Original link: https://www.latepost.com/news/dj_detail?id=1150
Kuaishou saves 100 million yuan just by reducing welfare
Kuaishou Chairman Su Hua joined the first quarter earnings conference call tonight and made an opening speech. After handing the CEO job to his entrepreneurial partner Cheng Yixiao at the end of October, he has stopped attending such investor meetings.
Big people go to events that they can or can’t go to to show the outside world that they don’t have any problems. Before you know it, entrepreneurs have the same need. After Su Hua gave a brief speech, Cheng Yixiao took it over and introduced Kuaishou’s business status.
In the first three months of this year, an average of 346 million people (DAU) opened Kuaishou to watch videos and live broadcasts every day. Kuaishou’s DAU hovered around 300 million in the previous year, which was the first significant increase.
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Cheng Yixiao repeated the goal proposed last year: 400 million DAU in the medium and long term, and he said that Kuaishou will achieve this goal at a limited cost. The cost of Kuaishou is indeed well controlled in this quarter. The main cost of sales and marketing expenses (mainly attracting new users and selling advertisements) is nearly 2.2 billion yuan less than the previous quarter.
According to “Waidian Finance and Economics”, Kuaishou recruits new users who have used Kuaishou but left, and the cost is significantly reduced. On the other hand, the Changchun epidemic that started in March may also make more people kill time on Kuaishou. Changchun is one of the few areas where Kuaishou DAU can achieve 1:1 with Douyin.
Kuaishou compresses costs in all directions. R&D and administrative expenses are nearly $600 million less than at the end of last year — layoffs, reduced benefits. Among them, benefits alone saved 111 million yuan, with an average reduction of thousands of yuan per employee.
Kuaishou welfare used to exceed Bytes. In the most exaggerated time, Kuaishou Administration Department will have a special person to ensure that the daily snacks are not the same, and employees can eat “snacks they have never seen before”. At one point, they also accurately measured the sweetness of the apples given to employees at afternoon tea, and whether the beef in the cafeteria beef noodles was heavy enough. Now the free meals are gone, and employees who have worked in society for more than 3 years are no longer entitled to housing subsidies.
In the end, Kuaishou reduced the loss (adjusted to remove the impact of option exercise) to 3.72 billion yuan, which is 2 billion yuan less than this time last year.
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But in today’s environment, more users did not bring the same revenue growth to Kuaishou. In the first quarter, Kuaishou’s advertising revenue (online marketing services) was 11.351 billion yuan, 32.6% more than the same period last year, but the growth rate was only 1/5 of last year’s. Similarly, Kuaishou’s live broadcast (rewarding) revenue was 1 billion yuan less than the same period last year.
Advertising directly reflects changes in the economic environment, because companies are not optimistic about the future and will reduce brand advertising. Cheng Yixiao said that all kinds of advertisers are becoming conservative in their placement. “The year-on-year growth rate of advertising revenue has slowed down from mid-March, and there is no recovery momentum for the time being.”
Kuaishou is not a brand advertisement. Now, what supports the growth of Kuaishou advertisements is more so-called “internal loop advertisements” – brands or anchors who spend money to buy exposure through live broadcasts.
In theory, “internal loop advertising” is less affected by economic fluctuations – the economy is not good, and people still need cheap goods. But Cheng Yixiao said that as e-commerce logistics and warehousing are affected by the epidemic, “internal circulation advertising” is facing a slowdown in growth similar to GMV, but there are some signs of recovery recently.
The epidemic is uncertain, the future of the economy is uncertain, and so is the growth of Kuaishou. (Huang Junjie Shi Xian)
Airbnb China Hibernation
Today, shared accommodation platform Airbnb announced that it will close its domestic travel business in China from July 30 this year, and retain its outbound travel business. According to multiple sources, Airbnb currently has about 500,000 active listings in China, all of which will be removed from the shelves.
Airbnb says this is because the repeated outbreaks of the virus have made domestic travel expensive to operate.
