Aurora Mobile Ltd (JG) Q4 2020 Earnings Call Transcript

Aurora Mobile Ltd (JG 0.67%)
Q4 2020 Earnings Call
Mar 18, 2021, 7:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Aurora Mobile fourth-quarter and fiscal-year 2020 earnings conference call. [Operator instructions] I'd now like to hand the conference over to your host today, Rene Vanguestaine. Thank you. Please go ahead.

Rene Vanguestaine -- Investor Relations

Thank you, Amber. Hello, everyone and thank you for joining us today. Aurora's earnings release was distributed earlier today and is available on the IR website at ir.jiguang.cn. On the call today are Mr.

Weidong Luo, chairman and chief executive officer; Mr. Fei Chen, president; and Mr. Shan-Nen Bong, chief financial officer. Following their prepared remarks, all three will be available to answer your questions during the Q&A session that follows.

Before we begin, I'd like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as a mandate and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions, which are difficult to predict and may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Future information regarding these and other risks, uncertainties and/or factors are included in the company's filings with the U.S.

Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. With that, I'd now like to turn the conference over to Mr. Luo.

Please go ahead.

Weidong Luo -- Chairman and Chief Executive Officer

Thanks, operator. Good morning and good evening to everyone on the call. Welcome to Aurora Mobile's fourth-quarter and full-year 2020 earnings call. The year 2021 marks the 10th anniversary of Aurora Mobile.

Looking back, we are extremely proud of what we have achieved in the past decade in helping all our mobile app customers in China to improve their operational efficiency, helping each and everyone of them improve their operations, grow and now monetize. I still see vividly remember the very first JPush product we developed for mobile app developers way back in 2011, and we have come a long way since. Over the -- over this past decade, through in-house innovation, technical progress and relentless pursuit of excellence, we have reached many milestones. We started with one JPush product in 2011 and over the years, we developed seven additional products for mobile app developers, meeting their different and evolving optional needs.

Cumulatively, as of December 31, 2020, we can work with more than 591,000 app developers, representing more than 1.7 million apps in total. Our developer services SDKs have been installed more than 46.7 billion times. In the fourth quarter of 2020, on average, every month, there were more than 17,000 new mobile apps joining and using one or more of our eight developer services. I would like to use this opportunity to thank all the mobile app developers who have been alongside us, trusting us and cooperating with us over these 10 years.

I believe the next 10 years will be even greater for our customers, thanks to the new exciting and innovative product and service offering from Aurora Mobile. The year 2020 was a very extraordinary year in which an unexpected pandemic reset the world and changed how people live their lives and how companies conduct their business in so many ways. During the crisis, we persistently carried out our core strategy to serve our developer customers by helping them with their business operations, user growth and the monetizing of their user base. Based on the solid business foundation built with our developer subscription services, we ventured into new business territory by innovatively creating our JG Alliance business lines to help our developer customers better monetize their user traffic.

The JG Alliance became a great success as we achieved a phenomenal 15x growth year over year in revenue and DAUs grew rapidly from 0 to 130 million in merely five quarters. Meanwhile, we completed the wind down of our targeted marketing business. Despite being the largest revenue contributor in 2019, we felt the targeted marketing business is not fit with our company's long-term direction. I am proud to announce that by the end of the fourth quarter 2020, our business transition was 100% complete, and we have successfully transitioned our company to a pure SaaS-based business model.

During the year, we also put great emphasis on product development and innovation. We successfully launched three new heavyweight products. First, we enhanced our JG Alliance product portfolio by adding a new in-app message product. And in our developer subscription business, we launched the unification messaging service or UMS, and video-as-a-service or VaaS products to address new critical needs from developers.

On the customer front, retail from partnership with numerous well-known and key customers across almost every industry vertical, as you have seen from the press releases we issued from time to time. Cooperation with these KA customers has helped us better penetrate into different industries, tech and new energy vertical sector, for example. After our cooperation with the world's leading new energy vertical manufacturer MBYTE as of this week, we now have 39 customers within the auto industry, of which 19 are free paying. We are replicating the success of the EV market expansion model in other industries, such as short video, education, gaming, finance, telecom, e-commerce and blockchain.

