Vol.63 Tencent Music Is Being Too Generous: A Discussion of the Ximalaya Acquisition
Summary
庄明浩’s core judgment is that Tencent Music’s approximately $2.7B–$2.8B full acquisition of Ximalaya is “truly very generous.” The consideration is not just $1.26B in cash, but also 5.1986% of TME; another 0.37% stake, worth approximately $106M at the time, is reserved as an incentive for the Ximalaya team if it hits future KPIs.
Ximalaya’s operating data look more like those of a mature platform with stalled growth than a platform asset that still deserves a high multiple. Revenue was RMB6.16B in 2023, up just 1.7% year on year, with adjusted profit of approximately RMB224M. Of its 300M MAUs, only 130M came from the app; mobile monthly paying users were 15.8M, with an 11.9% payment rate. “Whether you look at revenue, user scale or the company’s overall trajectory,” 庄明浩 believes the trend is probably downward.
Comparable companies and Ximalaya’s own financing history both show that this price primarily solves the liquidity problem for an earlier generation of investors. Ximalaya was valued at $3.4B in 2018, then raised a combined $900M in its 2020–2021 E rounds at a post-money valuation of $4.3B. Exiting today at roughly 60 cents on the dollar is hardly a victory, but after 4 failed IPO attempts and a collapse from rumored $10B expectations to HK$5B–HK$6B—with no buyers still willing to subscribe—“no one would choose not to sell.”
TME can afford the deal, and it is genuinely one of the few buyers that might make “one plus one greater than two.” TME generated RMB8.14B in adjusted net profit in 2024, nearly covering the cash portion of the acquisition, and held approximately RMB35B in cash, short-term investments and current assets. It earned another roughly RMB2.2B in 2025 Q1. It is already a “carrier” assembled from QQ Music, Kugou, Kuwo, WeSing and Lazy Audio, with an existing audio business.
The fundamental constraint on audio is not whether users need sound, but that its “companionship” attribute makes its traffic inherently less valuable than video. Ad impressions, clicks and conversions are weaker, subscriptions are constrained by domestic payment habits, and live audio can contribute cash but cannot lift valuations. 庄明浩 returns to the “rocks, sand and water” framework for attention: sound remains the water filling the gaps, but the question now is, “How much is that water actually worth here?”
Xiaoyuzhou cannot simply be valued using Ximalaya’s old platform yardstick because it belongs to a post-2021 narrative built around small teams and low costs. It did not rely on massive funding rounds or go public with losses; monetization has gradually opened up through splash-screen ads and podcast hosts taking commercial orders. After Ximalaya’s $2.8B deal, Xiaoyuzhou’s investors are “probably happy,” both from a competitive and a pricing perspective.
The deal also reflects a shift in the regulatory and capital-market regime: antitrust filings are still required, but 庄明浩 believes “the antitrust narrative has turned the page.” YY ultimately sold to Baidu for $2.1B, Xunlei bought Hupu for RMB500M in cash, and rumored secondary-market valuations put Xiaohongshu at $35B—above Baidu’s roughly $30B market cap at the time of recording. Together, these deals point to a new valuation regime. The previous generation of investors is no longer fixated on the $10B myth; the most honest sentiment is: “thank you, finally… thank you for the liquidity.”
Deep dive
1. The $2.8B price was pushed even higher by TME’s rising share price
The headline consideration in the announcement was $1.26B in cash plus 5.1986% of TME. Based on TME’s market cap of a little over $28B at the time of recording, the equity component was worth approximately $1.49B, putting the total price at roughly $2.7B–$2.8B.
Reuters’ earlier report of approximately $2.5B was not materially off: between late April and transaction confirmation, TME’s share price rose from roughly $12–$13 to $18, a gain of about 50% in just over a month. The mixed consideration rose dynamically with it.
The deal also set aside 0.37% of TME, worth approximately $106M at the time, for Ximalaya’s team to support retention and future KPI delivery. 庄明浩’s immediate reaction was a single sentence: “TME is really very generous.”
2. Ximalaya still has scale, but the data show no high growth
Ximalaya’s total MAUs were approximately 300M in 2023, but only 130M came from its mobile app. The remaining 170M came from in-car systems, smart speakers, watches and other devices, and should not be treated as equivalent to mobile-app MAUs.
Revenue was RMB5.86B, RMB6.016B and RMB6.16B in 2021, 2022 and 2023, respectively—an annual increase of only RMB100M–RMB200M. For a platform company, 庄明浩 says, growth of roughly 1%–2% is “absolutely not a very, very good number.”
Adjusted profit was approximately RMB224M in 2023. Market rumors put 2024 net profit above RMB500M, but he stressed that this figure does not appear in public materials and can only be treated as a forecast.
Mobile monthly paying users stood at 15.8M, with an 11.9% payment rate, down from 2021. 庄明浩 recalls that TME’s payment rate is already above 20%, suggesting that while Ximalaya has a subscription base, its conversion efficiency still lags.
