Traffic business suffers from the bottom of the pot The end of the Internet is the metacosm?

In 2021, the Internet industry's "wall demolition" action has achieved results, breaking the situation of "rent collection" in the head platform enclosure -

Reporter Xie Ruolin

2021 is the first year of the 14th Five-Year Plan, the construction of new infrastructure has entered a new stage, and the development of the digital economy has ushered in a new pattern.

This year, Internet user records were constantly being broken and rules were constantly being reshaped. As of June 2021, the number of Internet users in China reached 1.011 billion, an increase of 21.75 million over December 2020, and the Internet penetration rate reached 71.6%. Among them, the scale of rural Netizens is 297 million, and the rural Internet penetration rate is constantly increasing and achieving "the same speed as the same network" as the city. More than 1 billion users are connected to the Internet, providing a strong endogenous driving force for promoting the high-quality development of China's economy.

2021 is also a year of structural turning points, with change everywhere. In the "Spring Festival Red Envelope War" at the beginning of the year, the Internet giants also shouted to run into the "second half of the Internet" and prepared to vigorously "do a big job". However, after the holiday, as the regulatory vein gradually became clear, the Internet industry entered a period of transformation pain, and enterprises experienced a double reshuffle of performance and valuation. The bubble is bursting: the primary market has changed from investment to "subscription"; it is not uncommon for Internet company IPOs to break; the Internet sector in the secondary market has been pulling back all the way, the yield of the China Internet Index overseas in the past year is -41.84%, the valuation of most enterprises is at a historical low, and profitability has become a key factor in the restructuring of corporate value.

In 2021, the Internet industry is being redefined, the definition of e-commerce, live broadcasting, social networking, video, search and other industries is no longer clear, traditional platform-based enterprises have slowed down the pace of expansion, and some "old stories" have put on the new vests of the metaverse and become new competition objects.

Under strong supervision, the giants "know the stop"

"Embracing regulation" is the key word that runs through the Internet industry in 2021. At the end of last year, the Central Economic Work Conference proposed to "strengthen anti-monopoly and prevent the disorderly expansion of capital", which has also become the core orientation of policy norms throughout this year.

Regulatory policies fall into all aspects, specifically around three main lines: antitrust, interconnection and personal information security.

Anti-monopoly policies take precedence and clear penalties. On February 7, the Anti-Monopoly Commission of the State Council formulated and issued the Anti-Monopoly Guidelines of the Anti-Monopoly Committee of the State Council on the Platform Economy.

On April 10, Alibaba received a "sky-high fine" of 18.228 billion yuan for implementing the "two alternatives" monopoly, the largest fine in China's anti-monopoly history. But this was just the beginning, 6 months later, Meituan was fined 3.442 billion yuan for "choosing one of the two" and was required to refund the exclusive cooperation deposit of 1.289 billion yuan.

On the third day after Alibaba was punished, 34 Internet companies were required to conduct a comprehensive self-inspection within a month, and make thorough rectifications one by one. On July 7, the State Administration for Market Regulation opened an investigation into 22 cases of illegal concentration of undertakings in the Internet field, involving Alibaba, Tencent, Suning Tesco and other companies. On July 10, the State Administration for Market Regulation announced that it would ban Tencent from filing a merger between Douyu and Huya. On July 24, the State Administration for Market Regulation ordered Tencent to revoke the exclusive copyright of online music.

In the above cases, the suspension of the merger of Huya and Douyu is of far-reaching significance to standardize the operation of enterprises, and Tencent, as the leading party in the merger, has received the first administrative ban on "concentration of undertakings" in Internet enterprises, which is the first investment and merger case in the domestic Internet field that has been forcibly stopped by regulators in the past decade.

On November 18, the State Anti-Monopoly Administration was officially listed, which further enriched the anti-monopoly regulatory force and enhanced the authority of supervision.

The "wall demolition" campaign has also been quite effective. In the past ten years, affected by many factors such as shareholder interests, the "camp" of China's Internet platforms has been obvious, and the major camps have blocked links with each other, and they all want to circle content and services in their own "walls", which has greatly curbed the innovation and development of the industry.

On July 26, the Ministry of Industry and Information Technology launched a six-month special rectification action for the Internet industry, proposing to focus on the problems of malicious blocking of URL links and interference with the operation of products or services of other enterprises, including restricting the normal access of other URL links without legitimate reasons and implementing discriminatory blocking measures. On September 9, the relevant departments of the Ministry of Industry and Information Technology held an "Administrative Guidance Meeting on the Issue of Blocking Url Links", requiring that each platform must be unblocked according to the standard within the time limit.

Subsequently, Tencent quickly promoted the connection between WeChat and other products, opening up the external link access function in the chat scene. However, the reporter's test found that at present, the short video of Douyin can only rely on links to share on WeChat; in Baidu search, it is still impossible to search for the content of WeChat public accounts and today's headlines, nor can it search for Taobao's shopping information; Taobao Tmall and Hema still cannot use WeChat payment. It can be said that there is still a long way to go to achieve true "connectivity".

