Hello Group Shares Shrug Off Upbeat 2025 Outlook

The operator of the Momo dating app said revenue from its global business could potentially double to 2 billion yuan this year

Key Takeaways:

• Hello Group's revenue fell 12% in the fourth quarter, while its net income plunged 59%, hurt by a livestreaming crackdown and declining users
• The company is pivoting to international markets through its Soulchill and other new apps, targeting overseas revenue growth of up to 100% this year.

Hello Group Inc. (MOMO.US) hasn't been too popular on the social scene lately, despite its status as one of China's leading dating app operators.

The owner of Momo, once called the "Tinder of China," has faced years of declining fortunes, which showed no signs of abating in its latest quarterly report released last week. The results revealed yet another across-the-board slump, with revenue, profitability, and paying memberships all down — extending a decline dating back to 2020, even as the company tries to reposition itself as more than just a hook-up app.

Facing unrelenting domestic pressures — including regulatory scrutiny, market saturation and shifting user behavior to other platforms like short video sensation Douyin — company executives are now ramping up a long-touted overseas strategy in search of relief. While Hello Group has explored international markets since 2020, its leadership last week pledged bolder action on that front, pointing to rapid progress over the past year.

Before taking a closer look at Hello Group's overseas expansion, including its 2024 progress and looming challenges, we'll unpack the company's latest quarterly results to show where it currently stands. Its report underscores that its domestic slump isn't easing, explaining why the company views international markets as its most viable route to jumpstart its business.

Hello Group reported revenue of 2.6 billion yuan ($359 million) for the quarter through December, down 12% year-over-year. This extends a pattern of quarterly contractions dating back to the first quarter of 2020, with only one brief respite in the second quarter of 2023 when it eked out 1% growth. On an annual basis, revenue also fell by 12% in 2024, marking a fifth consecutive year of decline since peaking in 2019. 

The company's profitability also deteriorated significantly, with fourth-quarter net income tumbling 59% to 187.2 million yuan from 452.5 million yuan a year earlier. For all of 2024, net income fell by nearly 50% to 1 billion yuan.   

International expansion

Hello Group's declining fortunes stem partly from its struggle to keep pace with China's rapidly evolving social media landscape, where users are increasingly flocking to fast-growing new platforms, especially short video sites like Douyin and the popular Xiaohongshu social community site. The changing landscape is posing acute challenges for Hello Group's core business model of facilitating connections between strangers.

The company's struggle to adapt is reflected in the steady user declines across its two major apps, Momo and Tantan. In the fourth quarter, Tantan's monthly active users fell by 2.9 million to 10.8 million. While active user data for the larger Momo app wasn't disclosed, its paying users dropped to 5.7 million from 7.4 million year-over-year. Tantan's paying users similarly declined to 900,000 from 1.2 million. The declines are even more striking when compared to 2021, when Momo and Tantan boasted 9 million and 3 million paying users, respectively.

The company's falling revenue owes in no small part to the exodus of paying users, who primarily subscribe to premium services offering advanced features such as profile boosting. However, the most significant blow remains a regulatory crackdown that has limited gifting to livestreamers since 2020. That's severely affected Hello Group, as it heavily relied on commissions from user gifts to livestreamers.

The impact is evident in the company's revenue composition. In 2017 and 2018, livestreaming services contributed about 80% of Hello Group's revenue. But the amount has steadily declined during the clampdown, and in 2024 livestreaming revenue fell 16% year-over-year to 5.1 billion yuan, accounting for 48% of total revenue. Starting from the third quarter of 2023, value-added services — primarily membership fees — have overtaken livestreaming as the company's largest single revenue source.

This domestic crisis has forced Hello Group to step up its overseas drive, where executives see "clear growth potential" versus a more uncertain domestic market. The strategy centers on Soulchill, a social app targeting Middle Eastern markets. Soulchill's revenue surged 50% year-over-year in 2024 to nearly 1 billion yuan, overtaking Tantan's dwindling contribution. The company attributes the success to localized strategies, including culturally tailored virtual gifts and targeted livestreaming features.

Geographic expansion

According to CFO Peng Hui, the company plans to expand beyond its current markets of Turkey, Egypt, and Persian Gulf countries into developed markets in 2025, though specific targets remain undisclosed.

Hello Group is further expanding its overseas portfolio with two new apps launched in late 2023: Yaahlan, an Arabic-focused audio social game app combining gaming with voice interactions, and AMAR, a voice-based platform targeting young users in the Middle East and North Africa (MENA). According to COO Zhang Sichuan, both apps began monetization in late 2024 and are generating stable returns despite initial marketing costs.

CFO Peng projects overseas revenue will grow from 1 billion yuan in 2024 to between 1.7 billion yuan and 2 billion yuan in 2025. "If (return on investment) remains stable, we could see these newer apps reach Soulchill's current revenue scale by year-end," Peng noted on the company's earnings call. Peng said that profitability remains secondary to scaling efforts for now, meaning the overseas push is likely to keep eroding Hello Group's profits for at least the next year or two.

The expansion strategy also comes with its own risks. The company's heavy Middle East focus suggests a need for rapid diversification, as evidenced by COO Zhang's acknowledgment that instability in the MENA region impacted user spending in late 2024. Hello Group also faces competition in the region from two other social media companies with Chinese backgrounds, Yalla (YALA.US) and Newborn Town (9911.HK).

Marketing costs could also surge as Hello Group enters competitive Western markets, where it will face stiff competition from both established local rivals as well as global players like Match Group (MTCH.US).

Despite these challenges, executives view overseas expansion as crucial. COO Zhang emphasized that the company's "long-standing expertise in social entertainment products" justifies shifting resources to international markets, where it expects better returns than in the stagnant and highly competitive domestic market.

Investors remain skeptical. Hello Group's shares tumbled 8% the day of the earnings release, reflecting concerns about the sustainability of its domestic cash cow service and the capital required for overseas bets. The stock is up 12% over the last six months, but that's well behind the 45% rally for the Hang Seng China Enterprises Index over that time, showing investors are hardly convinced on the company's turnaround strategy.