For this domino effect where we leverage our existing cooperation relationship with the market leaders of each industry, we believe we can and we will quickly sign up more customers to ramp up or increase our market share. Throughout the year, we also upgrade our talent pool by hiring a number of senior executives across R&D, sales operations and HR, who have reached management experience accumulated from Tencent, baba, ByteDance and Huawei. We optimized our business operations so we can run the business more efficiently and create education certainty. Continued talent acquisition, we've targeted with wide performance-based incentive scheme put in place and functioning the way we manage our organizations will lay a solid foundation for our future sustained business growth and success.

Before I comment on our 4Q results, I would like to take this opportunity to remind everyone that we have uploaded the quarterly earnings deck on our IR web page for your reference. You may refer to the deck as we proceed with the call today. Let me continue with our key operating highlights for the fourth quarter of 2020 other than those I have mentioned earlier. First, the number of monthly active unique mobile devices we cover continued to grow, reached 1.395 billion in December 2020 from 1.36 billion in December 2019.

Over 90% of mobile devices in China have at least one or more Tier 1 SDK installed. Second, during the quarter, we saw the number of paying customers grow to 200 -- to 2,420 from 2,131 a year ago. I would like to focus the discussion on our SaaS business, which include only the developer services and vertical applications business as we have officially exited the traditional targeted marketing business on December 2020. Therefore, starting from January 1, 2021, all our revenue will be contributed by these SAAS Businesses.

Our SaaS business continued to record impressive results this quarter with revenue of RMB 76.6 million, which was at the higher end of our guidance range, representing 17% growth year over year and 18% growth quarter-on-quarter; and gross profit of RMB 58.5 million, growing 39% year over year and 20% quarter over quarter. On a SaaS business basis, the total revenue grow 70% year over year, mainly due to the strong 46% growth in developer services, partially offset by the decline in vertical applications, which have been impacted by the COVID-19. Nevertheless, revenue from vertical applications have seen solid sequential growth for three consecutive quarters as customers demand in this segment continue to recover. On a quarter-over-quarter basis, SaaS business revenue records grew -- sequential growth of 18% to 76.6% -- RMB 76.6 million.

In Q4 2020, our SaaS basis contributed 72% of total revenue, up from 60% in Q3 2020. Going forward, SaaS business will contribute 100% of our revenue. On a SaaS business basis, gross profit has also shown strong growth of 28% year over year to RMB 58.7 million for the quarter ended 2020 due to -- of the revenue growth of 17% year over year and margin expansion from 70% to 76% year over year, we expect our gross margin in 2021 to remain above 70% throughout the year. For Q4 2020, SaaS business contributed 98% of the gross profit, up from 96% in Q3 2020.

Going forward, SaaS business will contribute 100% of our gross profit. Here, I would also like to take a moment and share with you our new product initiatives. With the recent release of the launch of both the JG UMS and JG VaaS products after conducting thorough market analysis with our app developers and customers to understand their needs and pin points. Employees of JG UMS, which stands for Unification Messaging System, enables business to engage with their target customers more efficiently and cost effectively through one integrated messaging management platform, therefore, improving optional simplicity while reducing cost with flexible routing strategy management.

In the past two years, with the proliferation of many user engagement channels such as mini programs, which are public accounts thinking essentials, user engagement has become much more complex than ever before. UMS therefore, comes to the market as the right product at the right time to address such pain points. UMS is not only suitable for app developers, but also suitable for business that do not even have a mobile app. Pretty much all the business in China will need this product as long as they have a sizable customer base and utilize multiple channels to reach their customer base.

JG VaaS, which stand for video-as-a-service, on the other hand, enable mobile app developers to provide relevant user-friendly short video content in their apps, therefore, improving their user experience, increasing user engagement and stickiness and enhancing monetization capability. It is a distributed way for users to consume short video anytime and anywhere, rather than have to go to a dedicated video apps to view short videos in a centralized fashion. Both UMS and VaaS are operated in a subscription fee-based model, where our customers pay us annual fees based on the features they like to enjoy. We believe both products can greatly expand our paying customer base and ARPU for our developer subscription business over time.