"A series of problems in the Internet field occur frequently, mainly because the industry has been in a state of barbaric growth for a long time, on the one hand, the governance of the competent departments is lacking and the governance failure, on the other hand, the lack of social responsibility of Internet enterprises, blindly subject to the logic of capital to pursue profits, disorderly expansion." Fang Xingdong, chief expert of the Institute of Social Governance of Zhejiang University, told reporters that China's Internet industry must take the road of compliance and can no longer swim under the bottom line.

The focus of capital's exit will shift

In addition to strengthening anti-monopoly and further interconnection, in 2021, China's network information security protection has also taken a solid step. On September 1, the Data Security Law and the Regulations on the Security Protection of Critical Information Infrastructure were officially implemented, and on November 1, the Personal Information Protection Law was officially implemented.

In this context, a number of apps have been removed for "illegal collection of personal information", "forced frequent excessive request for permissions", and "illegal use of personal information". According to data from the China Academy of Information and Communications Technology, as of November, a total of 21 batches of special rectification actions for App infringement of user rights and interests have been carried out, rectification notices have been issued for 5406 apps, 2049 apps have not been rectified in place, and 540 apps that are still problematic have been removed.

There is no doubt that network information security is the foundation of the development of the Internet, but in the legislative process, there are still enterprises that choose to rush to do it.

On June 30, Didi Chuxing was listed in the United States. Before the market on the third trading day after its listing, the Cyber Security Review Office issued an announcement saying that it would carry out a network security review of "Didi Chuxing" and suspend the registration of new users. On July 4, the Cyberspace Administration of China issued a notice on the removal of the "Didi Chuxing" app because of its serious violations of the law and regulations on the collection and use of personal information.

This was followed by a comprehensive rectification of the ride-hailing industry, and the rectification work even affected the non-ride-hailing Internet companies that intended to IPO. On July 10, the Cyberspace Administration of China issued a notice on the Measures for The Review of Network Security (Draft Revision for Solicitation of Comments), which proposed that "operators with more than 1 million users' personal information who go public abroad for listing must apply for network security review to the Cyber Security Review Office."

This means that almost all Internet companies need to declare in advance to go public in the United States. Over the past decade, U.S. stocks have become one of the main channels for IPOs of Chinese Internet companies, including Alibaba, Baidu, JD.com, Pinduoduo, Weilai, Bilibili, etc. all listed in the United States.

On December 3, Didi Chuxing announced that it will start work on delisting on the New York Stock Exchange and start preparations for listing in Hong Kong.

On December 5, the spokesperson of the China Securities Regulatory Commission made it clear in response to a reporter's question that the China Securities Regulatory Commission and relevant regulatory departments have always been open to enterprises choosing overseas listing places, and fully respect enterprises' independent choice of listing places in accordance with laws and regulations. For individual media reports that the Chinese regulatory authorities will prohibit the agreement control (VIE) structure enterprises from going overseas to list, and promote the delisting of Chinese companies listed in the United States, this is a complete misunderstanding and misreading. Some domestic enterprises are actively communicating with domestic and foreign regulators to promote listing in the United States.

Taihe Capital believes that although Chinese enterprises can still make good use of overseas capital markets, the focus of the exit path of capital in the future will gradually shift from abroad to China, and there may be more internal circulation in china's capital market in the future, that is, investment and exit are in China, including A-share and Hong Kong markets.

Performance and valuation have been fully adjusted

In 2021, the Internet industry represented by the head enterprise ATT (Alibaba, Tencent, AndteDance) faced a cold winter, mainly reflected in three aspects: performance decline, valuation shrinkage, and suspension of the expansion of non-core businesses.

The most intuitive thing is the decline in income. In the past six months, ByteDance's domestic advertising revenue has stopped growing, which is the first time that the company has seen such a situation since it began commercialization in 2013; Tencent's adjusted negative net profit growth in the third quarter is the company's first decline in a decade; alibaba's non-GAAP net profit in the second fiscal quarter of fiscal 2022 fell by 39% year-on-year.

In addition to the "platform factory", the leaders of e-commerce, live broadcasting, long and short video and other subdivision industries are not having a good life. In the third quarter of this year, JD.com's net loss was 2.8 billion yuan, operating profit fell by 41% year-on-year; Meituan's adjusted net loss was 5.53 billion yuan; Huya's net profit decreased by 50.1% year-on-year; Douyu's net loss was 144 million yuan, a 7.8% year-on-year decline in revenue; iQiyi's net loss was 1.7 billion yuan; Bilibili's net loss was 1.622 billion yuan; and Kuaishou's adjusted net loss was 4.8 billion yuan.

