Benzinga | Sep 8, 2021 12:47PM EDT

Facebook and Snapchat Still Dominant in Middle East but Chinese Social Apps like Newborn Town Gain Ground

With surging smartphone growth in the Middle East and a massive rise in its youth population, mobile internet companies are scrambling to attract downloads from the region for their social networking apps.

Among the top contenders are JOYY Inc. (NASDAQ:YY) and Newborn Town Inc. (HKSE: 09911). While still growing in the West, they have already cemented their positions on the charts in emerging markets and continue to make inroads globally with their portfolio of innovative social video and dating apps.

Why It Matters

While Match Group and Facebook will undoubtedly continue to dominate the social networking apps market in North America, the trajectory of markets in developing countries and regions is less clear-cut. Indeed, Chinese mobile social media companies look poised to carve out a dominant position with their rapid adoption of new technologies and rigorous localization efforts.

Globally, the Middle East matters to app companies' bottom lines; out of all emerging market regions, it stands out regarding its smartphone users' paying capacity. And, its importance is expected to continue due to its young population, economic outlook, and rising adoption of smartphones.

According to Social Networking in Emerging Market by Frost & Sullivan, in 2019, the Internet penetration rates in the Middle East was 72%, higher than it in other emerging markets, with an Internet user growth rate of 11%, obviously higher than it in developed markets. And the social networking user base as a proportion of total population in the Middle East reached 56% in 2019, higher than it in the West Europe of 54%, indicating good popularity of social products in this region.

In the Middle East, the biggest market is the UAE, which serves as a bellwether of the region's mobile trends.

Bigo Live, the flagship app of JOYY outside of China, is the standalone leader in the market. It lets users broadcast videos or live streams with friends and strangers.

However, Newborn Town also has a leading position in the market, considering its portfolio of apps, including YoHo and MICO. Among the whole GCC, YoHo is one of the Top 2 audio social platforms, while MICO has entered the list of Top 3 highest-grossing social apps in all GCC countries according to App Annie. Driven by its social networking business, the company generated RMB 1.04 billion in revenue in the first half of 2021, representing a whopping 6-fold YoY growth.

Li Ping, CEO of Newborn Town, attributes the company's ability to rapidly scale the charts to its investment in AI technology and robust localization.

"AI will give companies that have a proven ability to leverage it consistently a bigger and bigger moat--it's the foundation of providing standout social experiences to millions of our users worldwide at scale," Li Ping said.

"However, consumers in the Middle East, like in other regions, have unique characteristics that no technology can fully weigh. That's why our local operations staff are a core part of our team and will continue driving our global growth with market-specific expertise."