Xiaomi, the super star of emerging handset makers, has aimed to become an Internet giant since it launched its first smartphone in August 2011. Since this launch Xiaomi’s growth has been nothing short of impressive, in four years it has become one of the 5 largest smartphone vendors in the world and the largest in the Chinese market (according to Q4 2014 statistics obtained by the IDC, an international market research firm). However, achieving Internet giant status has been somewhat elusive for the Chinese smart phone manufacturer, whose revenue from mobile services has remained somewhat paltry compared to its handset sales and the “Internet giants” it hopes to compete with.
That being said, history does not equal destiny. Xiaomi expects revenue from mobile services to more than triple this year to nearly $1 billion from less than $300 million in 2014. With expected revenue of about $16 billion, mobile services, such as games, apps, entertainment, financial and other services, still only account for 6% of Xiaomi’s total revenue. Yet impressive growth in mobile revenues suggests Xiaomi’s strategy is finally paying off; sell devices close to cost to get them into as many hands as possible, then sell users services and digital goods to turn them into continuous sources of cash.
In a recent interview Xiaomi’s CEO and founder, Lei Jun, stated that the e-commerce giant Alibaba, and Tencent, a Chinese internet giant, will be its competitors in the future. In the short to medium term Mr. Jun’s statement is highly optimistic. Even if Xiaomi manages to attain $1 billion in revenue from mobile service they will be far from an Internet giant. In comparison, Alibaba made $4.22 billion in the final quarter of 2014 alone. However, considering Xiaomi is planning a rapid international expansion (they primarily operate in China, Singapore, and Malaysia) they could generate a much larger user base and source of mobile services revenue by the end of 2015.
Last year Xiaomi became the most valuable technology startup in the world based on market capitalization. Yet it’s greater than $46 billion valuation was heavily reliant on investors’ hopes that Xiaomi could leverage its smartphone market share to create additional revenue streams via mobile services and goods. If Xiaomi manages to achieve 1$ billion in mobile services revenue by the end of the year and keep investors happy they will undoubtedly become an Internet giant before long.