3. The revenue mix is stable, but it exposes audio’s monetization ceiling
Subscription revenue was RMB3.189B in 2023, accounting for 51.7%, or approximately RMB250M per month. That makes Ximalaya look more like today’s membership-led video platforms than the ad-dependent platforms of the past.
Advertising contributed RMB1.423B, or 23%; live streaming contributed RMB1.13B, or 18.4%; and other innovative businesses contributed approximately RMB400M, or 6.8%. Subscriptions, advertising and live streaming together already cover the most common monetization channels for a content platform.
The issue is not whether the mix is “right,” but that none of these channels can provide another order of magnitude: subscription growth is slow, audio advertising is discounted, and audio live streaming can supplement revenue but cannot reopen the platform’s upside narrative.
4. Public-company comps make the offer look exceptionally generous
庄明浩 launched a prediction poll on April 27 with only 4 ranges: below $200M, $200M–$500M, $500M–$1B and above $1B. At the time, he explicitly did not believe the deal could reach Reuters’ reported $2.5B. He now concedes that “the facts slapped me in the face.”
At the time, Zhihu was valued at approximately $349M, Keep at $273M, DouYu at $220M, Huya at $778M and Weibo at $1.986B. Against those market-cleared valuations, Ximalaya’s $2.8B price was clearly above the recognized market value of each of these individual companies.
Bilibili had fallen from a peak of approximately $50B to around $7.9B, while Huya had dropped from roughly $10B to about $700M. Applying 15%–20% of peak valuation to Ximalaya would put it in the low single-digit billions; applying a single-digit percentage would leave it worth only several hundred million dollars.
He invokes Mark Cuban to explain his instinct. Cuban shorted Yahoo stock because “Yahoo spent $5.7B buying my company, and I knew exactly how that company was doing.” That was the first story that came to 庄明浩’s mind when he saw the offer.
5. A complicated financing history turned Ximalaya from a growth story into an exit problem
Founded in 2012, Ximalaya went through an angel round, Series A, multiple B and C rounds, Series D, and E1–E4, leaving it with a shareholder list spanning dozens of names. Strategic investors including Tencent, China Literature, Baidu, Xiaomi, TAL and Sony Music were mixed with a large group of financial investors.
The company dismantled its VIE structure and returned to a domestic structure in 2015, then rebuilt the VIE in 2018. The conversion between dollar- and renminbi-denominated investors, along with taxes and share transfers, made the capital structure even more complicated. Its valuation had already reached $3.4B when the VIE was rebuilt in 2018.
The 2020–2021 E rounds raised approximately $900M in total at a final valuation of $4.3B. In other words, after holding the company for nearly 5 years, the last cohort of investors could exit the entire company only at $2.7B–$2.8B—below their entry valuation.
庄明浩 compares the investors’ psychology to a mouse repeatedly toyed with by a cat before finally lying still. After the rumored $10B IPO expectations evaporated, it became difficult for them to keep imagining a spectacular outcome. Once someone offered a full-company acquisition at roughly 60 cents on the dollar, the rational choice was to sell.
6. Once the 2021 IPO window closed, the valuation system became a different world
According to rumors relayed by 庄明浩, Ximalaya had internally considered a $10B valuation for a US IPO in 2021 Q2, while some investors were willing to provide a $6.5B–$7B cornerstone investment. The company did not accept.
The Didi episode then brought Chinese companies roadshowing in the US to a collective halt. Ximalaya turned to Hong Kong, repeatedly updated its prospectus after it lapsed, and failed to complete 4 IPO attempts.
He recalls that the company had secured all required approvals by 2022 Q2, only to encounter a Hong Kong market with almost no liquidity. Even after cutting its IPO valuation to HK$5B–HK$6B, it still found no buyers. “Before and after the Didi episode in 2021, it was completely, completely 2 different worlds.”
7. TME can afford the deal—and is one of the few buyers capable of absorbing the asset
TME generated revenue of RMB7.36B and adjusted net profit of approximately RMB2.2B in 2025 Q1. Online music contributed RMB5.8B, while paying users reached 122.9M. The revenue center has shifted from the old live-streaming business toward online music, which public markets value more highly.
Full-year 2024 revenue was RMB28.4B and adjusted net profit was RMB8.14B, roughly equivalent to the cash portion of the Ximalaya deal. Cash, short-term investments and other current assets totaled approximately RMB35B, so the $1.26B cash payment would not materially strain its balance sheet.
TME is assembled from QQ Music, Kugou, Kuwo, WeSing and Lazy Audio. 庄明浩 calls it Tencent’s “carrier built piece by piece.” Ximalaya’s own trajectory is probably downward, but TME is one of the few companies that might be able to catch it and make “one plus one greater than two.”
The content complementarity between China Literature and Ximalaya may look even more obvious, but spending at this scale would create greater psychological pressure for China Literature. Its current capital-market narrative does not urgently need Ximalaya. Both ultimately sit under Tencent, while Tencent itself is also a Ximalaya shareholder, so the final choice may have come down to “a single thought.”
8. Regulatory review remains procedural, but it is no longer a core discount in 庄明浩’s view
庄明浩’s second premise for the episode was: “By the middle of 2025, the antitrust narrative has already turned the page.” That does not mean the transaction requires no review; it means the regulatory environment is different from the period when the Huya–DouYu merger was quickly halted.
