This article is part of our Rising Star Portfolios series. Sean is the co-manager of the Dada Portfolio.
A little more than a month ago, the Dada Portfolio took a $500 bite of matchmaking service Jiayuan.com (Nasdaq: DATE). With the company's excellent Q2 results reported this week, we think it's worth another nibble.
Revenue was up 121% this quarter on a year-over-year basis, but even more impressive was the 22% sequential revenue growth. In just these past three months, the company attracted 5.3 million new users -- that's approximately 521,000 new users per day! Moreover, Jiayuan now sees, on average, almost 257,000 more paying users per month than it did back in March. And rest assured, that increased volume is flowing down to the bottom line, where net income basically doubled for the quarter.
On the product-development front, some of the more exciting news on the conference call related to a new locational awareness built into the service. Users can now "search for and connect with other users located near them who might be suitable matches." The company also came out with beta versions of Jiayuan apps for the iPhone, Android, and Windows Phone 7. These apps would not only let you find other eligible singles in the area, but they'd also let you know whom you might've accidentally bumped into during the course of your day.
In this analyst's humble opinion, this is an awesome feature. The very best entertainment devices are those that engage you even when you're not actively seeking engagement. Think about the television you leave on in the background, or the Facebook wall and the Twitter stream that you can't help snatching a glance at even when you know you should be doing something else. Jiayuan's ability to engage its users even while they aren't actively using the platform is a value-add feature that gives it a big leg up on the competition. I think you're going to see even higher user base growth, and you're going to see increases to retention.
One other thing that caught my eye: CEO Rose Gong mentioned that virtual items accounted for only about 10% of Q2 revenues. This segment presents a super-high-margin, super-low-hurdle area of monetization.
There was one thing I didn't like: Average monthly revenue per paying user was flat. We hope to see this metric rise, though, as the virtual items and locational components of the Jiayuan service begin gaining more steam.
The Dada Portfolio is currently the second-best performing portfolio in the Rising Stars universe, handily crushing the S&P by almost 10%. We've been disciplined capital allocators, taking small positions in a diversified group of stocks and leaving us with the dry powder to get active in times like these. Jiayuan is currently selling at not much more than our original $500 stake, so we're going to double it by adding another $500 of Jiayuan. Leave us a comment on our discussion boards, and follow us on Twitter at @TMFDada.
The Dada Portfolio is a part of the Rising Star series of real money portfolios. It is co-managed by Sean Sun and Ilan Moscovitz.
