Last week, long-form video streaming platform iQiyi (NASDAQ:IQ) was exposed to be laying off a lot of employees; this week, the "layoff storm" quickly spread to short video platforms. According to media reports, Kuaishou (01024. HK) is in the midst of a new round of layoffs.
The long video streaming track has always been not optimistic about capital, mainly because the user payment rate and advertising revenue have begun to see the ceiling, while the content cost remains high, making it difficult for enterprises to achieve profitability; but on the contrary, the short video track is mainly based on user production content, while the monetization channel is more diverse, so it has always been regarded as "fragrant" by the market.
However, judging from Kuaishou's performance after its listing in Hong Kong in February this year, the overall stock price showed a downward trend, from the opening price of HK$338/share on February 5 to the closing price of HK$85.75/share on December 9. Based on this calculation, the stock price decline since the listing of Kuaishou has reached 74.63%.
The layoff storm coupled with the long-term downturn in stock prices, which can't help but make people wonder, is it kuaishou or the short video track behind Kuaishou that gradually "loses its aura"?
(i)
Revenue side: Start a "bleak" live broadcast business
According to the financial report, in the third quarter of 2021, the total revenue of Kuaishou was 20.49 billion yuan, an increase of 33.4% year-on-year. Although Kuaishou's revenue still maintained growth, the revenue growth rate slowed down.
Source: Corporate Finance Report, Red Star Capital Bureau
From the perspective of revenue structure, the current revenue of Kuaishou is mainly composed of three major parts, namely live broadcasting, online marketing services and other businesses.
1.1 Live Streaming Services
Kuaishou laid out the live broadcast business earlier, and under the "old iron culture", the anchor and the user's stickiness were strong, and the user's willingness to pay was also higher. According to iResearch consulting data, as of the first half of 2020, Kuaishou is the live broadcasting platform with the largest number of paid users in terms of tip flow and live broadcasting monthly.
But now Kuaishou's live broadcast business is showing a downward trend. From Q1 to Q3 of 2021, its live broadcast business revenue was 22.14 billion yuan, down 12.66% year-on-year; from the perspective of the contribution of live broadcast business to corporate revenue, in 2018, Kuaishou live broadcast business revenue accounted for 80% of total revenue, while in the first three quarters of 2021, the proportion of live broadcast business to total revenue fell by 39%.
Judging from the changes in the paid users of the Kuaishou live broadcasting service, the ARPPU value (average revenue per paid user) of the live broadcasting business has increased this year, but the total number of users who are willing to pay has decreased significantly.
In 2020, the number of monthly paying users of Kuaishou's live broadcast was 57.6 million, and as of Q3 2021, the number of services willing to pay for live broadcasting services has decreased to 46.1 million, which is also the main reason for the decline in revenue of Kuaishou's live broadcasting business.
1.2 Online Marketing Services
The so-called online marketing business, in simple terms, is advertising, including performance-based and display-based advertising services and Kuaishou fans.
The main form of performance-based ads is short videos with clickable thumbnails, and display-based ads are homepage pop-up ads, banner ads, logos and magic emoticon implants. Kuaishou fans are also Kuaishou "selling" fans to customers, who pay to promote their videos or live broadcasts to the target audience within a specified period of time.
At present, Kuaishou's online marketing business is growing rapidly, with online marketing service revenue of 29.42 billion yuan in the first three quarters of 2021, an increase of 120.5% year-on-year, accounting for 52% of total revenue. That is to say, the online marketing business has become the most important source of revenue for Kuaishou.
As the revenue of Kuaishou's online marketing services increases, the advertising value of single users also increases.
In the third quarter of 2020, the advertising revenue of Kuaishou unit MAU (number of monthly active users) was 12.9 yuan / person, compared with 19 yuan / person in the same period of 2021; in the third quarter of 2020, the advertising revenue of unit DAU (number of daily active users) was 22.7 yuan / person, and the same period in 2021 increased to 34 yuan / person.
1.3 Other businesses (mainly e-commerce)
Kuaishou's other businesses include e-commerce, online games and other value-added services, the most important of which is e-commerce business.
At present, the business maintains a strong growth trend, and the revenue of other businesses of Kuaishou in Q1~Q3 in 2021 is 5.09 billion yuan, an increase of 151.7% year-on-year, accounting for 9% of total revenue, mainly driven by the growth of e-commerce business.
In the third quarter of 2021, the GMV (total amount of commodity transactions) of Kuaishou e-commerce was 175.8 billion yuan, an increase of 86.1% year-on-year, and the total GMV of the first three quarters was 439.76 billion yuan, an increase of 115.5% year-on-year.
