In just three years, Momo (NASDAQ:MOMO) has grown from $3 million in annual revenue to $553 million in fiscal 2016. The Chinese mobile-based social networking site has made tremendous progress against competing social media companies, and the market has taken notice.

It's hard not to get excited about a Chinese social media company these days. At 731 million internet users, only 53% of China's population is online. Momo has positioned themselves in the right place at the right time. As a mobile company, it looks to further capitalize on the fact that 95% of China's internet users are on mobile.

Collage of Momo users

Image source: Momo.

And unlike some of its U.S. counterparts, this social media company is already profitable. In fiscal 2016, the company made $145 million, which amounted to an impressive 26% net profit margin -- and the company is not slowing down. Momo recorded $0.21 in earnings per share in the first quarter of 2017 versus only $0.02 per share in the same period last year.

As it turns out, the major revenue drivers for the company have shifted recently -- let's take a deeper dive into how Momo brings home the bacon.

Live video service 

In 2016, 68% of Momo revenue came from its live video offering. This was a huge increase from the 1% this category accounted for in the previous year. This massive shift occurred as Momo transitioned away from its online dating business. The trend has accelerated in the first quarter of 2017 as 80% of revenue came from live video.

The initial content on the company's live video platform was limited to online concerts and music shows in a professional studio environment. Shows were broadcast live up to four times daily. Momo then opened the platform to more parties, expanding beyond music until April 2016 when service opened to all users. Like YouTube, some content creators can grow loyal followings, allowing them to advertise a variety of products and services. However, most of the money that Momo makes comes from the exchange of virtual gifts. Yes -- virtual gifts. Viewers can show their appreciation to broadcasters by giving them digital stickers that vary in price. The broadcaster and Momo share the revenue generated by these gifts.

Admittedly, I was shocked this could even be a sustainable business model when I first heard about it. However, according to The Economist, revenue in the live-streaming industry was around $3 billion last year, just short of half of China's box-office receipts for the Chinese film industry. Not all that $3 billion is from the exchange of virtual gifts but given Momo's quick growth, there appears to be a strong market for it. The number of paying users for Momo's live video service increased from 0.2 million in 2015 to 4.1 million in the latest quarter.

Value-added service

Momo also allows its users to send gifts outside the video platform to its messaging or gaming services. Its value-added segment includes premium memberships, which give users the ability to add extra features to their homepage such as logos and short videos. Premium members have access to special emoticons, more users to follow, and the removal of advertisements.

During the most recent quarter, the value-added segment of Momo's business increased 54% year over year. However, due to the high growth in the live video segment, value-added services' contribution to total revenue during the same period decreased from 29.2% to 8.6%.

Mobile marketing, gaming, and other services

The mobile marketing services segment of the company consists of banner ads, text-based content, pictures, and video clips. This business is still experiencing strong growth, but its importance to the top line has similarly decreased over the last three years. Mobile marketing revenue grew nearly 71% from $38.9 million in 2015 to $66.3 million in 2016. However, its contribution to revenue decreased from 29% to 12% during the same period.

Mobile gaming growth in 2016 slowed to 14% after growing 177% in 2015. However, the company is looking to change its mobile game strategy, essentially incorporating it into a part of its core product. CEO Tang Yan had the following to say about mobile gaming:

Moving on to mobile gaming business -- 2016 was a year where we scaled back from the game publishing and joint operations to refocus on in-house developed games. In 2017, we will continue to execute against that strategy and make gaming an integral part of our social and entertainment ecosystem.

So despite having multiple profit centers, the aggressive expansion of the highly popular live video platform is what investors should watch going forward. The service is still quite new, having only launched in the third quarter of 2015, yet its paying user base has already reached 4.1 million. Given that Momo has 85.2 million total monthly active users, there is still plenty of room for this business to grow. Whether the stock price can keep up or not is another question.