Late exclusive丨10 years of loss, Himalaya plans to make profit for the first time at the end of the year

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In August 2022, Yu Jianjun, CEO of Himalaya, for the first time made clear the specific profit plan to all employees of the company. It has been ten years since the establishment of this audio platform.

“LatePost” understands that the management of Himalayas has developed a five-year plan:

  • In 2022, it will achieve a single-quarter profit in the fourth quarter, and the net loss for the whole year will be narrowed to about 300 million yuan.
  • Achieve a full-year profit of 200 million-300 million yuan in 2023.
  • Five years later, the annual income will be 20 billion yuan and the profit will be 4 billion yuan.

“The collapse of Daily Youxian has touched the management a lot.” A Himalayan source said, “They think this is not an accidental event, there may be more such companies in the future, and companies that cannot really make profits are very dangerous. “

According to Himalaya’s latest prospectus, the company’s revenue in 2021 is about 5.8 billion yuan, lower than video and live broadcast platforms such as iQiyi, bilibili, and Huya, and higher than graphic platforms such as Zhihu and Qutoutiao. In 2021, Himalaya’s net loss will reach 750 million yuan, and the loss will be wider than the previous year.

In today’s environment, no matter how persistent Internet companies or products are, they have to accelerate their commercialization, such as WeChat and bilibili. Himalaya is another type of representative: there are user needs and investors support them to move forward, but the profit margin is not large enough; now the market environment has changed, they have missed the overseas listing window, and capital is no longer motivated to be valued Limited growth pays; the economic downturn further exacerbates their operating pressures.

Himalaya’s latest round of financing occurred in April 2021, with a post-money valuation of about $4.3 billion. Since then, the three submissions have not been listed.

Before that, Himalaya had already started to cut some costs. The share it pays to content creators and copyright owners will drop from 33% in 2019 to 27.3% in 2021.

According to the prospectus, as revenue and user numbers keep growing, Himalaya’s annual gross profit margin will increase from 44.5% in 2019 to 54% in 2021.

However, the absolute value of the company’s R&D expenditure and marketing expenditure has expanded in the past three years, and the proportion of total revenue has remained relatively stable, generally remaining in the high range of 55% – 60%.

Yu Jianjun said at the staff meeting that “a single-quarter profit in the fourth quarter of 2022” has become one of the management’s assessment indicators, with a weight of 50%. However, he also made a special note that the fourth-quarter profit indicators of Himalaya are not tied to employee-level performance.

“The specific profit is not so important.” Yu Jianjun said, “The meaning of profit itself is very important, which shows that the Himalayas can make blood without external force.”

“To be profitable”

“LatePost” learned that in order to achieve profitability, Himalaya began to make relevant adjustments from the first quarter of this year.

Since March this year, employees in Himalaya have successively received layoff notices. Performance appraisals have also become stricter, with an emphasis on increasing the “distinction” of employees.

Although Yu Jianjun did not disclose the proportion of layoffs at the full staff meeting, he said that the cost of layoffs should be controlled within 10% of the total cost of reduction. At the end of 2021, Himalayas had 4,342 full-time employees.

Himalaya also reorganized its business and organization, including integrating businesses with similar models and strong synergy to reduce internal friction and improve operational efficiency.

In May, Himalaya integrated the parent-child paid membership, parent-child education, children’s smart hardware and other businesses that were originally scattered in various departments, and established a large parent-child business department; on the product side, Himalaya merged the main website version and the speed version, unified by the main terminal. Qin Lei, the product manager, is in charge, and the children’s version business is merged into the parent-child business.

In terms of growth strategy, Himalaya cut off a number of inefficient distribution channels. “Whether it can be paid back within 24 days” used to be an assessment indicator for Himalaya to decide whether to invest in marketing expenses in a channel. After the reform, the team adjusted the standard of “24 days” to “18 days”. In addition, Himalaya also pays more attention to user retention and raises the corresponding goals.

Yu Jianjun said at the plenary meeting that profit should not be profit obtained by scraping figures, nor should it be profit obtained simply by reducing costs, but “making profit a natural thing” and “maintaining a certain degree of profit.” Profitability against the backdrop of user growth and revenue growth.”

Focus on improving the screen time

Audio itself is not a product form with a lot of room for advertising monetization, and the monetization efficiency of audio advertising is far weaker than that of video and graphic advertising.

According to LatePost, less than 3% of Himalaya’s advertising revenue is audio ads after the screen is turned off. As an audio product, 50% of Himalaya’s advertising revenue comes from the opening screen ads that appear when the app is opened.

The average daily usage time of users of Himalaya is more than 144 minutes, which is even higher than that of Douyin and Kuaishou users (the average daily usage time is about 120 minutes), but when users use Himalaya, they only turn on the screen for an average of 8 minutes per day.

A Himalayan source said that one of the platform’s key plans this year is to increase the screen time, with the goal of increasing it from 8 minutes to 12 minutes, which can increase advertising space.

Subscription business (membership, pay-on-demand) is the largest source of revenue for Himalayas, accounting for 51.1% of total revenue.

If the platform wants to increase this part of the revenue, either by purchasing more copyrights to attract users to subscribe; or by increasing the price of existing content and membership fees. However, choosing the former will further increase the cost of content, and choosing the latter will lead to user loss to a certain extent. How to balance the two is a long-term challenge. The current total number of members of Himalaya is 14.4 million, and the payment rate is 12.9%, which is comparable to that of Tencent Music.

It is even possible that the amortization cost of copyright for Himalayas will increase significantly in the next few years. An Internet analyst who has been paying attention to the audio industry for a long time told LatePost that in the early development of Himalaya, the founder realized the importance of copyright and signed a batch of copyright cooperation with companies such as China Literature at a low price for 10 years. protocol.

“These contents may expire in the next three or four years, and the cost of renewal may be several times higher than at that time.” The analysts said.

Himalaya has incubated the audio live broadcast business since 2017. In 2021, this segment will account for about 17% of its overall revenue. However, only 1% of Himalayan mobile users listen to live broadcasts. This means that the vast majority of users just click into the web page from other places and have not formed the habit of listening to live audio.

Himalayas once identified online education as the second growth curve. In April 2021, the prospectus submitted by Himalaya to the New York Stock Exchange shows that from 2019 to 2021, the proportion of revenue contributed by the education business to the company will increase from 0.5% to 13%. But five months later, the prospectus submitted by Himalaya to the Hong Kong Stock Exchange stated that the education business had stopped.

“Extremely hypothetical, even if it does not go public for two or three years, it must not affect the development of Himalaya, and it will not affect Himalaya becoming a good company.” Yu Jianjun said at the Himalaya staff meeting. A good company means creating user value, employee value and shareholder value. But now, this is clearly not an easy goal.

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