B station “enchantment” is difficult to break

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Author | Ma Shuye Editor | Rao Xiafei

Source: Burning Dimension

On September 8, Bilibili (BILI.US, hereinafter referred to as “Bilibili”) announced the financial data for the second quarter of 2022 as of June 30. In this quarter’s financial report, the year-on-year revenue of Bilibili increased. Speed ​​dropped into single digits for the first time.

The financial report data shows that this quarter, Bilibili achieved revenue of 4.9 billion yuan (RMB, the same is not marked below), an increase of 9% over the same period last year of 4.495 billion yuan.

This is the first time that the year-on-year revenue growth of Station B has dropped by single digits. From the perspective of revenue growth, Station B is getting slower and slower.

In terms of performance split, this quarter, the e-commerce and other income of station B was 601 million yuan, compared with 578 million yuan in the same period last year, a slight increase of 4% year-on-year; game revenue was 1.046 billion yuan, a decrease from 1.233 billion yuan in the same period last year. A year-on-year decline of 15%, which is also the quarter with the largest year-on-year decline in the game business of Station B.

The revenue of the advertising sector in this quarter was 1.158 billion yuan, compared with 1.05 billion yuan in the same period last year, a year-on-year increase of 10%, and the increase was not obvious. Or based on this, at the financial report meeting, Chen Rui, chairman and CEO of Bilibili, emphasized the strategic importance of Story Mode (vertical screen mode) to the increase of Bilibili’s advertising business revenue.

At the same time, Station B has not escaped the “dilemma” of losses, with a net loss of 2.01 billion yuan, compared with 1.122 billion yuan in the same period last year, and the loss expanded. This also makes it more difficult for Station B to achieve the short-term goal of “the non-GAAP (non-U.S. accounting principle) operating loss rate narrowing year-on-year from 2022”.

In the fourth quarter of 2021, Station B proposed a profit target for the first time. From 2022, the non-GAAP operating loss rate for the whole year will be narrowed year-on-year, and the Non-GAAP breakeven will be achieved in 2024. In the first quarter of this year, Chen Rui reiterated this profit target.

However, on the conference call on the evening of September 8, the management of Station B did not raise any further profit expectations. At the financial report meeting, Chen Rui emphasized that growth is still the most important work of Station B at present. While accelerating commercialization, it will continue to control costs, increase gross profit margins, and narrow losses. But judging by the second-quarter figures, the losses appear to be getting bigger and bigger.

Affected by the lower-than-expected financial report, on September 8, Beijing time, the US stocks at Station B fell sharply before the market. As of the close of U.S. stocks on September 9, Beijing time, Station B closed at $20.07 per share, down 15.03%, with a total market value of $7.839 billion.

The good news is that the users of Station B continue to grow. In this quarter, the average monthly active users of Station B increased by 29% year-on-year, breaking the 300 million mark; the average monthly paying users increased by 32% year-on-year to 27.5 million.

Chen Rui once said that before 2023, the number of monthly active users of station B can reach 400 million. Today, station B is constantly approaching the goal of 400 million users. However, how to increase users’ willingness to pay, improve profit margins, and further reduce costs and increase efficiency is obviously the company’s next effort.

In addition, Chen Rui also proposed that the revenue of station B in the third quarter is expected to be 5.6-5.8 billion yuan. To achieve this goal, station B has a long way to go. Story Mode, which has been highly anticipated, is still difficult to bear the burden of profitability.

Station B, where the “enchantment” is difficult to break, what is the next step to “change your life against the sky”?

Breaking the circle, but the money is not easy to make

From station B, which shouted the breaking circle in 2020, after the content successfully tore off the “two-dimensional” label, it was difficult to get out of the dilemma of realization.

In the past two years, Station B has made a series of attempts to break the circle, focusing on building a diversified content community, and trying to remove the subcultural labels such as two-dimensional, ghosts, and niches that remain in the public’s impression.

Among them, Story Mode, which is promoted by Station B, seems to have played a role. The data proves that the average daily playback volume of Story Mode vertical screen videos has increased by more than 400% year-on-year, the overall traffic of the community has increased by 48% year-on-year, and more than 60% of creator income.

These actions seem to have played a role, and in the past two years, Station B seems to be breaking through the circle.

“Many middle-aged people around me, and even the elderly have started to use station B. They like to go to station B to watch documentaries.” A post-95 netizen gave his parents “Amway” a food documentary at station B in 2022. He found that around him Many middle-aged people began to accept station B.

The breakthroughs in the circle have been reflected in the data to a certain extent. According to this quarter’s financial report, the average monthly active users of Station B increased by 29% year-on-year, breaking the 300 million mark, while the daily active users increased by 33% year-on-year.

