Also in this letter:
- Windfall for short video creators
eBaytaps into NFTboom Prosusto raise stake in Naspers
Vision Fund fuels SoftBank’s record profits
Masayoshi Son-led internet conglomerate SoftBank has posted the highest ever quarterly and annual profits for a Japanese firm, driven by investment gains at Vision Fund.
Details: SoftBank’s net profit stood at $17.7 billion for the quarter, led by a $37 billion profit at its Vision Fund unit. For the financial year, SoftBank reported a net profit of $45.9 billion, largely fueled by Vision Fund’s $57.8 billion profit.
Winning bets: The $100 billion first Vision Fund racked up a $24.5 billion investment gain from the public market debut of South Korean e-commerce firm Coupang Inc. and a $6.3 billion gain from US food delivery platform DoorDash Inc.
SoftBank, which is the sole limited partner in SoftBank Vision Fund 2, has also increased the capital committed to the fund from $20 billion to $30 billion.
SoftBank’s portfolio comprised 125 companies across both Vision Funds as of the end of March. Eleven of its 81 portfolio companies from Vision Fund 1 were publicly listed, and as were three of its 44 companies from Vision Fund 2. SoftBank exited 11 investments over the past fiscal, booking $4 billion in realised gains.
Recent India bets: SoftBank Vision Fund 2 led a $300 million investment in social commerce startup Meesho, catapulting the company’s valuation to $2.1 billion. The fund is finalising a $450-million investment in food delivery app Swiggy, its first bet on India’s food delivery sector, after more than three years of flirting with both Swiggy and IPO-bound Zomato. Read our explainer on it here.
SoftBank Vision Fund is also in talks to lead a $100-million funding round in SaaS startup Whatfix, which could value the company at $500 million, up from $150 million when it raised funds a year ago. Go deeper here.
Short video players launch funds to attract creators
Short video players are luring creators to their platforms with dedicated funds to incentivise original content creation.
YouTube: On Tuesday, Google-owned YouTube launched a $100 million fund that will be distributed to creators making original content for its short video offering YouTube Shorts in 2021-22. It will reward “thousands” of creators who generate the most engagement and views. YouTube said that this fund is not limited to creators in the YouTube Partner Programme and will be available to all creators.
YouTube Shorts was first tested in India last year and was recently extended to the US. The service claimed to have notched 6.5 billion daily views as of March and also got a dedicated tab on YouTube’s iOS and Android apps earlier this week.
Snap Inc: Snapchat has been paying creators $1 million a day for top-performing videos on its short video service Spotlight. The service was extended to India in March, making local creators (16 or older) also eligible for this daily prize.
MX Player: Last December, MX TakaTak launched a Rs 100-crore creator fund to incentivise users to create engaging content on the short video app. (Disclosure: MX Player is owned by Times Internet, which also owns ETtech.)
TikTok: The short video app, banned in India, launched a $200 million fund for creators in the United States last July and plans to grow it to over $1 billion in the next three years.
Why is this happening? The short video segment has boomed in the past year or so, following the runaway success of TikTok, which still dominates monthly app download charts across the world.
Indian short video apps have retained about 67% of the TikTok user base, and added 30-35% new users in the past year, according to a recent report by consulting firm Redseer.
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Second Covid-19 wave hits India’s smartphone sector
The second Covid-19 wave has upended all business projections of India’s smartphone sector, with market trackers sharply cutting their shipment growth estimates to either flat or a mere 1% increase this year. Earlier forecasts had said the industry would grow 16%.
Research firm Strategy Analytics has lowered its previous estimates of 170 million shipments by 10%, matching 2020 levels. TechArc has pegged 2021 estimates at 150 million, the same as in 2020.
In April, market research firm Counterpoint Research had cut its smartphone shipments forecast for April-June by 5 million units to 32-34 million, after flagging a potential Covid slump in smartphone shipments.
Reducing production: The pandemic has also hit local production, with several electronics manufacturers, including Lava International and Transsion Holdings, slashing production by up to 50% amid a shortage of components and factory workers, and poor user demand.
Launches delayed: Top smartphone companies including Xiaomi, Samsung, Realme, Poco and Vivo, are also delaying their product launches this month due to tepid consumer demand and challenges in distribution and manufacturing process, said industry executives. Before the pandemic, May has typically seen more than 30 product launches, according to Counterpoint Research.
Meanwhile, Xiaomi can heave a sigh of relief. The Biden administration has removed the Chinese electronics maker from a government blacklist, allowing US entities to invest in it.
Xiaomi had sued the government last year after the US Department of Defense had claimed the firm had ties to China’s military and put it on the blacklist. It was one of the last actions of former US President Donald Trump before he left office. In March, a federal judge blocked the enforcement of this blacklist, citing a “deeply flawed” process.
Prosus to raise stake in Naspers to nearly 50%
Naspers’ Dutch technology investment subsidiary Prosus aims to raise its stake in the South African parent to nearly 50% in a share swap deal, which will move the conglomerate’s Tencent holding from Johannesburg to Amsterdam.
How is the deal structured? Prosus will issue new shares to buy up to 45.4% of Naspers shares, giving it a 49.5% stake in the South African Internet conglomerate and increasing its free float to over $100 billion. Once the share-swap deal is complete, Prosus will launch a $5 billion share buyback, chief financial officer Basil Sgourdos told Bloomberg.
Naspers will retain a controlling stake in Prosus and hopes the deal will improve the valuation of both firms. Prosus currently has a market cap of €138 billion ($167.4 billion) while Naspers’ market cap is at €80 billion ($97 billion).
- Last month, Prosus sold 2% stake in Tencent for $14.7 billion, which reduced its holding in the Chinese tech giant from 30.9% to 28.9%. Tencent’s entire stake is worth €172 billion ($208.6 billion) at current market prices.
Bob van Dijk, group chief executive officer of Prosus and Naspers, told reporters that Prosus shareholders would benefit as Naspers shares are more deeply discounted. Prosus trades at a 20% discount, and Naspers at a 35% discount.
India exposure: Naspers has been one of the most prominent investors in India’s startup ecosystem. As of July last year, the South African conglomerate had ploughed $500 million into India, and the country remains its top destination for investments, Bob van Dijk had said in an interview to ET.
Some of its key bets in the country include edtech giant Byju’s, food delivery service Swiggy, social commerce startup Meesho, home services marketplace Urban Company, edtech firm Eruditus, agritech startup DeHaat and corner-stores commerce platform ElasticRun. Naspers also operates the India units of digital payments firm PayU and classifieds marketplace Olx.
eBay taps into NFT frenzy
For years, eBay has been a key destination to buy and sell collectibles. So it comes as no surprise that the American e-commerce firm will now allow the sale of NFTs, or non-fungible tokens, for collectibles such as trading cards, images and video clips.
But first, what is an NFT? Read our explainer here.
What’s the plan? In the short term, the NFT inventory will be provided by trusted sellers across categories such as trading cards, music, entertainment and art.
In the coming months, eBay will be adding new capabilities to bring blockchain-driven collectibles to its platform, said Jordan Sweetnam, senior vice president and general manager for eBay’s North America market.
“Everything that’s collectible has been on eBay for decades and will continue to be for the next few decades.” EBay chief executive Jamie Lannone had told CNBC last week.
Today’s ETtech Top 5 was written by Vikas SN in Bengaluru and edited by Zaheer Merchant in Mumbai.