In June 2021, more than 75% of Weibo's identified monthly active users belong to Generation Z, will Weibo's second growth curve come due to Generation Z?
Wen 丨 BT Finance Speech
On December 8, Weibo officially landed on the Hong Kong Stock Exchange, with an issue price of HK$272.8 per share, opening at HK$256.2, down 6.09%. As of the close of the day, Weibo was quoted at HK$253.4/share, down more than 7%, with a total market value of HK$59.446 billion.
This is the first time that Cao Guowei has sent Weibo to the IPO bell ringing site, more than 7 years after it was listed on the NASDAQ in April 2014.
However, it is difficult to show the glory of the year. This time to go public in Hong Kong, the first day of the opening of the market broke, can not help but feel that a layer of haze.
From the rise of WeChat and Douyin, Weibo's advertising revenue has been greatly affected, and now, the market value of rising stars such as B Station and Little Red Book has also exceeded Weibo. On this occasion, Weibo went to Hong Kong for the second listing, as a 12-year-old "elderly" Internet company, what different stories can it tell for the capital market?
Is the strategy of raising prices and protecting profits still work?
In 2009, Sina Weibo was founded, and the Weibo market began to compete with the deer.
In 2011, Sina, NetEase, Tencent and Sohu stood on the Weibo market, and finally Sina Weibo broke out after the battle, and the word "Weibo" changed from a social media category to Sina exclusive. In April 2014, Weibo was listed on the NASDAQ, but for the Internet industry at that time, monetization had been a problem, and it was not until the fourth quarter of the same year that Weibo reversed its losses.
Although Weibo does remain profitable and maintains a large user base: as of June 2021, Weibo has 566 million monthly active users and 246 million daily active users, this does not mean that Weibo's profitability is strong, on the contrary, Weibo's profitability is declining.
(Source: Sino-Thai International Research Department)
From 2018 to 2020, Weibo's revenue was $1.719 billion, $1.767 billion and $1.69 billion, respectively, and the decline in revenue under the impact of the epidemic in 2020 is force majeure, which most investors have expected. Unaudited revenue in the first three quarters of 2021 was about $1.6 billion, and the sum of the three quarterly revenues was close to the annual revenue of previous years, which seemed to be developing in a good direction, but there was a very important problem, and the revenue growth in the past three years was relatively slow.
If you look at the profit, the situation is even less optimistic, Weibo's profits in 2018, 2019 and 2020 were 609.3 million US dollars, 597.6 million US dollars and 506.8 million US dollars, respectively, the profit is still declining, and the profit in 2021 is slightly improved, and the profit in the first half of the year is 301.8 million US dollars. Considering that Weibo is in the near-mature social media field after all, the slowdown is understandable, but the decline in earnings does illustrate some problems.
Weibo's revenue is mainly derived from advertising revenue, and the revenue from advertising and marketing services accounts for nearly 90% of total revenue, 88% in 2020 and 86% in the first half of 2021. With such a heavy proportion of advertising revenue, the number of advertisers has naturally become a very concerned indicator for investors.
The number of advertisers in 2018 was the highest in the past four years, with 2.4 million and 1.6 million advertisers in 2019 and 2020, respectively. The number of advertisers as of the first half of 2021 was 600,000, a sharp drop of half from 1.2 million in the same period last year.
Weibo's prospectus mentioned that "it is mainly due to the loss of small and medium-sized enterprise customers and individual customers." "The main reason for the loss of advertisers is that in addition to the fact that some small and medium-sized micro and small enterprises have not survived the long epidemic, the other is because the average expenditure of each advertiser has increased from $470 to $825, raising the threshold of 75% to keep some small businesses with insufficient budgets out of the door." This year's ad spending soared again to $1,379, leading to a further sharp decline in advertisers.
(Source: Weibo Prospectus)
In the past three years, the number of Weibo users has indeed increased, but the growth trend has slowed down significantly, and revenue and profit have not been able to grow with it. Weibo has taken the way of raising prices to ensure profits, and the price paid is the loss of customers, which is not a long-term solution, just like quenching thirst. Moreover, with the passage of time, the platform competition in the traffic era will become more serious.
Under supervision, the growth rate may further slow down
China's Internet traffic competition is fierce, and the social media field under strong supervision is more carefully differentiated, such as WeChat heavy social networking, Douyin heavy entertainment, and Weibo existing in the form of blog forums, which has led to advertisers' choices becoming more diverse and targeted.
When advertisers choose a platform to place ads for marketing, they usually choose a model that can accurately reach such users based on the user's portrait, while considering many factors such as interaction, the form of advertising and pricing. At this time, platforms with a large number of active users, a wide range of people, strong marketing capabilities, and large influences have more competitive advantages.
As of June 2021, the monthly active users ranking of Chinese social platforms are: WeChat 1.25 billion, Douyin 650 million, QQ 590 million and Weibo 566 million. At the same time, the use time of Internet users has been maintained at about 4.8 hours for 4 consecutive years, and the user dividend has been exhausted, and everyone is fighting for this limited time. In the past two years, the Small Red Book and B Station have gradually participated in the competition.