He recalls that a concentration filing still has revenue thresholds, potentially involving one party or both parties exceeding RMB1B or RMB400M, but he is not certain of the exact figures. What is clear is that TME’s acquisition of Ximalaya will require a filing.
Focus Media’s acquisition of New Focus and Xunlei’s acquisition of Hupu, both advanced in 2025, are additional evidence of the changed environment in his view. Antitrust remains a variable in the transaction process, but it is not the core explanation for the $2.8B price.
9. Audio is the “water” in the attention economy, but its unit value is below video
In conversations with a friend in the audio industry, 庄明浩 noted that Ximalaya and TME differ from Douyin and Kuaishou by more than one order of magnitude in revenue, MAUs and time spent. The starting point is audio’s “companionship” attribute.
Companionship means audio is usually not the primary task competing for a user’s attention. The same amount of traffic is therefore discounted in impressions, clicks and conversions. Because sound is harder to display, its advertising value is structurally lower than video’s.
Platforms have consequently turned to subscriptions, but domestic users’ willingness to pay remains limited. Live streaming can generate cash but cannot raise the industry ceiling. 庄明浩 cites Kuaishou’s financials: live streaming still generates RMB9B–RMB10B in quarterly revenue, yet the capital market barely discusses it anymore.
He uses an attention analogy from Sarah, a former Benchmark GP: long-form content is a rock, short video fills micro-moments like sand, and audio is the water poured into the remaining gaps. The framework still holds. The new question is: “How much is the water actually worth?”
10. Xiaoyuzhou belongs to a low-cost new narrative and cannot be valued proportionally to Ximalaya
Ximalaya represents the previous platform playbook: build DAU and MAU, raise money continuously, drive up the valuation, then go public in the US with losses. Xiaoyuzhou, founded approximately 5 years ago, belongs to a different narrative that emerged after the Didi episode.
Xiaoyuzhou has a small team and a low cost base. Monetization is gradually opening up as splash-screen ads increase and podcast hosts take on commercial orders more frequently. 庄明浩’s view is that even with limited revenue, the company may still “live very comfortably,” leaving outsiders looking somewhat like “the eunuchs more anxious than the emperor.”
If valued purely by users, and assuming Xiaoyuzhou is approximately one-tenth the size of Ximalaya, a rough extrapolation would imply around $200M. Revenue would be an obviously unsuitable basis, while the growth trajectory should command a multiple. 庄明浩 does not offer a final valuation, but believes Xiaoyuzhou’s investors are “probably happy” to see the $2.8B transaction.
11. YY and Hupu show that M&A value depends on cash flow, time and the acquirer’s ability to take over
YY was initially sold to Baidu for $3.6B in 2020. The next day, Muddy Waters published a short report alleging that 90% of its gross billings were fake. Baidu subsequently paid a first installment of $1.86B, with another $1.6B placed in escrow; its personnel, products, data and technology were also deeply integrated. JOYY’s quarterly results no longer included the business, and Baidu has not disclosed its revenue since.
After an antitrust investigation began in 2021, the business went through layoffs and executive departures. Baidu unilaterally announced termination in 2024, and the parties ultimately closed at $2.1B in February 2025. Baidu recovered the $1.6B escrow and paid only a further $240M in final consideration.
YY’s domestic business generated revenue of RMB9.95B and profit of RMB3.141B in 2020. 庄明浩 asks where the profits and cash from 2021 to 2024 actually went. If future earnings can fill the several-hundred-million-dollar gap on Baidu’s books, the deal may ultimately be “acceptable” from a cash-flow perspective—but only after 4 or 5 years of disruption.
Xunlei acquired the Hupu community for RMB500M entirely in cash, with RMB400M already paid as the first installment. The deal excludes Dewu, Shihuo and Road King. Hupu’s traffic, revenue and profit are stable and should boost Xunlei’s earnings in the short term; over the long term, everything depends on whether Xunlei can put Hupu’s community traffic to work.
12. $30B has become the new benchmark, and the exit itself is enough to make investors celebrate
庄明浩 relays that a fund affiliated with GSR once marked Xiaohongshu at approximately $26B, while the market reportedly valued secondary shares at $35B 6 months later. By comparison, Baidu was worth roughly $30B and TME approximately $28B at the time of recording.
He therefore treats $30B as a new threshold: Xiaohongshu may already be worth more than Baidu, while TME is close to Baidu. Even if Baidu were eventually left mainly with its library and maps businesses, “a $30B company is probably just one or 2 core products,” which does not seem entirely unacceptable.
A Ximalaya investor’s social-media post captured the mood most accurately: “The valuation may not satisfy every investor… thank you, finally, finally.” It ended with the direct line: “Thank you for the liquidity.”
That is the episode’s landing point: the $2.8B is not only buying revenue, profit and MAUs; it is also providing an exit for equity that had been trapped for years inside the previous generation of platform narratives. “A lot of investors said that as long as there’s liquidity, they’re very happy.”