However, station B, which has 300 million monthly active users, is difficult to hand over a satisfactory monetization answer sheet.

On the one hand, it is worth noting that this quarter, the average monthly paying users of station B increased by 32% year-on-year to 27.5 million, but overall, the year-on-year growth rate of monthly average paying users continued to slow down. According to the financial report data of the past year, from Q2 in 2021 to Q2 in 2022, the year-on-year growth rate of the average monthly paying users of station B is 62%, 59%, 37%, 33%, and 32% respectively.

In this regard, analyst Tang Dajie pointed out that the core value of station B lies in having highly viscous generation Z users, but how to use it to realize its business model is still immature. Therefore, even if the users of station B continue to grow, they are willing to Paying users have quietly entered the growth ceiling.

Under the circumstance that commercial realization is difficult to break through, the revenue of station B is in a difficult situation of growth. In the first quarter of 2022, the operating income of station B was 5.054 billion yuan, a year-on-year increase of 30%, setting the lowest growth rate of revenue in a single quarter in the past three years; by this quarter, the operating income of station B was 4.9 billion yuan, compared with the same period in 2021. 4.495 billion yuan, an increase of 9% year-on-year. In the last 7 quarters, the revenue of station B dropped to single digits for the first time year-on-year.

Behind this is the “circle spell” that is difficult to break at station B.

Although in the conference call, Chen Rui mentioned that the current content consumption is an important part of consumption upgrade, and the younger generation is more willing to invest in spiritual and cultural consumption, but the UP owners of station B are affected by account attributes, user tolerance, etc. Constrained by factors, we have to “generate electricity for love”.

A beauty brand PR Li Jie told Ranjiyuan, “In terms of advertising, the cost performance of station B is significantly lower than that of Xiaohongshu and Douyin.”

In Li Jie’s view, different from station B, Xiaohongshu and Douyin have a more distinctive grass-growing attribute, and users are more tolerant of advertisements. “The same advertisement, submitted to Douyin and Xiaohongshu, in the comment area They are all giving feedback and preparing to try it out, and they are submitting to station B, but the comment area is playing tricks.”

In this regard, many UP owners of station B also expressed helplessness.

Ming Na, the owner of Wanfan UP in a certain living area, said to Randiyuan that although the brand partner has been carefully selected, the number of broadcasts in a single episode of inserting an advertisement will be cut in half, which is not only difficult to meet the cooperation requirements of the brand side, but also easy to damage loyal fans. Viewing experience, “Now I receive advertisements about once every two months, but in Xiaohongshu, I can basically receive ads every month with the same account.”

Limited by account attributes, UP owners in areas such as digital 3C, automobiles, knowledge, life, food, etc. are more likely to receive advertisements, while UP owners in subdivided fields such as ghost animals and music can only rely on the incentives brought by the number of broadcasts to “earn money”. It’s hard money”, and with the cost reduction and efficiency increase of station B, the incentive measures for UP owners have been adjusted. Ming Na said that the incentive income of many UPs has plummeted.

Under the epidemic, according to QuestMobile, after the year-on-year growth of China’s Internet advertising market reached a peak of 54.6% in the first quarter of 2021, the market growth began to show a downward trend. The market growth in the second three quarters of 2021 was 19.6% and 9.5% respectively. and 12.7%.

With the overall market growth slowing down, Station B, which holds the core circle of Generation Z, handed over a broken answer sheet is undoubtedly a little less surprising.

“Nobody Mentioned” Games

It is worth mentioning that the game business, which once contributed half of the turnover to Station B, was not mentioned in this quarterly conference call.

In the past two years, Bilibili has been trying to “de-gamify”. In fact, in 2021, the contribution rate of Bilibili’s mobile game revenue to revenue growth has not exceeded 30%.

But games are still one of the main sources of income for Station B. In this quarter, the game revenue of station B was 1.046 billion yuan, a 15% year-on-year decrease from 1.233 billion yuan in the same period last year, and still accounted for 21% of the total revenue of station B.

In the game field, Bilibili is continuing to deploy game self-research capabilities, focusing on the research and development of high-quality games. However, at present, the road to breaking the circle of the game is not smooth.

Data shows that self-developed game revenue accounted for 5% of total game revenue in this quarter, mainly from the launch of “Mobile Fighter Ji: Fusion” in many countries and regions.

“Mobile Battle Ji: Fusion”, which was launched in May last year, briefly reached the 12th place on the iOS best-selling list in the country under the promotion of Station B. However, “debut is the peak”, and then dropped out of 600 places. The current rating on TapTap is 5.9. Comments such as “good screen painting”, “poor game planning”, and “difficult to get started” constitute the general perception of players.