We anticipate that these two products will start generating revenues in the second quarter of 2021. Now, I will turn the call to Fei who will discuss the Q4 performance in greater detail.

Fei Chen -- President

Thank you, Chris. Let me start the discussion of different revenue streams within the SAAS Businesses. Our star performer, developer services, shine continuously from the first quarter to the fourth quarter of 2020 and was the biggest revenue contributor within our SAAS Businesses in fourth quarter 2020. For the quarter ended December 31, 2020, we recorded RMB 52.5 million in revenue for developer services, which represented 46% growth on a year-over-year basis.

The significant revenue growth in developer services was fueled by 28% and a 14% growth in customer numbers and ARPU, respectively. For subscription services within the developer services, we continue to see more customers signing up through our suite of developer services. New and the renewal customers include, among others, [Foreign language] FARFETCH [Inaudible] Subscription services revenue was RMB 35.1 million, an increase of 6% year over year and 16% quarter over quarter, primarily driven by the increase in customer numbers. Value-added services within developer services, which includes revenues from JG Alliance services and the Advertisement SaaS recorded another strong quarter as revenues grew by 28 -- 29% quarter over quarter and 432% year over year.

The value-added services full-year revenue grew from RMB 3.3 million in financial year 2019 to RMB 52.5 million. The 15x annual revenue growth demonstrates the large potential market opportunity and a growing demand for our value-added services. In the fourth quarter, the revenue from value-added services was RMB 17.4 million compared to RMB 3.2 million in the same quarter a year ago. This 432% year over year revenue growth is attributable to the growth in both the supply and the demand side of the JG Alliance.

On the supply side, we continue to see many apps joining our JG Alliance traffic network. The total number of apps and the DAUs within our network exceeded 200 apps and 130 million DAUs in the fourth quarter, representing 100% and 30% growth from the third-quarter 2020, respectively. The notable new members of JG Alliance on the traffic site mainly include large and popular mobile apps from different industry sectors such as utilities, education and the financial. The continued growth in the number of apps and the DAUs is proof of the strong market demand for JG Alliance products.On the demand side, many program developers continue to play a pivotal role as traffic consumer of JG Alliance by contributing 39% of revenue in the quarter.

Notable customers of JG Alliance included, but not limited to, Weibo, JD, Pinduoduo [Foreign language]. Our JG Alliance ever increase in traffic pool resources and the innovative and unique advertising formats have given our customers a brand-new, effective and a different media for user acquisition needs and dormant user retargeting needs. Now, I would like to provide a brief update on the legacy targeted marketing business. The revenue and the gross profit contributions from targeted marketing have both declined from 40% in Q3 '20 to 28% in 4Q, and from 4% in third-quarter '20 to 2% in fourth-quarter '20, respectively.

The fourth quarter of 2020 is the last quarter where we recognized revenues from Targeted Marketing. This business has ceased its entirety by December 31, 2020. Therefore, starting from first-quarter 2021, revenues will be 100% from our SAAS Businesses, which include only developer services and vertical applications. Now, let's move on to the discussion of vertical applications.

The combined revenue from vertical applications, which include market intelligence, financial risk management and iZone increased by 10% sequentially from RMB 21.9 million in the third quarter of this year to RMB 24.1 million. Revenue from vertical applications recorded a sequential growth every quarter in 2020. Revenues from our market intelligence product increased by 16% year over year. We continue to see strong growth from corporates with more than 60% revenue contributed by corporate clients.

New corporate customers included [Foreign language] In the financial risk management segment, revenue increased by 23% quarter over quarter as demand for this business has recovered strongly from the impact of COVID-19 since the first half of 2020. Solid and continued demand from banks and the licensed financial institutions has pushed both the ARPU and the customer number to grow by 15% and 7%, respectively, sequentially. And lastly, our iZone business is still facing challenges as a result of COVID-19 impacting on the demand for location-based products. This business unit is still undergoing a number of new initiatives in product transitions.

We recently launched a joint product with Country Garden called the [Foreign language]. This product will not only provide the foot traffic analysis for properties up for sale, but also help property developers to identify and target potential property buyers. We expect such products could help renew the growth in iZone over time. With that, I'll now pass the call to Shan-Nen.

