Business of Art, Culture and Entertainment Assignment: Yalla Group

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Table of Contents

1. Company and Business Model Description...............................................3

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1. Company and Business Model Description
Yalla Group is a media and gaming company headquartered in the United Arab Emirates. According

to the Yalla Group 2023 Annual Report, the company is the biggest gaming and internet social networking

business in the Middle East and North Africa (MENA). The company revenue increased by 5% in 2023 to

hit $318.9 million, while the monthly active users (MAU) increased by 13%, totaling 36.2 million users

(2023 Annual Report, 2024). The company’s operations are centered around two main products, Yalla and

Yalla Ludo. The Yalla application functions as a voice-centric service for group conversation, while Yalla

Ludo is a casual gaming application with audio conversation in-game and customized Majlis functions. The

Yall Ludo features online editions of prominent board games that are available for play in the Middle East

and North Africa regions (MENA Financial News, 2023). Yang, the chairman of the board, explained the

Yalla concept as an online majlis that simulates the social gatherings he used to attend in Abu Dhabi. In

those gatherings, guests bring presents, and users can purchase virtual gifts through the Yalla application

(Yang and Kerr, 2021). A significant contributor to Yalla's success was the way they localized their

offerings. The President, Ismail, associated Yalla’s success with the local look and feel of the applications

(Yang and Kerr, 2021). According to Yang and Kerr (2021), Yalla has localized well despite its engineering

team and founders being in Hangzhou, near Shanghai.

Yalla Value Creation Model

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 Figure 1: Media Value Creation Model
Source: (Connock, 2023)

The business model adopted by the company is freemium, and its revenue streams come from premium

subscriptions and in-app purchases. According to Connock, the value creation model for game content is

divided into four stages: development, production, distribution, and monetization, as illustrated in Figure 1

(Connock, 2023). An example of in-app purchases within the Yalla Ludo, where users can purchase

diamonds and gold to unlock more engaging features. This type of microtransaction in mobile games is

called gachas, which offer items essential to progress in the game (Grguric, 2022). Another microtransaction

model adapted by Yalla is in-game currency (Duverge, 2016). Within Yalla Chat, users can purchase virtual

gifts through non-refundable virtual currencies.

Expansion and diversification strategies have also been key to the continued profitability of the

company. For instance, to draw in a worldwide customer base, Yalla has extended its presence into other

foreign markets, pushing its boundaries beyond MENA regions. For instance, the company’s affiliate

entities have a presence in China, South America, and Hong Kong, among other regions. This follows the

globalization pathways that media have adopted, paving the way for limited boundaries (Noam, 2018, p.

670). In terms of diversification, Yalla is always creating novel capabilities and solutions to broaden its

customer base and meet changing demands in the gaming and social networking industries. For instance, as

illustrated in Figure 1, other products that the company has developed include Waha, Yalla Chat, Yalla

Baloot, and 101 Okey Yalla, among others (MENA Financial News, 2023).

2. Analysis of Business Model

According to Ivey, between 2016 and 2017, freemium game downloads were 392.5m, generating

$19.65m of revenue, compared to only 231k downloads for paid games, contributing $0.87m in revenue

(Ivey Publishing, 2021). The model adopted by Yalla Ludo is aligned with the industry in 2016 when Yalla

Group was established. According to Kumar (2014), the freemium model allows a newly established

company to scale up and acquire fans without high-cost advertisements. Further, compared to limited-period

free plans such as 30-day unpaid trials, freemium plans are more attractive to users because of the

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cumbersome cancellation process implications (Kumar, 2014). Additionally, the freemium model has been

key to client acquisition and retention. The subscription model has also increased purchase intentions,

making it advantageous to businesses (Iyengar, Park & Yu, 2022, p. 2). A study by McKinsey found that

one of the main downsides facing all subscription-based companies is that customers are more likely to

unsubscribe when their orders get overwhelming or when they are unable to adjust the number of their

orders to better suit their needs (Chen et al., 2018, p. 1). In the context of Yalla, this can mean that users are

likely to unsubscribe when engaged or find other suitable games and services to adopt, which could result in

financial consequences. Although Yalla's revenue increased in 2023 compared to 2022, the number of

paying users declined slightly from 12.5m in Q4 2022 to 11.9m in Q4 2023. To this end, although the model

works for Yalla, it requires increased innovation to keep customers loyal. According to Kumar (2014),

freemium should not be perceived as a customer acquisition tool only. Companies should not opt to cancel

freemium when their user base declines or conversion rates to paying users decline. Companies should

innovate and improve the value of upgraded services and perceive the freemium model as an obligation to

continuously improve upgraded services and innovate (Kumar, 2014). Further, Yalla can consider the recent

shift of games towards a Metaverse. For example, Roblox hosted a concerts within its game, one of which

