Photo/Shetuwang

Sept. 19 (NBD) -- Stock of Chinese news aggregator Qutoutiao Inc. (NASDAQ: QTT) has dropped by 42 percent as of Tuesday since its initial public offering.

Last Friday, the company got listed in the United States, aiming to raise 84 million U.S. dollars. 

Founded in 2016, Qutoutiao targets third- and fourth-tier cities in China and has grown into the second largest mobile content aggregation platform after Toutiao. As of July this year, the news aggregation app registered 154 million downloads and 48.8 million monthly active users.

Despite similar user interface with Toutiao, Qutoutiao differentiates itself by providing digital coins to users who read news, invite new friends or share with friends news on the app. One thousand coins are worth around 0.5 yuan (7.2 cents), which fluctuates depending on the app's advertising revenues. 

Qutoutiao provides companies with advertising push service based on the app's big data. Through user profiles, the app pushes targeted advertisements to users who may have interests. An advertising agent of Qutoutiao told NBD that advertisers can open an account with a deposit of no less than 5,000 yuan (729.2 U.S. dollars) which can be used as advertising payment later. Qutoutiao bills based on the number of times that users click on the advertisement, charging 0.2 yuan (2.9 cents) for one click. 

According to Qutoutiao's prospectus, advertisement is the largest contributor to its income. Last year, the startup generated 513 million yuan (74.8 million U.S. dollars) in advertising revenue, accounting for more than 99 percent of the total net revenues.

The filing also shows that Qutoutiao's sales and marketing expenses stood at 495 million yuan (72.2 million U.S. dollars) in 2017, which is equivalent to 95.74 percent of net revenues.

Despite fast revenue growth, the company hasn't made profits so far. Qutoutiao reported a net loss of 10.9 million yuan (1.6 million U.S. dollars) in 2016, and the figure further increased to 94.8 million yuan (13.8 million U.S. dollars) in 2017. 

However, the news aggregator's current business model may not be able to develop into a long-term mechanism to attract users and make profits.

In the first six month of this year, the loss even rose to 514 million yuan (75.0 million U.S. dollars).

But a person-in-charge of public relations at Qutoutiao explained that of the loss, 180 million yuan (25.3 million U.S. dollars) was given to the founder of Qutoutiao in the form of locked-in shares. 

The person also stressed that the company's operating cash flow is positive, but it takes time to reflect in financial reports.

Email: zhanglingxiao@nbd.com.cn