On GMV alone, there is still a certain gap between Kuaishou and Taobao and Douyin. The advantage of Kuaishou's live e-commerce business is that the conversion rate of user payment under the closed loop of the "old iron" economy is higher in the short video industry; but the disadvantage is that the products are mainly food, agricultural products, clothing, and daily necessities, and the average price of a single commodity is low and the currency conversion rate is low.
According to the financial report, the company's other service revenue in the third quarter was 1.86 billion yuan, even if it was all e-commerce revenue, the monetization rate was only about 1%. From the current mainstream e-commerce platform, Pinduoduo, which has a low monetization rate, has also increased to about 3%.
(ii)
Expenditure side: huge marketing, amplifying losses
According to the company's financial report, in the first three quarters of 2021, Kuaishou's adjusted net loss was 14.511 billion yuan, compared with 7.244 billion yuan in the same period last year, an increase of 100.3% year-on-year.
From the perspective of gross profit margin, Kuaishou's gross profit margin is actually growing. From Q1 to Q3 of 2021, the gross profit margin of Kuaishou was 42%, while the gross profit margin in 2018 was only 29%, and the increase in gross profit margin was mainly due to the high gross profit business of online marketing services and e-commerce business. Because of the high cost of sharing, the live broadcast business is relatively speaking, but it will reduce the gross profit margin of the enterprise.
But even so, Kuaishou is still difficult to get rid of the loss dilemma. So, where does Kuaishou's money go?
The first is the sales expense, which Kuaishou is very "generous". In 2018, Kuaishou's sales expense ratio was 21%; from Q1 to Q3 in 2021, its sales expense ratio has increased to nearly 60%.
In this regard, Kuaishou said that this part of the expenditure is mainly due to the increase in promotion and advertising expenditure due to the increase in product promotion, brand marketing activities and overseas market expansion. For example, in 2020, it cooperated with CCTV Spring Festival Gala to distribute 1 billion red envelopes; in 2021, it reached a Spring Festival Gala cooperation with 10 provincial satellite televisions such as Hubei Satellite TV and Chongqing Satellite TV to distribute 2.1 billion red envelopes.
In addition to the high sales costs, research and development is also the key investment of Kuaishou, and the R&D expense rate of Kuaishou in Q1~Q3 in 2021 will reach 19.3%, while the R&D expense rate of Kuaishou in 2019 is only 7.5%.
In addition, other costs of Kuaishou are also increasing, mainly due to the rapid growth of content cost expenditure, which brings us to the new layout of Kuaishou.
(iii)
The way forward: grasping the content, we grasp the main contradiction
Judging from Kuaishou's latest user-level data, there are many "surprises".
In the third quarter of 2021, Kuaishou's DAU was 320.4 million and MAU was 572.9 million, both of which hit record highs.
From the perspective of single-user daily usage time, the average daily active user usage time of Kuaishou in the third quarter of 2021 was 119.1 minutes, an increase of 35% year-on-year.
Behind the growth of these data, perhaps thanks to the new layout of Kuaishou.
At present, as far as the current situation of the domestic short video industry is concerned, the penetration rate has been relatively high, and the market has also changed from an incremental market to a stock market. Therefore, for short video platforms, the key to the second half of the journey lies in improving the retention of users, and how to improve the stickiness of users is naturally inseparable from the content itself.
Since the beginning of this year, Kuaishou has made frequent moves in terms of content layout. In March, Kuaishou became the official live streaming and short video platform for the CBA League, and by the end of April, the number of viewers of its sports vertical category had increased by more than 200%.
On October 18, Kuaishou and NBA China held a strategic cooperation conference in Beijing, announcing that the two sides will reach a multi-year strategic partnership from now on, and Kuaishou will become the first content creation media partner of NBA China, as well as the NBA's official short video platform and NBA video content creation community.
In terms of micro-variety shows, Kuaishou's self-made "See fast life", "Tear Resistance Conference", "Olympic First Grade" and other programs are mainly platform masters. According to the official data given by Kuaishou, in Q3 2021, kuaishou short dramas will be active 230 million per day, and the series of short dramas with more than 100 million views will exceed 850.
On the one hand, these contents can attract more users' long-term attention, on the other hand, they can also provide more content materials for the platform's UGC producers, in general, they are all to enhance user stickiness and improve user retention.
Therefore, many netizens said that Kuaishou began to imitate the set of B station, began to buy a large number of external content copyrights, and activated the vitality of the platform through content. Perhaps Kuaishou also knows that "old iron culture" is not indispensable, and only long-term sustainable quality content is the cornerstone of its own survival.
brief summary
For the stock price that is not optimistic, the voice of market controversy is whether Kuaishou can protect its "one acre and three points of land". After all, under the internal and external troubles, the most important thing for Kuaishou should do is to protect the content ecology on which it depends.
Red Star News reporter Yu Yao Liu Mi
Edited by Yu Dongmei
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