(Lil Nas X) had 33 million visitors (Kastrenakes, 2020). Yalla can adopt Metaverse and host local concerts

like the Yalla tournaments it currently hosts through Yalla Ludo. Additionally, according to Lukman (2023),

the most important monetization model is In-game purchases (IAP) and 87.8% of gamers spending in Asia

and is for in-game purchases.

Expansion as a model of diversification is a model that the business has utilized and is currently

utilizing in North America, Hong Kong, China, and the United Arab Emirates. The expansion can be

justified as a plus due to the rising monthly active users (MAU) and profitability. For instance, in

multinational corporations, international expansion results in profitability (Hutzschenreuter & Horstkotte,

2013, p. 259). This means further expansion of Yalla Group beyond the existing location will increase its

profitability. Nevertheless, expansion can also present challenges relating to cultural gaps, legal difficulties,

and social gaps, which would hinder operations.

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 Further, a critical aspect of Yalla success is content moderation. In 2021, Yalla had 200 content

monitors and big rooms that could fit thousands. Content monitoring is costly because even Artificial

Intelligence (AI) and other technologies have limitations, and human intervention is required. The global

social networking audio-based application Clubhouse was banned from several countries because of political

discussions by users. Yalla incurs a high content moderation cost, which they should explore technological

advancements to reduce (Yang and Kerr , 2021).

Another means of monetization that Yalla can adopt is in-game advertisements. Since a major

contributor to Yalla’s success is localization, Yalla can adopt dynamic in-game advertising, which provides

real-time targeted ads based on geographic location. Another example is Advergames, which are games built

around a single brand to advertise its product (Hart, 2021).

Finally, the economic climate has a major effect on Yalla and the media industry. Covid-19 was an

upturn for Yalla, and as illustrated in Figure 4, the share price reached $40 per share compared to $6-4 per

share post-pandemic (Yalla InvestorRoom, n.d.). On the other hand, inflation will lower users’ ability to

subscribe to services, lowering profitability. However, according to Yalla’s 2023 Annual Repot, Inflation in

UAE and China has not materially affected their operations (2023 Annual Report, 2024).

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 References
2023 Annual Report. (2024). Available at: [Link]

%28Yalla+Group+Limited+American+Depositary+Shares+each+representing+one+Class+A%29++

%2820-F%29+[Link] [Accessed 15 Jul. 2024].

Chen, Tony, Ken Fenyo, Sylvia Yang, and Jessica Zhang. “Thinking inside the subscription box: New

research on e-commerce consumers.” McKinsey & Company (2018): 1-9

Connock, A., 2022. Media Management and Artificial Intelligence: Understanding Media Business Models

in the Digital Age. Routledge.

De Maio, B. and Coste-Manière, I., 2020, December. The Impact of COVID-19 on Consumer Behavior in

the Luxury Industry. In International Conference on Multidisciplinary Research (Vol. 2020, pp. 169-

178).

Duverge, G. (2016) Insert more coins: the psychology behind microtransactions. Touro University. [online]

Available at: [Link]/psychology/psychology-behind-microtrans actions/

Grguric, M (2022) Gacha system in mobile games: everything you need to know. Udonis. [blog] 5 January.

Available at: [Link] [Link]/mobile-marketing/mobile-games/gacha system

Hart, A. (2021, 5 May 2021) Marketing Today with Alan Hart In Adverty’s Niklas Bakos: Marketing Today

with Alan Hart 5 May 2.

Holthe, G.Ø. and Langø, K.E., 2016. Value creation in freemium business models: A study of freemium

business models in the b2b market (Doctoral dissertation, Master’s thesis).