In 2013, the shared accommodation platform Airbnb initially explored the Chinese market, and cooperated with tourism content platforms such as Qiuyou.com and Mafengwo on a project called “Win China”. At that time, Airbnb wanted to let more Chinese travel enthusiasts know about this brand, and they would remember to use it to book accommodation when traveling abroad.
The good feedback from this water test started Airbnb’s journey into the Chinese market. But I didn’t expect that 9 years later, Airbnb returned to the starting point in China – only overseas travel business.
Airbnb had high hopes for the Chinese market. In 2017, it said that it hoped to develop China into the world’s largest source of tourists by 2020, and arranged for Airbnb co-founder and chief strategy officer Nathan Blecharczyk to be the chairman of the China region.
But Airbnb’s business in China is difficult. People choose homestays more to save money than to live in castles and tree houses. In recent years, too many hotels have been built in various cities in China. Except for a few luxury-level or global chain groups, the prices are very cheap. For example, very new Chinese chain hotels in Beijing’s Third Ring Road often cost only 400 yuan a night before the epidemic, and homestays have no obvious advantages. This is a far cry from the $100-200 a night in any old hotel in New York.
According to the Prospective Industry Research Institute, as of January 1, 2020, there were 17.62 million hotel rooms nationwide. According to a rough estimate of the occupancy rate of 39% (the average occupancy rate of star-rated hotels in the country in 2020), the number of orders for hotels across the country has exceeded 6 million a day, which is nearly 100 times that of homestays.
The limited domestic B&B market is also crowded. Aggregate apps like Meituan dominate the market, with lower customer acquisition costs than Airbnb.
By 2020, Airbnb listings and bookings are lower than Tujia and Meituan. According to the statistics of Jiemian News, by the end of 2020, the number of listings was Tujia Homestay (910,400 units) > Meituan Homestay (805,400 units) > Airbnb (562,700 units). Airbnb is also the third largest in terms of order volume, about half of that of Tujia and Meituan.
The arrival of the epidemic has further aggravated the difficulty of operating the Chinese market. As a public company, Airbnb needs to consider costs.
But Airbnb still has some unique advantages, and when Chinese tourists can travel abroad, it will still be a brand with a huge variety of choices. Domestic competitors such as Ctrip, Meituan, and Tujia cannot provide the same overseas options.
Airbnb China chose to go into hibernation, waiting for the spring of outbound travel. (Wang Yuqing)
Yixian E-commerce (Perfect Diary) revenue continues to decrease, with a market value of less than 2 billion yuan
- Yixian e-commerce, which has grown through KOL marketing, is continuing to reduce marketing investment, trying to make itself a sustainable brand without burning money. Because the high marketing investment is unsustainable, and one day it will be profitable; also because Douyin, Taobao Live, and Xiaohongshu advertisements are getting more and more expensive, and big brands in Europe and America have also learned its marketing methods.
- But now, as much as Yixian e-commerce cuts marketing expenses, the revenue basically falls. In the first quarter, marketing expenses fell by 41.83% year-on-year, and revenue fell by 38.3%; in the fourth quarter of last year, sales expenses decreased by 21.7%, and revenue fell by 22.1%. Revenue has declined in the same proportion as marketing, and there is no clear sign of the separation between the two. So with the release of today’s financial report, Yixian E-commerce’s share price plummeted by more than 11% shortly after the opening, and its market value was only 260 million US dollars (about 1.74 billion yuan).
- In the difficult period of transformation, we encountered the blow of the general environment. According to a report from CITIC Securities, Taobao’s cosmetics industry sales in March and April 2022 fell by 20.3% and 22.5% year-on-year.
- The few pieces of good news are that Yixian’s new e-commerce business, skin care products, increased revenue by 68.4% in the first quarter, contributing more than 20% of revenue to the cosmetics-started company for the first time. But that wasn’t enough to make up for the decline in the cosmetics business.