In addition to “Mobile Fighter: Fusion”, which is loud and rainy, the other dozen self-developed games, including “Carbonic Crisis” and martial arts RPG “Dragon and White Bird of Great Rivers and Lakes”, are all “released immediately”. bashing”.

“It is an inevitable move for Bilibili to transfer to self-research.” Jin Yechen believes that as the original main game product of Bilibili’s only generation enters the end of its life, even if Bilibili adjusts its direction and acts as an agent for overseas business, it will be difficult to achieve long-term growth. Under the front and back of big companies such as Byte and Tencent, the self-development of Bilibili betting games has undoubtedly become a self-protection. In August this year, Station B released 16 new games, including 10 unique games and 6 self-developed games.

The increase in self-research, to a certain extent, means that R&D cost investment will usher in an increase. The net loss of Station B in this quarter was partly due to the operating costs caused by the increase in revenue sharing and content costs, while the other part was due to the company’s increase in R&D personnel, the expenditure of equity incentive fees, and the termination of several game projects, resulting in a year-on-year increase of 68% in R&D expenses. %, and the chain continued to increase by 11.9% to 1.13 billion yuan.

In addition to self-research, Station B is also actively investing in “curve to save the country”. According to IT Juzi statistics, in 2021, Station B has invested in 20 game companies, accounting for 35% of the total investment. In the first quarter of this year alone, it invested in at least 7 game companies, not only involving various mobile game versions, but also participating in Various vertical game tracks such as Japanese IP mobile games, film and television IP mobile games, mecha games, and female-oriented games.

Fengsheng, a senior game analyst, said that investing in game-related companies will become an important strategy for the game business of Station B in the future. Station B will still adhere to the strategy of combining “self-research + investment” in the future. Self-research includes not only game self-research, but also IP operations such as the film and television of two-dimensional games. External investment can also improve efficiency and reduce costs.

But this also tests the investment vision of Station B. Once the invested company has not been approved for the game version number, or the market is cold, it will also increase the cost of research and development and time.

However, for Bilibili, the game business that once carried Bilibili to be listed is now very tasteless. Under the goal of reducing costs and increasing efficiency, active investment and self-research require a large amount of resource investment, but the return But it still takes time to prove.

Live broadcast and e-commerce, it is difficult to help station B to recover blood

The continued downturn in games and advertising has placed the growth burden on the live broadcast and e-commerce sectors. However, this quarter, the e-commerce and other income of station B achieved revenue of 601 million yuan, a year-on-year increase of 4%. The feeling of existence is still very low. It is not realistic for station B to rely on live broadcast and e-commerce to recover blood.

In recent years, station B has been trying to make efforts on live broadcast. During the Double 12 last year, the new version of the APP of Station B added the function of a small yellow cart, allowing users to place orders and shop while watching the live broadcast.

Thanks to the growth of live broadcast and other businesses, in the second quarter, the value-added service business revenue of station B reached 2.1 billion yuan, accounting for more than 42% of the total revenue, a year-on-year increase of 29%, and it is the fastest growing business.

And the strategy of station B on live broadcast is to continue to create the integration of live broadcast and PUGV ecology, and encourage more UP masters to become anchors. In the second quarter, the number of active anchors at station B increased by 107% year-on-year, and the average monthly paying users of the live broadcast business increased by nearly 70% year-on-year.

Although station B has not yet decomposed the specific revenue of the value-added service part, but in the first half of the year, in the field of live broadcast, station B relies on virtual human anchors to play uniqueness.

On July 29th, the topic of #virtual anchor B station live broadcast 2 hours earns over one million# was on the hot search on Weibo. Up to now, the number of readings has exceeded 960 million times, and the number of discussions has reached 11,000 times. , the live broadcast business of station B has once again attracted attention.

In June 2021, Chen Rui said at the 12th anniversary celebration that in the past year, a total of 32,412 virtual anchors have started broadcasting at Bilibili, an increase of 40% year-on-year. The uniquely interactive Bilibili has become the largest virtual anchor in China. Anchor live broadcast platform.

Regarding Station B’s move to develop virtual anchors, Tang Shuyuan, an analyst at the Digital Research Institute of the Times, pointed out that at present, virtual anchors are sought after by young people, and they are one of the important applications of the future metaverse and digital economy. It is estimated that by 2030, virtual The overall market size of digital people will reach 270 billion yuan. With the help of virtual anchors, Station B will undoubtedly step on the tuyere of the Metaverse.

But whether station B can break the circle with virtual live broadcast, there is still a question mark.

