JOYY's Strategic Transition to Ad Tech-Driven Growth: A New Engine for a Maturing Market

JOYY Inc., once synonymous with the explosive growth of live-streaming in Asia, is now navigating a pivotal transformation. As its core livestreaming revenue declines, the company has pivoted aggressively toward ad-tech, betting on its BIGO Ads platform to become a second growth engine. This strategic shift raises critical questions: Can JOYY's ad-tech ambitions scale to offset a shrinking user base? Does its 25.6% year-over-year non-livestreaming revenue growth signal a sustainable pivot, or is it a temporary reprieve in a crowded market?

The Decline of the First Engine

JOYY's Q2 2025 earnings underscore the fragility of its original business model. Live-streaming revenue fell 19.4% year-over-year to $375.4 million, driven by a 13% drop in paying users and a 16% decline in average revenue per user (ARPPU). This erosion reflects the natural maturation of the live-streaming market, where user saturation and regulatory pressures have curtailed growth. The company's reliance on a narrow cohort of high-spending users—74% of live-streaming revenue now comes from just 1.45 million paying users—has created a precarious dependency.

Yet, amid this decline, JOYY's cash reserves remain robust at $3.3 billion, a testament to its disciplined cost management. Operating expenses fell 9.5% to $179.8 million, with R&D and marketing costs shrinking by 14% and 19%, respectively. This fiscal prudence has enabled a 155% surge in operating income to $5.8 million, a rare feat in a sector marked by margin compression.

The Rise of the Second Engine

JOYY's ad-tech pivot is now its most compelling narrative. BIGO Ads, the company's AI-driven advertising platform, grew revenue by 29% year-over-year to $132.4 million in Q2 2025. This outperformance stems from two key advantages:

1. AI-Driven Targeting: By leveraging machine learning to optimize ad placements and user engagement, BIGO Ads has improved advertiser ROI, attracting both regional and global brands.
2. Scalability: Unlike live-streaming, which is constrained by user base size, ad-tech can scale across platforms and geographies. JOYY's ownership of apps like Bigo Live and Likee provides a ready-made audience for ad inventory.

The platform's growth is not just quantitative but qualitative. Advertisers are increasingly valuing its ability to deliver measurable outcomes, a critical differentiator in an era of ad fraud and declining trust in traditional digital channels.

A Test of Long-Term Viability

JOYY's success hinges on three factors:

1. Sustaining Ad-Tech Momentum: Maintaining 30%+ annual growth in BIGO Ads will require continuous innovation. Competitors like Meta and Google dominate global ad-tech, but JOYY's focus on emerging markets—where mobile-first advertising is still nascent—offers a unique edge.
2. Capital Allocation Discipline: The company's $98.5 million in dividends and $36.5 million in buybacks during H1 2025 demonstrate a commitment to shareholder returns. However, reinvesting a portion of its $3.3 billion cash hoard into AI R&D or strategic acquisitions could accelerate ad-tech adoption.
3. User Retention in Live-Streaming: While ad-tech offsets declining live-streaming revenue, JOYY must still stabilize its core business. A further drop in paying users could erode cross-platform engagement, indirectly harming ad effectiveness.

Investment Implications

JOYY's current valuation reflects a mix of caution and optimism. At a price-to-earnings (P/E) ratio of 12x (as of August 2025), the stock trades at a discount to peers like ByteDance and Tencent, despite its stronger cash position. This undervaluation may stem from skepticism about ad-tech scalability, but the company's financial flexibility and strategic clarity present a compelling risk-reward profile.

For investors, the key question is whether JOYY can replicate its ad-tech success in a market where Meta and Google control over 60% of global digital ad spending. The answer lies in its ability to exploit gaps in emerging markets and leverage AI to differentiate its offerings.

Conclusion

JOYY's transition to ad-tech is not without risks, but its 25.6% non-livestreaming revenue growth, coupled with a fortress balance sheet and disciplined capital returns, positions it as a unique player in the evolving digital advertising landscape. While the road ahead is uncertain, the company's pivot reflects a rare combination of pragmatism and vision. For long-term investors willing to navigate near-term volatility, JOYY offers a rare opportunity to bet on a second-growth engine in a maturing market.

The ultimate test will be whether BIGO Ads can evolve from a promising platform to a dominant force. If it does, JOYY's shareholders may yet find themselves in a position to celebrate—not just for surviving the decline of live-streaming, but for redefining its legacy.