- Continued reduction in investment allowed Yixian E-commerce to reduce operating cash outflow to RMB 104 million, which gave it more time to transform. According to the strategy of reducing marketing and increasing R&D in the transformation to a “sustainable brand”, Yixian e-commerce’s R&D investment in the first quarter increased to 4% of its revenue, reaching the highest level after listing, surpassing L’Oreal (2.4%). But as the founder Huang Jinfeng himself said, it will take a few quarters to see the results. (Wang Yuqing)
Autohome advertising revenue declines, most worried about lack of consumer confidence
- Autohome’s revenue in the first quarter of this year was 1.47 billion yuan, a year-on-year decrease of 20%, and its profit was 318 million yuan, a year-on-year decrease of 49.79%. Among them, the media service revenue was 270 million yuan, a decrease of 56% compared with the same period of the previous year. The shortage of chips continued, coupled with the impact of the epidemic in some cities in the first quarter, the advertising investment of car companies declined.
- New energy vehicles are also facing the same problem. However, due to the small base in the previous year and the rapid growth of the market, the revenue of the new energy vehicle brand of Autohome increased by 156% year-on-year in the first quarter.
- Management responded to market concerns on the conference call. Expressed their belief that as car companies resume production, supply is no longer a problem – they are more worried about insufficient demand. Cars are the most expensive consumer goods that ordinary people buy. If consumers lack confidence in the future, they will become more cautious in their purchases. The phenomenon of reduced car bookings and delayed demand has become obvious, and the need for stronger policy support is emphasized.
- The executive meeting of the State Council held a few days ago mentioned 33 measures to stabilize the economy, including relaxing car purchase restrictions and reducing the purchase tax of some passenger cars by 60 billion yuan. (Lin Guangying)
No new version number for more than half a year, NetEase game revenue continued to grow by 15.3%
- The last time NetEase got a domestic game version number was in July last year, and the version number was suspended for the next 8 months, and the first batch that resumed distribution in April this year was not listed. However, its gaming revenue has not been greatly affected.
- In the first quarter of this year, NetEase’s online game revenue was 17.3 billion yuan, a year-on-year increase of 15.3%. This growth rate is in the middle of the eight quarters since 2020.
- Even if there is no new version number, big companies often have more countermeasures, because they have more version numbers and can operate old games. NetEase said that many classic IP products such as “Fantasy Westward Journey” and “Westward Journey” are still popular, while new games such as “Harry Potter” and “Eternal Calamity” launched last year have brought year-on-year growth.
- NetEase still has less than 100 imported game version numbers issued a year. In December last year, “Diablo: Immortal” jointly developed by NetEase and Blizzard obtained the version number required for the imported game to be put on the domestic shelves. At present, 35 million players have made reservations around the world, including more than 15 million reservations in China, which will be released on June 23.
- As the industry has been discussing, due to the abundant game reserves, sufficient cash flow, and closer communication with regulators, the tightening of the version number is more beneficial to large companies in the long run, and the market share may tend to be concentrated. From 2018 to 2021, the total number of approved game version numbers are 2105, 1570, 1408, and 768, respectively. The version number was reissued in April this year, and the first batch of 45 games was released. (Lin Guangying)
Environmental protection makes oil companies more money
- As usual, when oil prices rise, the market will naturally adjust supply and demand: consumer consumption decreases, global oil companies mobilize spare capacity, and oil prices naturally decrease.
- This year is more troublesome. Although oil prices are approaching the highest level in a decade, both adjustment mechanisms are failing: the use of oil by global consumers has not been high in the two years of the new crown epidemic, and it is increasing as global economic activity resumes. Meanwhile, the Aramco CEO said “there is only 2% remaining capacity in the oil industry”.
- Energy companies are also reluctant to expand production capacity, with fossil energy investment in 2021 down 23% from 2019, according to S&P Global. They worry about future clean energy trends. With the shortage of fossil energy, governments in many countries have accelerated the energy transition. The European Union recently announced to increase the share of renewable energy from 40% to 45% by 2030 and reduce energy consumption by 13%. It may take 6-7 years to invest in a fossil energy mining project.
