Text | Zhijin Finance, author l Dazhao
China's computer software industry once had a famous enterprise, its name is Jinshan, the software it produces, accompanied by the growth of a generation.
Kingsoft Painting King, Kingsoft Poison Bully, Kingsoft WordMaster, Kingsoft Quick Translation, WPS these products are all household names, and even installed must-haves.
In the hotbed of Jinshan, a group of Chinese Internet tycoons have also been cultivated, and the Jianghu people call the "Jinshan system".
Lei Jun, founder of Xiaomi Group, Fu Sheng, CEO of Cheetah Mobile, Feng Xin, CEO of Storm Group, Wang Feng, founder of Blueport Interactive, Chen Rui, CEO of Bilibili, Wang Tao, CEO of Ping An Good Doctor, Zou Tao, chairman of the board of directors of Kingsoft Cloud, Zhang Qingyuan, director of Kingsoft Office, Guo Weiwei, vice president of Xishanju, and Jiang Tao, founder of CSDN, are inextricably linked to Kingsoft.
But in the past 2021, Kingsoft's life has not been good. In February 2021, Kingsoft's stock price briefly touched a 79.30 yuan high, a record high, but then began to fall slowly, and by the close of December 31, the stock price was only 34.25 yuan, and it was tragically "cut off" during the year.
At present, the consolidated business of listed company Kingsoft mainly comes from Kingsoft Office and Xishanju (listed companies hold 52.7% and 72% of the shares respectively), which are engaged in the two main businesses of office software (represented by WPS) and games (represented by IP-related products of "Sword Man Love").
Kingsoft also has two important related companies, Cheetah Mobile and Kingsoft Cloud, because the two are no longer combined, here is not to talk about it.
As of the 2021 mid-year report, the revenue of office software and entertainment services accounted for 51.24% and 48.76% respectively, which was almost a five-to-five situation. Let's analyze how Kingsoft balances the relationship between office and entertainment from the perspective of main business.
"Internet" like office software
According to the company's official website classification: its office software business mainly includes WPS, cloud office, other products and skill templates: WPS is the core product, basically covering all systems of PC and mobile terminals, including Windows, Mac, Linux and mobile Android, iOS.
Cloud office focuses on online collaboration, including Kingsoft documents co-edited by many people, Kingsoft calendar with collaborative schedules, Kingsoft conferences, remote conferencing software Kingsoft Conference, and Kingsoft digital office platform that helps enterprises digitize as a whole.
Other products are some weakly associated office software, including PDF, picture browser, Kingsoft Typing Pass to learn typing, translation software Kingsoft Wordmaster and so on.
From a product point of view: WPS has always been facing individual users with an Internet mindset, adopting the model of "free use of drainage + advertising/subscription monetization". Individual users download and use WPS for free, and monetization mainly comes from advertising (charging advertisers according to CPS, CPT, CPA and other billing methods), subscriptions (various membership services), and other value-added services (boutique membership classes, audiobooks, etc.).
WPS adopts the "software charging + service subscription" model for government and enterprise customers, and provides three different charging methods according to the scale and needs of customers: quantity authorization (charged according to volume), venue authorization (unlimited number of limited time and place), and service subscription (framework subscription service).
At present, the revenue of the "subscription + licensing" model has reached 88%.
According to the data of Kingsoft and Kingsoft Office, the cumulative number of paid members of its office software reached 21.88 million in 2021Q2, and the corresponding cumulative payment rate increased to 4.4%, compared with 8.47 million in 2019Q2, with an average annual compound growth rate of 60%.
The number of uploaded files in the cloud increased to 118.9 billion in 2021Q3, an increase of 32% year-on-year, and the continuous high growth rate reflects the deepening of user use and the increase in stickiness.
On the other hand, WPS cloud charging is more moderately priced.
Free users can enjoy WPS cloud service 1G space, WPS members can be expanded to 100G, the annual fee of 180 yuan; in contrast, if Microsoft Office users want to use cloud services, directly purchase a single version of the annual fee of 398 yuan to get 1T space, if you can get 6 people, buy the home version of the minimum per capita of 83 yuan, but considering that the software price of the body is still much higher than WPS, so WPS is more attractive to price-sensitive users.
As of 2021Q3, the number of monthly active users of the company's office software products has reached 521 million, an increase of 14% year-on-year, compared with 203 million in Q3 2016, with an average annual compound growth rate of 20%.
At the same time, the mobile version of WPS has long been ranked top2 in the free list of iOS efficiency applications (second only to Baidu network disk), and as of 2021Q3, it has had 311 million monthly active users, an increase of 13.5% year-on-year, and in the past five quarters, it can still maintain a stable growth rate of 7%-15% year-on-year.
With the improvement of domestic copyright protection laws and regulations and the increase in consumers' willingness to pay, WPS-related income is expected to further increase; while the demand for cloud office under the epidemic situation increases, and the user stickiness of Kingsoft-related office products is also expected to increase.
From the performance data, in the past five years, the average growth rate of the company's operating income is nearly 6%, and the average year-on-year growth rate of net profit attributable to the mother is more than 250%, maintaining a high-speed growth trend.
As of December 30, 2021, Kingsoft office market value exceeded 120 billion yuan, PE (TTM) up to 107 times, has been highly recognized by the capital market.
