Xiaomi’s $564-Million Internet Services Revenue Gives it More Reason to Worry

Xiaomi has risen to glory thanks to the uber affordable smartphones that come equipped to the brim with the class leading hardware. It is but evident that Xiaomi is raking razor thin margins on the devices it sells, in fact it is the software and related services offered by Xiaomi that earn more revenues for the company.

Reuters seems to have gotten hold of an internal document from the company which revealed that Xiaomi had earned $564-million from its Internet services. That being said, Xiaomi had initially set a target of $1-Billion for the Internet services and 100-Million for the number of devices shipped, both of which were out of reach for the company.
The internet revenues are a result of the games and the mobile payment apps which surged a 150 percent Year-on-Year growth. It would be safe to assume that the major chunk of the revenue were from the Chinese market, as the Google Playstore is something that one doesn’t simply bake in to their phones. It’s in fact this very reason that companies feel threatened by the Google Playstore’s imminent foray into the Chinese market.

Xiaomi’s magical effect seems to be waning off since they have been finding it tough to reach their own 100-Million sales target, as if this was not enough, Xiaomi is also facing a hurdle when it comes to expanding its operations in US, thanks to the lack of IP properties and the fear of being sued. Xiaomi’s last public valuation stood at $45-Billion in 2014 end but since then, a lot of things seem to have gone awry for the Chinese company.
If you think that the $564-Million revenue from Internet services will figure out as the brighter side for the company, you are wrong. Here is what Ben Thompson, a tech analyst told Reuters “Given that Xiaomi’s valuation has always been based on the company being more than a commodity handset manufacturer, missing their services goal by such a significant margin is even more concerning than missing their handset target.”
That being said, it is quiet possible that Xiaomi has been putting pressure on itself to achieve the impossible and the end effect is being perceived as underwhelming. 2016 should be really interesting considering the slowing down of smartphone market and ever improving Internet of Things space where Xiaomi has a strong foothold as well.