- It’s hard to tell if Saudi Aramco is happy or not. Thanks to soaring oil prices, its net profit last year exceeded US$110 billion; oil prices have risen by nearly 50% since the beginning of this year, and Saudi Aramco’s first-quarter net profit increased by 82% year-on-year to US$39.5 billion.
- The increase in oil prices affects the cost of production and transportation of enterprises, and increases the price of commodities. According to reports, the United States is considering relaxing environmental requirements for gasoline, such as delaying the ban on butane-containing gasoline that produces more exhaust gas, in order to reduce oil prices. (Huang Junjie)
OTHER NEWS
Meituan B&B, Tujia, and Wooden Bird B&B compete for Airbnb hosts.
Airbnb announced today that it will suspend the Chinese market on July 30, and many domestic homestay platforms have quickly introduced measures to attract Airbnb hosts. Meituan B&B, Tujia, and Wooden Bird B&B all stated that they have formed an exclusive service team and opened a speedy review channel. It will also help with migration and give traffic incentives.
WeRide will cooperate with Bosch on autonomous driving, and it is expected to get orders from the automaker as soon as this year.
Autonomous driving technology company WeRide announced on the 24th that it will cooperate with automotive technology supplier Bosch to develop L2-level autonomous driving business. Bosch is mainly responsible for system development, integration and verification, while WeRide is responsible for application software development. Bosch said that the two sides have convened hundreds of engineers for this project, and a German development team will provide some underlying technical support; WeRuan Zhixing said that the company will expand its recruitment in the case of economic downturn. The two parties did not disclose specific details such as the investment amount, planning, and timetable.
Shanghai announced that the mall will fully resume operations after June 1.
According to the Shanghai Municipal Commission of Commerce, shopping malls and shopping malls in Shanghai will fully resume offline operations after June 1, but the total passenger flow cannot exceed 75% of the maximum carrying capacity. The recovery of supermarkets, convenience stores, etc. is synchronized with that of shopping malls. In other offline businesses, catering can only be delivered this month, barber shops can make online reservations this month, and offline reception will be staggered. Housekeeping and appliance repairs will gradually resume operations this week.
Luckin made an operating profit for the first time.
In the first quarter of this year, Luckin Coffee’s operating income was 2.4 billion yuan, a year-on-year increase of 89.5%, and its operating profit turned positive to 53 million yuan for the first time. Management said the growth was mainly driven by 34 new products, with the “Coconut Cloud Latte” launched in April selling 4.95 million cups in its first week. Luckin’s average monthly transaction customers in the first quarter were 160 million, a year-on-year increase of 83%; as of the end of the quarter, there were 6,580 stores, a year-on-year increase of 32%. However, from April 1 to yesterday, an average of 950 stores were temporarily closed every day for various reasons.
NetEase Cloud Music has half more paying users, but it still relies on rewards to reduce losses.
In the first quarter, NetEase Cloud Music’s adjusted net loss was reduced to 150 million yuan, half of what it was at this time last year. On the one hand, there is a “price promotion” for music members. The monthly paying users of online music services increased by half year-on-year to 36.74 million, with a total income of 710 million yuan – not enough for copyright fees. The larger revenue is NetEase Cloud’s social entertainment revenue (rewards), which reached 1.17 billion yuan. This revenue structure is similar to Tencent Music, and the ultimate reward is the future of Chinese music services.
“Factory quarantine” increases costs, Vietnamese companies say they don’t have the energy to raise wages.
Vietnam originally planned to increase the domestic minimum wage by an average of 6% in July this year, but the relevant person in charge said that the industry expressed “rare dissatisfaction”, and industry groups such as electronics and textiles suggested that the salary increase be postponed to January next year. The reasons include the implementation of “factory isolation” for several months in 2021, with employees staying and working in the factory, increasing costs and leaving companies “without the energy to significantly increase wages.” It is reported that foreign-invested enterprises, which account for 70% of Vietnam’s exports, are also paying close attention to wage increases.
Toyota lowered its June production again, and 16 production lines in Japan were shut down again.