Shan-Nen Bong -- Chief Financial Officer

OK. Thanks, Fei. Since Chris and Fei already talk about our top-line numbers for this quarter, I'll go through some of the other P&L and balance sheet items. And let me summarize the key takeaways and highlights for -- on the P&L items for this quarter.

First, the SAAS Businesses revenue and gross profit contribution recorded solid double-digit year-over-year growth in all four quarters in 2020. Second, the value-added services achieved revenue growth of 432% year over year in Q4 2020. Third, we recorded yet another record high group gross margin of 56% in Q4 2020, up from 47% in Q3 2020. If the business becoming pure SaaS-based, we anticipate our gross margin to be above 70% in 2021.

Fourth, 98% of our current quarter gross profit was contributed by the SAAS Businesses. Lastly, targeted marketing business has completely wind down by 12/31/2020. And we are now beginning a new chapter in the Aurora Mobile story where from January 2021, all our revenue will be 100% contributed by the SAAS Businesses only. We are demonstrating that operationally and financially that this transition is beneficial and healthy to our financial performance as a whole.

Onto operating expenses. The total operating expenses increased by 3% year over year to 105 -- RMB 106.5 million. In particular, R&D expenses decreased by 8% to RMB 40.6 million, mainly due to decrease in staff costs as a result of lower headcount and low severance payment in Q4 2020. Such reduction was due to the restructuring that took place in Q4 2019.

Selling and marketing expenses decreased by 27% to RMB 22.3 million, mainly due to the reduction in salary costs as a result of lower headcount and lower off-line marketing expenses due to the COVID pandemic restriction. G&A expenses increased by 51% to RMB 43.5 million, mainly due to the RMB 10.9 million impairment charge related to fixed assets due to our going cloud project in 2021. We're under -- under the U.S. GAAP, we are to book the impairment charge for the servers to be retired or made redundant.

Other factors contributed to the increase, including increase in professional fees and bad debt provision. Adjusted EBITDA improved 22% to negative RMB 17.1 million from negative RMB 22 million in Q2 2020. In addition, Q4 2020 was the quarter where we achieved the best quarterly adjusted EBITDA results in year 2020. The company will continue working hard to improve this number going forward.

Onto the balance sheet items. Accounts receivable turnover days continued to improve and show great results as it decrease significantly from 70 days in Q4 2019 and 45 days in Q3 2020 to 37 days in Q4 2020. This was attributable to management greater effort and emphasis on stringent customer credit granting policy, outstanding accounts receivable monitoring, along with aggressive and timely collection during the quarter. Furthermore, the decline of targeted marketing business during the quarter also contributed to the shortening of AR turnover days.

The deferred revenue balance, which represents cash collected in advance from customer increased significantly by 41% year over year to RMB 109 million as of December 31, 2020. This is in line with our shift to the SAAS Businesses where most customers are required to prepay their annual contract fee upon commencement of service. In the fourth quarter of 2020, our operating cash flow was once again positive. This is the third consecutive quarter since Q2 2020 that we have recorded net operating cash inflow.

All of the above KPIs showed that our transition to focusing on SaaS business is generating more cash and granting fewer AR credit days that we have had under the targeted marketing area. The improvement in each of these balance sheet items were primarily driven by our shift to SaaS business model and we are very pleased with this improvement over the quarters. Next, total assets were RMB 787 million as of December 31, 2020, and this includes cash and cash equivalents of RMB 436 million, account receivables of RMB 44 million, prepayments of RMB 12 million, fixed assets of RMB 73 million, long-term investment of RMB 168.5 million. Total current liabilities were RMB 460 million as of December 31, 2020.

This include accounts receivable of RMB 16.6 million, deferred revenue of RMB 109 million, accrued liabilities of RMB 109 million, convertible notes of RMB 225 million. And for the financial year ending December 31, 2021, the company expect the total revenue to be between RMB 380 million and RMB 400 million, representing a year-over-year growth of approximately 47% to 55%, and the gross margin to be above 70% for the full-year 2021. However, please note that for meaningful comparison purposes, the prior-year revenue numbers used to calculate the growth percentage share excludes revenue from targeted marketing business. And the above outlook is based on the current market condition and reflects the company's current and preliminary estimate of the market and operating conditions and customer demands, which are subject to change.

