This case focuses on the customer loyalty program of Qutoutiao Inc. (QTT, NASDAQ: QTT). Financial analysis, unit economics, and accounting treatments will be explored in the case.

QTT operated a mobile content platform, “Qutoutiao,” in China, which literally meant “fun headlines” in Chinese. QTT aggregated mobile content from various sources and used AI-based algorithms to present customized content to users. The data analytics capabilities of the algorithms enabled QTT to analyze user data and customize feeds to users in order to generate more advertising revenue.

In December 2019, Wolfpack Research (Wolfpack) published a report on QTT, casting serious doubts about the sustainability of its business model, in particular, the customer loyalty program. The program comprised “user engagement” and “user acquisition” activities that were found to be “extremely expensive.” Days later, Wolfpack published a follow-up report extensively using unit economics to support its claims.

Students will be asked to apply unit economics to analyzing QTT’s operating and financial data. For financial analysis and forensic accounting purposes, students will also grapple with questions on how to substantiate the loyalty program expenses and liabilities, and to assess the financial implications of QTT’s accounting treatment in recording the loyalty program expenses.