Toyota Motor said it lowered its June global production target by 100,000 vehicles to 850,000 vehicles due to a shortage of chips, but maintained its full-year target of 9.7 million vehicles. In addition, affected by the epidemic in Shanghai, the supply of parts is in short supply, and a total of 16 production lines in 10 factories in Japan will be suspended for up to 5 days. Toyota has lowered its monthly production target several times this year. At the beginning of the month, 14 local production lines were shut down for 6 days for the same reason. Toyota’s global production fell 0.6% year-on-year in the first quarter of this year.
Overinvested, Amazon plans to sublease warehouses to cut costs.
Amazon is seeking to sublease at least about 930,000 square meters of vacant warehouses and is trying to terminate or re-contract. The total area of the two phases of JD’s Asia No. 1 warehouse in Shanghai is only 200,000 square meters. During the epidemic, due to the rapid growth of e-commerce demand, Amazon aggressively expanded its logistics facilities. However, as people returned to the offline world, Amazon’s e-commerce revenue in the first quarter of this year decreased by 3.4% year-on-year. The management admitted that the logistics capacity was overcapacity and faced inflationary pressures such as freight and wages. .
New cars are hard to buy, and the average car age in the United States is over 12.2 years old.
According to S&P Global, the average age of vehicles in use by U.S. consumers is now 12.2 years, an increase of nearly two months from a year earlier, due to tight supply. During the epidemic, many people switched from public transportation to private cars, also driving the increase in used car demand. However, the average age of electric vehicles in the U.S. this year is 3.8 years, down 0.1 from a year earlier, indicating an acceleration in new vehicle sales.
Lithium battery prices have risen, and Mavericks has turned a loss in the first quarter.
Mavericks sold 164,000 two-wheeled electric vehicles in the first quarter of this year, a year-on-year increase of 9.4% – still growing, but only about 1/6 of the growth rate in the previous quarter. In addition, the proportion of cheap models in the vehicles sold is larger, the gross profit margin is lower, and the price of lithium batteries is caught up, and Mavericks has a net loss of 29.6 million yuan in the first quarter. The Mavericks had been profitable for the previous three quarters.
The issuance of consumer loan ABS on the Internet platform was restarted.
According to Caixin, consumer loan ABS (asset securitization products) on Internet platforms such as JD.com, Duxiaoman, and Meituan may restart this month. Among them, the two products of Jingdong have been bookkeeping yesterday and the value of interest has been set on the 26th. After the Spring Festival this year, the Shanghai and Shenzhen exchanges suspended the new issuance of consumer finance ABS by Internet companies. However, industry insiders said that they have not heard of the release of Ant Group’s ABS issuance. The basic principle of consumer loan ABS is to sell the accounts receivable of consumer loans as an asset.
Starbucks announced its withdrawal from the Russian market, closing 130 stores.
Starbucks notified employees on Monday that the company was pulling out of the Russian market entirely. Starbucks has stopped operating stores in Russia since March this year. Starbucks said it would pay nearly 2,000 Russian employees six months’ wages and help them transition jobs. Starbucks has 130 stores in Russia, about 1/6 of Shanghai’s.
Youdao has almost filled the hole left by the subject tutoring business in elementary and junior high schools.
NetEase Youdao’s revenue in the first quarter was 1.201 billion yuan, a decrease of 7% compared with 1.3 billion in the same period last year. At this time last year, Youdao’s largest source of income was the subject training business of primary and junior high schools, which disappeared due to the double reduction policy. Youdao relies on quality education (Go, chess, etc.), adult and vocational training to make up for the training income gap. In the first quarter of this year, this part of the business revenue increased by 36.1% year-on-year to 826 million yuan, which is Youdao’s largest source of income. Youdao regards educational intelligent hardware as a future growth space, and its R&D investment has increased by 59% year-on-year.
Text | Huang Junjie Shixian Lin Guangying Intern Wang Yuqing Intern Yi Silin
Editor | Huang Junjie
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