The macro environment is not friendly to social media platforms, in view of the industry's significant impact on social atmosphere and public opinion, the relevant departments have also adopted strict regulatory measures, including restrictions on customer advertising in the financial, education and other industries, the rectification of open-screen advertising, especially the supervision of the fan culture of the entertainment industry is more stringent, in summary, it is expected that the future living space of China's Internet advertising industry will be further compressed.
Since Weibo can operate in this field for 12 years, it must also have a unique place. How to make good use of weibo's competitive advantages, deepen content in the field, diversify development, open up monetization channels, and optimize profitability are more concerned by investors.
Is Gen Z users the antidote to growth?
Thanks to the diversified content, especially in the field of video, the influence of Weibo's post-90s user group has not been weakened. In June 2021, more than 75% of Weibo's identified monthly active users belonged to Gen Z, the generation born in 1990 or later.
(Source: Weibo Prospectus Notes)
Weibo focuses on fashion and beauty, games, sports and other fields, which are also loved by young users. Weibo disclosed in the three quarterly reports that it will vigorously develop the e-sports industry, form teams and hold events, lay out upstream and downstream in the game field, and promote the commercialization of games.
Weibo video accounts have also grown rapidly, with more than 10 million content creators participating in the Weibo Video Account Program as of June 30, 2021. At the same time, Weibo strengthens the effective dissemination of video content in information push and video communities to promote video content consumption, promote user participation and improve the platform's video content ecosystem.
Weibo has a large number of users, with a comprehensive content theme and content creator, covering 46 vertical fields such as celebrities, entertainment stars, variety shows, media, finance, games, beauty, fashion, etc., of which 28 areas have more than 10 billion views in the average monthly view statistics in June 2021. From June 2019 to June 2021, Weibo's average daily video users grew at a compound annual growth rate of 20%.
Weibo is the most social social media platform in China, touching all walks of life in front of users. Weibo's users include ordinary people, celebrities, celebrities, media, enterprises, government agencies, public welfare organizations, etc., making it a microcosm of Chinese society.
In June 2021, the number of top content creators with more than 10,000 followers or views reached 2.3 million, compared with the same period in 2019, with a compound annual growth rate of 24%. It is precisely because of this social nature of Weibo, its influence on the public and public opinion is more than other platforms, such attributes have advantages and disadvantages, Weibo plays a social role such as publicity, guidance, and notification, and is not easy to be replaced; at the same time, it will also face stricter supervision by the government and society.
Weibo's 2021 production and research content focuses on business compliance, ensuring the legal compliance of content and increasing production and research costs. The key directions of the compliance audit cover: rice circle governance, governance with Qinglang action, and juvenile protection. Handle illegal microblogs, groups, news, and malicious marketing accounts in large quantities.
New content and vertical content is the future?
The institutional view of Weibo is generally neutral, the user structure is its advantage, and the strategic layout is also forward-looking, but the current problems also exist objectively, and Weibo's revenue growth faces macro resistance and competitive pressure.
Huatai Research Institute expects the outlook for advertising demand to be relatively modest next year, but platform competition is becoming increasingly fierce, and budget growth in key advertising categories such as FMCG and e-commerce has slowed. At the same time, due to the decay of the low base effect, the revenue growth of value-added services is expected to slow down.
In an environment where the government strictly regulates entertainment culture, users' attention to and participation in hot news and content in the entertainment industry will inevitably decrease. In order to cope with the current environment, Weibo management will increase its investment in the development of new content and in the vertical content field.
Weibo's current advantage lies in the retention and acquisition of users, and precise delivery and marketing reduce the cost of customer acquisition. The advantages should be fully developed and utilized, and Weibo's future business focus should be on user acquisition, product research and development, and video content.
At present, the cost of video content is also gradually increasing, mainly content costs and bandwidth costs. The current video content creation is more large-scale, industrialized, team-oriented, while fierce competition, often require a team to use more than half a year to incubate, and Weibo video number started relatively late, only launched in July 2020, in order to occupy a seat in the field of video content, enough influence, must increase investment.
Overall, the operation of video content is bound to compress the current gross profit margin of Weibo, but in order to continue to ensure the attractiveness of Weibo content to young users, video content must increase efforts to invest and operate. Today's strategic investments are for better monetization in the future.
The post-90s generation has gradually become the main force of social construction and consumption, and the power period of the entire Z generation user group has just begun. Weibo's current user structure with Generation Z users as the absolute main body means that Weibo still has a long period of development, provided that Weibo can continue to maintain user stickiness and attractiveness to new users.
In addition, industry competition and macro pressure is also the biggest disadvantage facing Weibo at present, at any time to be prepared for intensified competition and macroeconomic obstruction, Weibo must be based on the present, steady and steady, the prospects can be expected but also have a long way to go!
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