In this context, Internet companies have "open source and throttling", on the one hand, pressing the pause button for non-core business and short-term unprofitable business, such as invariably shrinking the social track, Tencent shut down the "Friends" App, and ByteDance's "Flying Chat" App has also been discontinued recently. On the other hand, the "optimization tide" has arrived as promised, and recently, iQiyi, Kuaishou, ByteDance, Alibaba and other enterprises have been exposed to optimization plans, of which iQIYI has the widest optimization scope (20%-40%).

The cold wind blows directly to the capital market, and the valuation of Internet companies continues to retrace. As of December 13 this year, many stocks have retraced by more than 50%. Overall, the Hong Kong Hang Seng Technology Index fell by 25.2% during the year, and the US stock CSI Overseas China Internet Index fell by 41.84% in the past year.

For example, iQiyi fell 70.77%, Pinduoduo fell 64.19%, Alibaba fell 46.26%, Baidu fell 30.94%, Bilibili fell 31.02%, Weilai fell 29.71%, and Kuaishou fell 24.57%. Internet companies listed this year are also facing the pressure of breaking, for example, Waterdrop, NetEase Cloud Music, Weibo, Zhihu, etc. have all suffered breaks on the first day of listing.

An Internet industry analyst told the Securities Daily reporter that this year, affected by market uncertainty, the primary market is also more calm, and investment decisions are obviously lagging behind.

Taihe Capital believes that this year, investment institutions are slowly inclined to be priced by the market, and the proportion of each institution's share in a round of financing has begun to average, and there has been a phenomenon of investment becoming "subscribed", which was rare in the past.

SpDB International Research Report said that the performance of the Internet sector this year is weak, mainly due to the fact that, first, the tightening of policy supervision has led to an increase in market risk aversion; second, the Internet sector is hot in 2020, resulting in valuations hitting a record high at the beginning of the year; third, in the context of the weakening of the Internet demographic dividend, the performance growth rate has further slowed down.

How long can the "metaverse" fire?

Despite the controversy surrounding the metaverse, there is no doubt that this is the hottest concept in the Internet industry this year.

As a decentralized on-chain open source ecosystem, the application scenario of metaverse is not only entertainment, but a parallel digital world that can simultaneously socialize, learn, work, and shop on the platform. Roblox's listing prospectus, "the first stock of the metaverse concept", summarizes the eight key characteristics of the metacosmity: identity, friends, immersion, anywhere, diversity, low latency, economy, and civilization.

Since the beginning of this year, Internet giants at home and abroad have laid out meta-universes, of which Facebook is the most radical, which not only changed its name to Meta, but also announced that it hopes to become a meta-universe company in the next five years. In addition, Roblox also went public in March this year, the stock price rose 54.4% on the first trading day, the valuation climbed from $4 billion a year ago to $45 billion, and then Tencent quickly won its China agent qualification.

At the domestic level, in April, ByteDance spent 100 million yuan to invest in the code of meta-universe related game manufacturers, and 4 months later, ByteDance acquired Pico, the leading domestic VR company; Baidu also launched a social app called "Xi'an", which is a power meta-universe.

Under the huge traffic and topic, the "meta-universe concept stocks" have become the object of the market's competition, and the "meta-universe concept" plate covering 75 A-share listed companies has increased by 51% in three months since its establishment on September 7.

The most representative Zhongqingbao posted on September 6 that the company is about to launch a virtual and realistic fantasy linkage of the simulation of the business meta-universe game "Brewing Master". Subsequently, its stock price soared from 8.2 yuan / share, during which the Shenzhen Stock Exchange repeatedly sent letters asking whether to rub hot spots, and Zhongqingbao also admitted that the company's meta-universe business is still in the exploration stage, but this has not stopped the enthusiasm of the secondary market. As of December 13, since Zhongqingbao first mentioned the concept of "meta-universe", its stock price has risen by nearly 365%.

How long can the metaverse still be on fire? It is not yet known.

However, at the recent AI open day held by Baidu, Baidu vice president Ma Jie said, "At present, the metacosm is moving towards the peak of excessive expectations, and in the second half of next year or the year after, I believe that this bubble will burst." ”

Shanghai securities analysts said in the research report that the meta-universe is still in the stage of "weaving stories and drawing blueprints", and ample market imagination space will make the heat continue in the short term, and Internet head companies with game businesses such as Tencent and NetEase will occupy the inherent business advantages. "Some games, as the pioneering field of the metaverse concept, realize the immersive virtual experience of users through VR, but there is still a distance from realizing the metaverse vision, and it is in the very early stages of industrial exploration. This year's re-introduction of the meta-universe is based on technological progress and the market's exploration of the next stage of the Internet, and is also the inevitable result of the development of digital society. As the future form of the Internet, the trend has begun, and the phased landing may gradually change the industry in the future. ”