At present, the live broadcast business does not seem optimistic. In April this year, the topic of #Bilibili’s live broadcast department may be on the hot search. An anonymous employee revealed that the live broadcast of Bilibili will lay off 30% of the staff. In response to the above news, the relevant person in charge of Bilibili responded, “The live broadcast business Gross profit has improved for three consecutive years, and we are actively recruiting.”

Zhuang Minghao, a senior practitioner in the live broadcast industry, said that the biggest problem facing the live broadcast of station B is still high cost and low profit.

According to the financial report, in the second quarter, the value-added service revenue of station B was 2.10 billion, a year-on-year increase of 29%, accounting for 43% of the total revenue; in the fourth quarter of 2021, the value-added service revenue of station B reached 1.89 billion yuan, a year-on-year increase of 52%; 2022 In the first quarter of this year, revenue from value-added services reached 2.05 billion yuan, a year-on-year increase of 37%.

Although the revenue of value-added service business continues to grow, the live broadcast share has also become one of the important revenue costs of station B. An anonymous person close to station B said that according to the latest guild sharing policy of station B in 2022, new anchors who have entered station B after January 1, 2022, in addition to 70% of the no-responsibility reward share for 3 months, plus completion The guild can get up to 80% of the rewards and rebates for the growth tasks.

In addition, according to the financial report, in Q4 2021, the revenue sharing cost of station B increased by 91% year-on-year to more than 2.4 billion yuan, mainly due to the increase in revenue sharing paid to live broadcasters and content creators; in Q1 2022, the operating cost was 4.247 billion yuan Yuan, an increase of 43% year-on-year, of which the share given to creators is as high as 2.146 billion yuan.

In addition, Ran Dimension observed that at this stage, most of the virtual live broadcasts are still biased towards the two-dimensional attributes. Jin Yechen, a contributor to technology self-media Red Sofa, also said that in theory, virtual live broadcasts can provide richer content than real live broadcasts, but the current virtual live broadcast of station B greatly depends on its two-dimensional community atmosphere and a homogeneous two-dimensional aesthetic paradigm. , squeezed the growth space of multiple content.

Compared with the live broadcast business that frequently attracts attention, the e-commerce business of station B seems to be a bit “low-key”.

Previously, Luo Kai, the co-founder of MCN Tomato Egg at Station B, revealed that on March 1 this year, the GMV of the UP main game at Station B exceeded 10 million yuan. During the 618 period, this number became 100 million yuan. However, Luo Kai further stated that at present, the electricity products of station B are still concentrated in 3C digital, and the volume of beauty and other fields is not large. The narrowing of categories also limits the profitability of the e-commerce sector.

In this quarterly conference call, the relevant personnel of station B proposed that station B will actively promote the form of cooperation with the head e-commerce platform in the future, and become the grass-growing content of the original UP owner, but whether this move can drive the revenue of station B , no conclusion can be drawn in the short term.

In addition to reducing costs and increasing efficiency, Station B, which frequently appears as an investor, is “recharging” investors’ confidence through a pan-entertainment ecosystem that deploys industrial collaboration.

In the conference call, Chen Rui also emphasized that the focus of reducing costs and increasing efficiency is not only cost reduction, but also efficiency enhancement, that is, to be smarter to spend money in the right places and do more focused and important things. This may also explain the investment moves of B Station in the pan-entertainment industry in the past six months.

According to IT Orange data, in 2021, Station B will invest in a total of 57 companies, doubling the number of investments in 28 companies in 2020. In the first quarter of 2022 alone, Station B has invested 10 times, and the investment territory involves games, Movies, audiobooks, virtual people, and more.

In this regard, Gao Dongxu, founder of China Entertainment Think Tank, said that Bilibili intends to make up for the lack of IP copyright through frequent investment in the upstream extension of the IP copyright industry chain. For example, there are Yaoqi comics acquired by Station B for 600 million yuan, whose works include “One Hundred Thousand Cold Jokes”, and the animation production company Huimeng Animation also has representative works such as “Under One Man” and “Blessings from Heavenly Officials”. Through investment, Station B can form a benign ecological closed loop of collaboration across the entire industry chain, including IP incubation, animation production, animation education, and animation copyright operation.

Gao Dongxu further stated that in addition to numerous game and animation companies, Station B is also focusing on other more diversified fields such as VR technology creation, online reading, and entertainment marketing, and also intends to broaden its own monetization channels.

Chen Rui mentioned in an interview with the media before that, “As young people become mainstream, station B will also become mainstream.”

However, from the already weak advertising and game revenue, to the new story of building a pan-entertainment industry layout this quarter, before becoming mainstream, perhaps what Station B needs to think about is, how far is it from breakeven?

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