YouNow Sees Strong Revenue Growth After SEC Approves Token Distribution

In a disclosure expected to be published Wednesday by the U.S. Securities and Exchange Commission (SEC), blockchain-based live-streaming company YouNow reported revenues have grown steadily since the release of its props token in July.

The filing follows YouNow receiving approval from the SEC this summer to distribute its props token under a Regulation A+ qualification, one of the new categories of fundraising created by the JOBS Act of 2012. Besides YouNow, only a handful of crypto firms have chosen the Reg A+ framework to date, including Blockstack.

The filing suggests that regulated token sales can be remunerative in the long term, with YouNow's revenues up 32 percent since the props token was added to the app in July.

"We expected a lift in business results of up to 10 percent upon providing users with the Token’s utility and then another lift of approximately 10 percent upon exchange listing/liquidity," YouNow CEO Adi Sideman told CoinDesk via email, adding:

"The reality proved significantly better than expected."

All of YouNow's SEC filings are viewable here, along with its original offering circular here.

It is worth noting, however, that the improved revenues have not yet been adequate to prevent the company from operating at a loss. According to the latest filing with the SEC, YouNow "is currently working with various venture capital firms and cryptocurrency funds to secure additional capital through the sale of Props tokens and common stock in order to fund its future operations."

The company, backed by Union Square Ventures and others, has also seen more influencers drawn to the app.

Props is an ERC-20 token that lives on the ethereum blockchain. YouNow's decision to create the token completely changed the company's business model.

Sideman said the Reg A+ framework has proven helpful in validating a long-held belief among many token-backed startups: that consumers hunger to share in the growing value of a network.

"The SEC allows me to say that you have a potential upside in this network. There's a benefit in that."

YouNow now

YouNow is an app for people to live-stream their lives.

The most popular users attract large followings, and YouNow makes it possible for fans to express appreciation for these stars by purchasing digital gifts. From a viewer's perspective, these are animated balloons or flowers that explode on the screen when someone buys them. For the talent, though, part of the money spent on the gift becomes earnings.

Gifts are bought on YouNow using an in-game currency called bars, which can be purchased with fiat as an in-app purchase.

Since props went live on YouNow, daily purchases of gifts went up from about $20,000 a day to about $30,000 a day, Sideman said. YouNow has seen a 30 percent increase in daily purchases.

When exchange?

Users can withdraw props to any ethereum wallet, with a built-in integration with Coinbase Wallet that makes it very simple.

However, there's no real market price for props yet because the tokens are not trading on exchanges.

There are still real benefits to holding props, though. First of all, it is a measure of status in the network, which means that a "like" or comment from someone with a large number of props influences the application more than those from someone with fewer tokens.

Also, people with a large number of props get a stipend of free "bars" every day they are active. In the future, YouNow expects to give large props holders discounts on bars and a higher revenue share for income earned through digital gifts.

Newly distributed props come from the "protocol rewards engine," a smart contract on ethereum that allocates a daily emission of props to apps based on the amount of activity they generate. For now, YouNow is the only app the engine is watching but Sideman says more are coming soon.

Each new app will be able to choose its own methods for allocating its daily props supply. Three apps with over a million users are working on integrating props now, Sideman told CoinDesk.

"CamFrog and PalTalk are in private beta and expected to publicly launch this quarter," he said.

Half of the total supply of props, 500 million tokens, have been set aside for growing the props ecosystem.

Update (Oct. 11, 15:47 UTC): The link to the actual filing has been added to the piece along with additional details on the company's financials.

YouNow's Adi Sideman (left) and Blockstack's Ryan Shea speak at Consensus 2018, image via CoinDesk archives