the company’s latest results showed those efforts have already helped to produce an acceleration in its growth, as it posted better-than-expected quarterly revenue and its highest net profit margin since going public in September 2020.

“This impressive performance was fueled by our dedication to enhancing localization with new gamification features and targeted gaming events, as well as our ongoing efforts to refine operational processes, optimize user acquisition and further develop our product ecosystem,” CEO Yang Tao said in the results announcement.

The company’s revenue growth has slowed considerably in the last two years but its actual revenue of $88.9 million for the third quarter was more than 8% above the upper end of its previous forecast, resulting in a 4.4% revenue rise for the quarter year-on-year.

As the company regains some of its former momentum, two analysts polled by Yahoo Finance expect Yalla’s revenue growth to return to double-digit territory next year, forecasting the figure will accelerate from 2.5% growth this year to 13% in 2025.

Yalla has spent much of this year laying the groundwork for its move into mid-core and hardcore games that it hopes will return it to the strong double- or even triple-digit growth from its earlier days. The company said it currently has three mid-core games in development, with plans to start testing one or more of those by the end of the year.

Following the testing phase, the company will gather feedback and make adjustments before promoting the games on a broader basis, said COO Jeff Xu on the company’s earnings call. He didn’t provide a more specific timetable. But barring any major hiccups, we can probably expect the first mid-core games to begin mass promotion sometime next year, which may partly explain the analyst expectation for accelerating revenue growth.

The company is also looking for third-party game publishing partners to bring other titles to its users, and pointed to a recent interview between its President Saifi Ismail and well-known British gaming magazine Pocket Gamer as evidence of its growing profile in the serious gaming community. It mentioned efforts to identify suitable third-party game publishing partners are ongoing, but did not provide any names.

Regional Alliances

The other major piece of Yalla’s foray into serious gaming has been its staging of major tournaments throughout the MENA region, which not only raise its profile but also provides connections with organizations that can help to promote the events and future similar efforts.

After holding its first two events in Riyadh and Baghdad earlier this year, its core Yalla Ludo gaming product staged another event in Abu Dhabi in July, which was followed by a second event in the city in partnership with the UAE Esports Federation. It followed those with another event in Cairo in August, working with the Egyptian Ministry of Tourism and Antiquities, Egypt’s Ministry of Youth and Sports and the Egypt Esports Federation.

“This steady stream of offline events has deepened our brand awareness, solidifying Yalla Ludo’s industry leadership while also meeting MENA users’ entertainment needs,” said Ismail. The company previously said the first two tournaments in Riyadh and Baghdad attracted a combined 150,000 registered players.

Last but certainly not least, the company’s gaming initiative should also get a boost from a massive campaign by Saudi Arabia to boost esports in the region. Yalla executives pointed out that Saudi Arabia staged an esports tournament over the summer that attracted 1,500 players from across the globe, lured by a record-breaking $60 million in prize money.

“Expanding from casual games into mid-core and hardcore games is a marathon, not a sprint,” said Yang. “We are committed to elevating Yalla Game’s standing in MENA’s mid-core and hardcore gaming market, capitalizing on our wealth of experience and know-how in casual games to drive success.”

While the big potential of serious games lies on the horizon in 2025, Yalla’s latest quarter was more understated, notching modest growth on its original suite of casual games and social networking chat services. Within its overall $88.9 million in quarterly revenue, chatting services that account for about two-thirds of the total grew 8.5% to $58.9 million in the third quarter.

The company’s monthly average users (MAU) grew 14.5% to 40.2 million. And, more notably, its number of paying users also rose by 12% to 12.6 million. The resulting revenue growth, combined with the company’s strong focus on cost controls and interest income, helped drive Yalla’s net profit margin to 44.1% – a record since its listing in September 2020, and more than double its first positive net margin of 18.6% in the fourth quarter of that year.

The bottom line was that Yalla’s profit rose 11.2% in the third quarter to $39.2 million, up from $35.2 million a year earlier. Its strong cash flow also helped the company to raise its cash position to $570 million by the end of September from $536 million at the end of last year.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.