How long can the game be red
In most people's impressions, mentioning Kingsoft will only think of WPS, but in fact, for many years, kingsoft's revenue has always been supported by online games.
Kingsoft's software game business is mainly based on the IP of "Sword Man Love".
The company's "Sword Man Love" released in 1997 is one of the earliest martial arts RPG games in China, and together with the "Xuanyuan Sword" series and the "Legend of the Paladin Sword" series, it is called "Domestic Three Swords", which is widely recognized in the domestic gamer group. The follow-up development of Kingsoft's "Swordsman Love 2" and "Swordsman Love Story: Legend of the Moon Shadow" have achieved sales of 200,000 sets and 150,000 sets respectively, considering the flood of piracy that year, the entire "Sword Man Love" series of stand-alone games has more than 7 million players.
After entering 2000, the domestic online game market gradually opened, and the company also pushed the "Sword Man Love" series to the computer-side online game, of which the "Sword Net" trilogy was the most successful, and the key to the successful transformation of the company's works from a stand-alone online game and sustained success was a large investment in research and development.
For example, "Sword Net 1" was launched in 2003, investing 15 million yuan for development; "Sword Net 2" added the latest PK gameplay and live-action capture technology;
2009's "Sword Net 3" abandoned the 2.5D picture and launched a free-viewing MMO based on a self-developed 3D engine. In the 12 years since the launch of Sword Net 3, the product has launched 30 expansion packs, an average of 2.5 per year, providing full playability.
However, at present, in the domestic game market, Tencent and NetEase are two big mountains, and the head effect is obvious.
According to Analysys analysis data, Tencent and NetEase ranked one or two of China's top 20 companies in the first half of 2021, and Kingsoft ranked 16th, with a huge disparity in status.
Secondly, Kingsoft, which is good at terminal games, has missed the dividends of mobile games in the development environment of mobile Internet in these years, and has not yet appeared a hit of mobile games. Year-on-year, Tencent's "Peace Elite", "Glory of the King", NetEase's "Yin and Yang Division", Mihayou's "Original God", etc., harvested a large amount of traffic and dividends for the company.
What is clear is that Kingsoft is not unaware of the mobile game market.
According to previous disclosures, it has released the shooter game "BulletAngel" in Thailand and Vietnam; at the same time, the "Sword Net 1 Pocket Edition" ported to the style of the terminal game "Sword Net 1" was first released in Vietnam, and it rushed to the top of the iOS and Android store list on the same day.
On December 29 last year, the new "Swordsman" IP mobile game "Swordman World 3" was launched, and the first day of performance was eye-catching. As of the 24th a.m. on the iOS side, it has firmly topped the free list, with more than 360,000 downloads, and the best-seller list has also rushed into the top ten.
However, the Swordsman series IP has a history of more than 20 years, after the rise of players dominated by the Z generation, this IP will inevitably face the problem of IP aging, in response to this problem, Lei Jun, chairman of the board of directors of Kingsoft, mentioned that "the future will increase the research and development of new categories of games."
At present, the reserve products of Xishanju can also reflect the company's attempts in different directions:
For example, "Bipolar" is a public welfare free game, which is a student product incubated by Xishanju SEED Lab, focusing on bipolar disorder, and has won many awards at home and abroad in 21 years.
Other research projects that have been disclosed since 2020 are also more diverse, "Codename: Cats" is a healing system, "Codename: Cast Star" is a science fiction style, and "CODE B.R.E.A.K" is a reference to the Japanese mecha theme.
On the whole, Kingsoft's game is still suspected of "eating the old book", although the swordsman IP can still use the feelings to absorb gold, but the risk is also huge, after all, the player's taste changes all the time. Coupled with the implementation of the game version regulations, how to balance the relationship between office and entertainment will become a problem that management needs to think about.
summary
Today, the starting point of Kingsoft is generally considered to be 1988, when Qiu Bojun joined Kingsoft in Hong Kong, developed WPS, and established kingsoft Shenzhen development department. The company has spanned more than 30 years and can be said to have witnessed the development of China's software and Internet industry.
In the capital market, Kingsoft has gained a lot in the past two years.
In 2019, Kingsoft Office relied on the WPS suite to list on A-shares, with a market value of more than 110 billion yuan as of january 14. Kingsoft Cloud also successfully went public in the United States in early May 2020, with a closing market value of nearly 3 billion US dollars on the 14th, converting rmb into a company with a market value of nearly 20 billion.
From PC to mobile phone, from software to APP, users have witnessed the changes in Kingsoft, but also seen the progress and shortcomings of this enterprise, during the period, some people left and some people gave up, those "San Francisco" scattered with stars (Kingsoft's departing employee group named "San Francisco"), many people have supported another piece of Internet sky.
There is a saying on the Internet called "when people reach middle age, they are not outstanding, and they are out." Jinshan, who is now nearly 34 years old, does not know whether it will encounter the so-called "35-year-old crisis"; in the face of the benefits brought by the epidemic to the cloud office and the harsh requirements of young players for games, 2022 is particularly important for Kingsoft.
Resources:
Guojin Securities: "WPS has a broad space for growth, and "Swordsman" IP builds the cornerstone of performance"
Soochow Securities: Kingsoft 21Q3 Quarterly Report Review: Office Continues to Grow Strongly, Optimistic About New Travel's Contribution to Increase Next Year