Lastly, before I conclude, I'll give a quick update on the share repurchase plan. In the quarter ended December 31, 2020, we did not repurchase any shares. As of December 31, 2020, cumulatively, we have repurchased a total of 921,000 ADS since the start of our program. And this concludes the management prepared remarks and we're happy to take the questions now.

Operator, please proceed.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Brian Kinstlinger from AGP. Please ask your question.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Thanks for taking my questions. Could you remind listeners the benefits of mini programs joining the JG Alliance? And then maybe which verticals are you seeing the greatest adoption versus which verticals maybe are taking a little bit longer to adopt the technology?

Fei Chen -- President

Hey, Brian, are you asking about the JG Alliance network right on the demand side? There are mini programs.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Right. Right.

Fei Chen -- President

OK. Yes, yes. So yes, as you know, the mini programs has been profiting -- has been profit generation over the past couple of years, right? So many mini program developers, once they build their mini program, the account, the mini programs, they need to acquire users. So currently, they -- most of them can only rely on the WeChat's internal traffic, right, for the users to search, to find the mini programs.

And the traffic within the WeChat is limited. So if they want to continue to grow, they have to look for additional resources, additional traffic. So that's where -- that's why we come into the place because for the JG Alliance network, our products, the -- we have two products, right? For the in-app messages as well as the live push messages, these two actually media formats worked very well to direct the traffic to the WeChat's mini programs. So that's why over the past year, these mini program developers -- the demand from mini program developers have been very strong for our traffic.

And the last quarter, we had over 30 -- about 39% of the revenue is generated by these mini program developers. And for example, like the -- in terms of the vertical, actually, the e-commerce, like the travel, also the financial, these sectors actually currently where the demand is coming from.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. My follow-up is in terms of the subscription services, can you talk about how fast you're able to convert the premium into paid customers? And what has been the biggest obstacle to converting these customers right now?

Fei Chen -- President

Yeah. So actually, in terms of the conversion, right? So currently, we have about 60,000 premium customers who actually enjoy our free service and then the paying ratio is relatively low, about three -- a little bit less than 4%, right? So that's still room for -- to increase the conversion. So what we are trying to do, basically, we need to put a few mechanisms in place. We need to have the sales organization basically to go through the list of the freemium customers and have an engagement with them and basically to educate them, the difference between the paying and the nonpaying, the benefits they can get by paying a little bit monthly fee, right? So this is ongoing.

And that these efforts actually, this year, we basically intensified -- put a greater efforts into this effort, right? And the second is we also look at basically to do the current paying customers, the profile analysis to identify the common features of these paying customers, why they like to pay, right? How big is their GPU? How many messages they typically send, right? So we come to, basically, it's stuff like doing a user profile, right? So based on this profile, we can more accurately select those freemium customers who are more likely to be converted, right? So this work is being done by the R&D operation and also sales operation, right? So that when the sales talk to the freemium customer, they can be more effective. Yes, so these are the approaches we are currently undertaking.

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Great. Thanks for your -- thanks for answering my question.

Fei Chen -- President

Thank you.

Operator

Your next question comes from Ryan Roberts from Navis Capital. Please ask your question.

Ryan Robert -- Navis Capital -- Analyst

Good evening. A couple from me. Maybe Shan-Nen, this is kind of better directed to you. I'm kind of curious what the bad debt provision is kind of we saw in this quarter.

And ultimately, you break down on the impairment a little bit. I think there was some error in the slide deck, you guys mentioned going cloud. I'm just kind of curious what the -- maybe more of that project because I think around the IPO time, one of the kind of the points -- the positive points was your network of servers across the country and how quickly you could perform the push services per certification, which is kind of a differentiating factor. And so I'm just wondering the context of the going cloud, what that means for the infrastructure and service level.

So I guess I'll just start with those two.

Shan-Nen Bong -- Chief Financial Officer

OK. Thanks, Ryan. OK, I'll take your question. On the bad debt, yes, we'll not go into specific of particular debtors.

