Is Musical.ly truly worth $1 billion?
Earlier this morning, Beijing-based ByteDance Technology Co. acquired popular lip synching app, Musical.ly.
According to the Wall Street Journal, the final sales price will fall between $800 million and $1 billion. However, sources close to both companies said that ByteDance will purchase the company for $800 million.
ByteDance had also acquired Flipagram earlier this year. The company reportedly competed against Musical.ly.
In a joint statement, both companies said,
“Musical.ly will continue to operate as an independent platform, integrating Bytedance’s global leading AI technology and leveraging its reach in China and key markets across Asia to enhance Musical.ly’s offering to users, creators, and partners.”
Musical.ly claims to have over 100 million active users. Yet, taking a closer look at the numbers, did ByteDance just overpay for a company that has clearly peaked?
Following in Vine and Snapchat’s footsteps.
Late last year, in a surprise announcement, Twitter said that it would shut down Vine. Right before Twitter’s strong Q3 2016 report, 350 employees were informed that they had to look for new jobs.
Vine had proven a hit several years ago. Back in 2013, the 6-second video platform had an impressive 40 million users. Yet, with the rise of strong competition in the mobile market, the service lost younger users, including millennials. In 2014, Instagram launched 15-second video clip recording. The move ultimately sank Vine, as company executives failed to innovate in time.
Snapchat has met a similar fate. Prior to the launch of its predictably inflated IPO, Instagram had launched their Stories feature. While an exact clone of Snapchat Stories, younger users, including millennials, quickly jumped ship to Instagram Stories.
As with Vine, Snapchat executives have failed to introduce innovative features. Parent company Snap’s stock reached an all-time low of $11.83 back in August. The company had also lost $6 billion in revenue overnight last May. Due to losses outpacing revenue, shares continue struggling at $12.50.
Then there was the absentee leadership. Its CEO reportedly went on a blissful yacht vacation after the company had lost $15 billion in value last July. It’s looking like a downward spiral.
Musical.ly may also meet a similar fate. According to multiple reports, the app’s growth has clearly peaked as the company has failed to “find an audience beyond Millennials.”
Taking a closer look at the numbers, a report released by MiDiA Research shows that the company’s user base has crashed. The app’s weekly active users (WAU) remained constant at 2.1% in the first two fiscal quarters of 2017. In Q3 2017, however, the company’s WAU dropped to 1.4%. If the company has at least 100 million users as it claims, then in just three months, Musical.ly has lost at least 700,000 users.
Competitor Dubsmash, a mobile video messaging application, also reported a similar loss. The app’s WAU peaked in Q2 2017 at 2.0%. In Q3 2017, its WAU dramatically shrunk to 0.8%. Like Musical.ly, Dubsmash has reported a total user base of “more than 100 million people.” If taken at 100 million just as with Musical.ly, the app has lost at least 120,000 users in three months.
So, is Musical.ly truly worth $800 million? No. No, it’s not.
A one trick pony.
But, what happened to the company? Midia explains where things went wrong.
“The problem for Musical.ly is that Snapchat and Instagram do a great job of this for these consumers too. Musical.ly became a one trick pony that suffered from not being able to use its core functionality as a beachhead for something much bigger.”
Musical.ly has fallen victim to the same plague that sank Vine and will ultimately sink Snapchat: a failure to innovate. Users, especially younger audiences, have caught on and have already started fleeing the app en masse. And the same teenage audience that flocks to an app will just as quickly desert it.
With the purchase, ByteDance has the opportunity to create an innovative full-featured music messaging app. Should it fail to do so, however, it won’t take long to read the following headline:
“Musical.ly has shut down.”
Featured image in the Public Domain.