3 Ways Huya Can Grow Its Business

HUYA Inc (NYSE: HUYA), also known as the Twitch of China, is a leading player in China’s online live game streaming industry with 150 million monthly active users (MAUs).

It operates in a competitive industry competing against companies such as DouYu International Holdings Ltd (NASDAQ: DOYU), Bilibili Inc (NASDAQ: BILI), Momo Inc (NASDAQ: MOMO), to name just a few.

Still, there are many ways Huya can grow its business over the short to medium term. Here are three of them.

Growing its user base

Though operating in the competitive entertainment industry, Huya specialises in gaming live-streaming, which allows it to hold a dominant position in this segment.

With its market-leading monthly active user (MAU) base of more than 150 million, Huya can attract high-quality hosts/content providers to deliver content on its platform.

Having high-quality content not only allows Huya to retain its existing users, but also grow its new user base. This, in turn, attracts even more quality content, and the virtuous cycle continues.

A growing user base is necessary for Huya to grow its revenue, both from selling virtual gifts and advertising.

Improving the monetisation rate

Despite its dominant market share, Huya is still in the early stages of monetising its assets. For example, only 6.1 million of its users (out of the 150+ million) are paying users in the last quarter.

This gives it ample room to convert its free users to paying users. Moreover, it can also grow the average revenue per user by offering high-quality content to delight them.

Besides, Huya can grow its advertising income – less than 10% of its revenue – which is an indirect method to monetise its free user base.

To this end, broadcasting high-quality content like live e-sports tournaments can be very effective in growing advertising income.

Also, Huya is increasingly diversifying into non-gaming content, which will further improve user engagement, and subsequently, its monetisation effort.

Tencent as a major shareholder

Earlier this year, Tencent Holdings Ltd (SEHK: 700) gained control of Huya by boosting its existing stake from 34.6% to 50.1%, taking over from its previous parent, YY.

The change in ownership is likely to be positive to Huya thanks to Tencent’s deep financial pockets, huge user base – stemming from its gaming services, WeChat, QQ – and extensive relationship with global entertainment and gaming companies.

Huya can leverage these resources to grow its user base, invest in high-quality content, and introduce new services, which will further strengthen its overall market position.

In other words, Huya’s long-term prospects become even more appealing now that it has secured the backing of Tencent.

Investing for the long term

In sum, I think Huya is well-positioned for growth over the long term thanks to the factors mentioned above.

Still, I will keep an eye on the competitive dynamics in this industry and watch out for any sign of weakness.