But in overall, those are the debtors pertaining to the legacy targeted marketing business that we are winding down. So those are the ones that has been lingering with us for a couple of orders that we are thinking that is no longer able to recover the debt. So those are the ones that we have made provision, 100% provision. So meaning that going forward, in Q1 2021, we have a fresh list of the accounts receivable going forward.

And secondly, the question you asked about the impairment. Yes, that was in relation to the going cloud project that we had. So based on the current projection, we are expecting to complete this going cloud project by sometime in second quarter of 2021. And the reason why we do this is throughout the years, we have managed to see, besides the fact that we are able to build our own infrastructure, we are taking advantage of the technical advancement of this cloud service provider because they have the ability to help us to leverage on their infrastructure.

I'm trying to say is it will only help us to improve our service delivery and stability going forward for all our developers.

Ryan Robert -- Navis Capital -- Analyst

Are you going to replace kind of a lot of your infrastructure, a lot of your servers with cloud?

Fei Chen -- President

No, no, no. So Ryan, let me answer that. So actually, we are not replacing everything. We are just replacing a part of, OK, which we think will benefit from the going cloud, OK? So basically, those servers might be better managed by the cloud service provider instead of -- so we can focus in on the path level instead of we put resources on the data center management, right, server management, those high level type of dirty work, right? So that's the focus.

Ryan Robert -- Navis Capital -- Analyst

OK. And then maybe just kind of on the numbers. And the last one, pretty chunky impairment on the long-term investment. Looking at about RMB 44 million.

Kind of curious what that is?

Shan-Nen Bong -- Chief Financial Officer

Yes. Again, those are the investments that we have made in the past pertaining to a few investees. Again, those are the ones that we have made -- the investment we made with the intention of helping us in the targeted marketing area. We thought of the fact that we'll be able to have some synergy through these investees.

And the fact that now, we are winding down the targeted marketing business, so we deem there's no longer any value for them to keep on going forward. And the fact some of them are not performing well operationally, so based on the U.S. GAAP on the ground of conservatism, so we make a full provision for a couple of them.

Ryan Robert -- Navis Capital -- Analyst

OK. So it sounds like it's mostly targeted marketing related. OK, OK. And maybe kind of just get a sense of -- on the new product side, I think you guys have launched some new kind of new products recently.

Just wondering if you can maybe share some early kind of feedback from customers and clients. I think it sounds like there's a lot of R&D effort upfront to kind of to develop these -- solve these pain points and develop these packages. I'm just kind of curious, so far, how has the reception been? And also, how does that factor into your outlook kind of for the year? So I think the guidance was RMB 380 million, RMB 400 million, which is -- what's that, 60%? Somewhere around there, Y-o-Y. And so I'm curious if you're expecting a lot of contribution from the new products or principally, that's mostly reflecting kind of JG Alliance.

I'm trying to get a sense of what maybe some of the assumptions are in there.

Weidong Luo -- Chairman and Chief Executive Officer

OK. Ryan, let me take your questions. So regarding the new product, the progress with the new products going to market, right? So first of all, these two new products, the UMS and the VaaS, were launched in the later part of fourth quarter. So after Chinese New Year, and then starting from beginning of this year and also quickly this Chinese New Year.

So actually right after Chinese New Year, actually, the real -- the sales work started, kicked off. And in a very short period of time, about a month, we actually already built very good pipelines. Yes. So for the UMS, actually, we already have 19 credible pipelines.

And the customers, we are in the constant dialogue with the customers. And these 19 customers represent a few million dollars -- RMB. And actually, I'll tell you a good news. Actually, as we speak -- actually, yesterday, when I asked our sales head, and then she told me she just signed one contract, UMS contract, and we have already received the money, so -- which is great, right? And for the VaaS, actually, it's in a very similar situation.

And after Chinese New Year, we mobilized our sales force. Currently, we already built 12 very credible sales pipelines. And again, these 12 pipelines account for a few million RMB. So based on this initial feedback, we are very encouraged, and we -- and based on the analysis, we also think these two products will have a higher ARPU, actually a much higher ARPU than our traditional path business, such as the JPush, right? So we believe over time, the course of the year, we think these two business will become the new growth -- actually legs for our subscription business.