Hutzschenreuter, T. and Horstkotte, J., 2013. Performance effects of international expansion processes: The

moderating role of top management team experiences. International Business Review, 22(1), pp.259-

277.

Ivey Publishing, 2021. GreedyGame: Leveraging Online-Gaming for Brand Storytelling ^ W21137 (no

date). [Link]

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Iyengar, R., Park, Y.H. and Yu, Q., 2022. The impact of subscription programs on customer

purchases. Journal of Marketing Research, 59(6), pp.1101-1119.

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Kastrenakes, J. (2020) Lil Nas X’s Roblox concert was attended 33 million times. The Verge. [online]

Available at: [Link]/2020/11/16/21570454/lil-nas-x-roblox-concert 33-million-views

Kumar, V. (2014). Making ‘Freemium’ Work. [online] Harvard Business Review. Available at:

[Link]

Lyons, A.C., Um, J. and Sharifi, H., 2020. Product variety, customisation and business process performance:

A mixed-methods approach to understanding their relationships. International Journal of Production

Economics, 221, p.107469.

Menafn (2023) ‘Yalla Group reports record revenues of AED 1.1 billion in 2022 - [Link],’ Middle

East North Africa Financial Network, 16 March. [Link]

Reports-Record-Revenues-Of-AED-11-Billion-In-2022-Mid-EastInfo.

Newzoo. (2023). Video game market revenue worldwide in 2022, by segment (in billion U.S.

dollars). Statista. Statista Inc.. Accessed: July 17, 2024. [Link]

[Link]/statistics/292751/mobile-gaming-revenue-worldwide-device/

Niko Partners. (2024). Distribution of gaming revenue in the Middle East and North Africa region in 2023,

by select country. Statista. Statista Inc.. Accessed: July 16, 2024. [Link]

[Link]/statistics/1322789/mena-distribution-of-gaming-revenue-by-select-country/

Noam, E.M., 2018. Managing media and digital organisations. Cham: Palgrave Macmillan.

Radcliffe, D., Abuhmaid, H. and Mahliaire, N., 2023. Social media in the Middle East 2022: A year in

review. SSRN.

Reime, E.V., 2011. Exploring the freemium business model (Master’s thesis).

Statista. (2024). Metaverse gaming revenue worldwide from 2022 to 2030 (in billion U.S. dollars). Statista.

Statista Inc.. Accessed: July 16, 2024.

[Link]

gaming-market-size

Statista. (2023). Revenue of the gaming market in the Middle East and North Africa region from 2017 to

2027 (in billion U.S. dollars). Statista. Statista Inc.. Accessed: July 16, 2024. [Link]

[Link]/forecasts/1343778/middle-east-and-north-africa-games-revenue

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Yalla InvestorRoom. (n.d.). Yalla InvestorRoom - Historical Price Lookup. [online] Available at:

[Link] [Accessed 16 Jul. 2024].

Yalla InvestorRoom. (n.d.). Yalla InvestorRoom - Stock Quote & Chart. [online] Available at:

[Link] [Accessed 14 Jul. 2024].

Yang, Y. and Kerr , S. (2021). Chinese-founded social network Yalla is rising star in Middle East. [online]

[Link]. Available at: [Link]

[Accessed 14 Jul. 2024].

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Quarter-and-Full-Year-2023-Financial-Results.

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Appendix 1: Yalla Group Overview

Yalla Group Overview:

Figure 2: Yalla Group Overview

Figure 2: Yalla Group Stock Price

Source: NASDAQ (Yalla InvestorRoom, n.d.)

According to Allcorrect Games (2023), Top Mobile Games in the Largest Countries of the Region (May
2023):
Yalla Ludo-Ludo&Domina is 1 in Saudi Arabia 10 in egypt and 2nd in UAE

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Appendix 2: Gaming Industry

Revenue of the gaming market MENA 2017-2029

Source: (Statista, 2023)

Distribution of gaming revenue MENA 2023, by select country

Source: (Niko Partners, 2024)

Global metaverse gaming market size 2022-2030

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 Source: (Statista, 2024)

Gaming revenue worldwide 2022, by segment

Source: Statista (Newzoo, 2023)

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Leading mobile game genres worldwide 2023, by share of advertisers

Source: Statista (ZingFront, 2024)

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