Newborn Town leans on better monetization as user growth slows

The social media company’s revenue rose over 30% in the first half of the year, as it wrung more money from individual spenders in the face of decelerating user growth

Key Takeaways:

• Newborn Town said it expects to report its revenue grew 34.3% to 38.8% in the first half of the year
• The social media company’s monthly active user growth is decelerating after years of rapid expansion

By Lee Shih Ta

As it approaches saturation, the social media market is entering a new phase that’s increasingly testing providers’ operational abilities. Escalating traffic acquisition costs, combined with stiff competition, are leading platform operators to shift from aggressively chasing new customers toward leveraging AI to improve efficiencies in areas like recommendations, cross-market operations and paid conversion.

In effect, the race to sign up a dwindling pool of unserved people is slowing, ushering in a new era of trying to squeeze more money from each existing user.

New data from Newborn Town Inc. (9911.HK), which operates social media sites outside China, reflects that trend, showing the company’s revenue continued to grow by more than 30% in the first half of 2026, even as its user growth rate slowed markedly.

Newborn Town expects to report its revenue landed between $595 million and $615 million in the first half of the year, up 34.3% to 38.8% year-on-year. Social networking remains the company’s core business, generating revenue of $530 million to $545 million, or nearly 90% of the first-half revenue total. Meanwhile, revenue from innovative businesses, which include short dramas and games, is expected to range from $65 million to $70 million.

Traffic growth vs user monetization

Average monthly active users (MAU) for Newborn Town’s social business in the first half of the year totaled 35.83 million, up 7.5% year-over-year. At the end of June, cumulative downloads of the company’s related products stood at roughly 1.08 billion, up 5% from the end of March. While the user base continues to expand, the pace of growth has slowed notably.

Historic quarterly data shows the company’s average MAUs rose from 28.55 million in the first half of 2024 to 33.34 million in the first half of 2025, representing a year-over-year gain of about 16.8%. While the figure continued to climb this year, the 7.5% growth rate for the first half of 2026 was notably slower. The company didn’t directly break out figures for the second quarter. But calculations using first quarter and midyear data show Newborn Town’s second-quarter MAUs totaled about 35.77 million, down about 0.3% sequentially.

The company’s social business revenue swelled by 34.2% to 38% year-on-year in the first half of 2026, notably outpacing MAU expansion, indicating that growth is increasingly coming from better monetization per user. Calculations using data from the announcement show the company’s monthly social revenue per active user in the first half of this year totaled $2.47 to $2.54, up roughly a quarter from $1.97 in the prior-year period.

The better monetization likely owes to several factors. Newborn Town has been integrating AI into its social products to improve user matching, content recommendations and paid conversion efficiency. Its flagship product, SUGO, generates money through services linked to voice chatrooms, instant messaging and virtual gifts. Meanwhile, its TopTop product fuses social networking with casual gaming to boost in-app spending on virtual items and gifts. AI also supports content moderation, translation and customer service, lowering human labor costs in the overseas markets that are Newborn Town’s main focus.

While boosting per-user monetization can cushion revenue growth as new additions slow, even that avenue could ultimately face a ceiling. That means the company will still need to rely on new markets and products to maintain its growth momentum. Better use of AI-driven recommendations and targeted advertising could help by lowering customer acquisition costs, which could help the company improve its profitability alongside top-line revenue growth.

Newborn Town’s social business growth rate in the 30% to 40% range looks notably stronger than its peers. JOYY Inc. (JOYY.US) reported its first-quarter social entertainment revenue inched up by just 3.2% year-over-year, with livestreaming revenue up just 2.4%. Meanwhile, Hello Group’s (MOMO.US) revenue fell 15.1% in China in the first quarter, though its overseas revenue surged 44.1%.

Short drama efficacy remains to be seen

Beyond its core social products, Newborn Town has also been building up its short drama business in recent years. Its innovative businesses segment, which includes short dramas, achieved revenue growth of 35.4% to 45.8% in the first half of the year, driven primarily by its AI-powered short drama operations.

Clocking in at just a few minutes per episode, short dramas are highly tailored for mobile viewing, drawing in users through video clips across other platforms such as Facebook, TikTok and Google. AI tools can be used for script analysis, subtitle translation, voice dubbing and ad production, paring down manufacturing costs of multi-lingual content.

Its years of experience operating social products have given Newborn Town well established localized teams, payment channels, and ad placement expertise — resources it can leverage in the short drama segment, helping the company to gage content preferences across diverse markets and improving advertising efficiency.

But the innovative business segment that includes short dramas currently accounts for just 10% of Newborn Town’s revenue, roughly the same as last year. Short dramas also rely heavily on blockbuster content, meaning profitability depends on creative performance, which is a hit-or-miss business that can also be costly. While AI can trim certain production expenses, it can’t erase inherent uncertainties surrounding content returns.

Investors remain dubious on the quality of Newborn Town’s growth. The company’s stock is down 24.7% over the past six months, and currently trades at a price-to-earnings (P/E) ratio of just 10.9 times — above Hello Group’s 9 but trailing JOYY’s 16 times. That valuation is squarely in the middle of the pack, even as the company’s 30%-plus top-line growth far outpaces its peers, showing it has yet to command a tangible premium.

Investor concerns revolve around the quality of Newborn Town’s growth. The company’s sales and marketing expenses swelled by 75% last year, easily outstripping its 35.3% revenue bump that year. Its social revenue growth rate this year is also significantly above its MAU expansion, showing its financial performance relies increasingly on better user monetization. Investors are still waiting for the company to prove that strong top-line growth can translate into stronger operating leverage and sustainable profits. While Newborn Town has proven its capacity for long-term expansion, its valuation will struggle to keep pace with revenue growth if customer acquisition and traffic-buying costs remain stubbornly high.

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