And we also actually put the KPI on these two products to our sales organization. So it's not that they are not encouraged to sell. Actually, they are very incentivized to push these two products out. And the market reaction, as I just mentioned, is very positive and promising, OK? So next quarter, maybe I can give you more data, more progress on these two -- new two products.

And also, you asked about the -- our overall guidance, right? We guided RMB 380 million to RMB 400 million, which represents 47% to 55% year-over-year growth. And you are right, actually, the most of the growth is not -- is going to be driven by the JG Alliance. As we talked about last time and before, actually, JG Alliance has characteristics that can have an explosive growth, right? So we are expecting on JG Alliance to continue to have a triple-digit growth this year. And for the subscription business, as I just mentioned, which typically is going to be around 30%-ish.

This is same -- same is true for the vertical application. So net-net, you will see about 55% growth for the entire year.

Ryan Robert -- Navis Capital -- Analyst

OK. And maybe if I could just take one last one, if you'll allow me. One of the things we kind of talked about on another previous call -- I mean, the one prior, were kind of the efforts to kind of bring back some of the targeted marketing clients to the new kind of JG Alliance that, that product that kind of -- that you've got the new advertising inventory and you have kind of companies that need advertising. And I guess, the COVID-19 situation aside, it sounds like you have this new advertising service you could sell to people that you already have a relationship with.

And I think, if I recall, I think you were trying to do some of that. And I'm just kind of curious if you can share any updates on how it's going, bringing back some of those old accounts to spend on your new -- kind of the new JG Alliance products.

Fei Chen -- President

Hey, Ryan. Actually, when I compare the customer base, right, actually, they are very different. The customers who currently use our JG Alliance network, actually, are very, very fundamentally different from those customers who use our targeted marketing business. So for the targeted marketing actually before, most of our advertising customers are coming from the financial sectors, like those are lenders, OK, per se.

But for these mini programs, actually, as I mentioned in the press release, if you recall those names, right, those are very large Internet companies. And regardless whether they are trying to go through our JG Alliance network to reactivate their dormant customers or they are trying to increase their user base for their mini programs, actually, most of them are very well-known Internet leaders. So the nature of these customers, they have -- basically, one, they are very creditworthy, right? There's little chance they can be defaults, right, than when you compare to the targeted marketing customers, right? And the second, they have a deep pocket and the budget is not an issue. As long as we have enough traffic, they will say, OK, give it all to me, OK? So that's a good thing.

So -- and also to share with you a data, I looked at the cohort analysis, right? Starting from last July, for every month the new customers joined our JG Alliance at the demand side, when I look at their revenue contribution for the second month, for the third month, for the fourth month and the following and so on and it's all above 100%, OK? So which means the customer retention is -- the stickiness is very, very high. It's unlike the targeted marketing business before. If I show you this number, it's going to be below 100%, maybe 50% next month, OK? So that's the drastic difference. So this gives us so much confidence that this product really, really shines, really has a strong value proposition.

And these customers, they are happy with the performance we are able to deliver. These customers, they are happy with the volume we are able to deliver. So yes, that's why we are so confident about the growth trajectory of this JG Alliance in 2021.

Ryan Robert -- Navis Capital -- Analyst

Understood. Thank you very much, Fei. That's very helpful. Appreciate it.

Fei Chen -- President

Thanks, Ryan.

Operator

[Operator instructions] All right, there are no further questions. I'll now turn the call back to Rene for our closing remarks.

Rene Vanguestaine -- Investor Relations

Thank you, Amber. Thank you, everyone, for joining our call tonight. If you have any further questions and comments, please don't hesitate to reach out to the IR team. This concludes the call.

Have a good night. Thank you all.

Operator

[Operator signoff]

Duration: 64 minutes

Call participants:

Rene Vanguestaine -- Investor Relations

Weidong Luo -- Chairman and Chief Executive Officer

Fei Chen -- President

Shan-Nen Bong -- Chief Financial Officer

Brian Kinstlinger -- Alliance Global Partners -- Analyst

Ryan Robert -- Navis Capital -- Analyst

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