Himalaya lost 2.4 billion yuan in three and a half years, sitting on 262 million monthly active users Why is it difficult to make money?

The author | Pan

Edit | Duke

The source | Titanium Finance

Previously, the Himalayas of the audio track often used "there is no capital pressure, and no one is forcing the listing" to respond to the listing rumors.

However, this is not the case anymore.

Just a few months after the US stock listing was blocked, Himalaya rushed to the Hong Kong Stock Exchange non-stop, which shows its eagerness to seek financing for listing.

According to public information, since its establishment in 2012, Himalaya has undergone 9 rounds of financing, and many giants such as Tencent, Yuwen, Xiaomi, Baidu, and Sony Music have been its strategic investors.

Although the capital continues to favor and the business is getting bigger and bigger, Himalaya is still facing a loss situation, and the listing to seek financing has become a key battle for it.

The current state of the Himalayas

Although the launch bell is a little late, at the audio track, Himalaya's position is still very important, and the listing process has been in the spotlight.

According to the prospectus, in the first half of 2021, Himalaya's monthly active users reached 260 million users, an increase of 25.7% year-on-year, ranking first among domestic online audio platforms.

Himalaya's revenue structure is mainly composed of five parts, namely membership subscription revenue, advertising revenue, live broadcast revenue, education service revenue and other innovative products and services, of which subscription business and advertising business are the company's most important sources of revenue.

According to the data, in the first half of 2021, Himalaya achieved revenue of 2.51 billion yuan, an increase of 55% compared with 1.62 billion yuan in the same period of 2020. Among them, subscription payment contributed more than 1.37 billion yuan, accounting for 54.6%; advertising contributed more than 600 million yuan, accounting for 24.5%, and the two revenues together contributed nearly 80% of revenue.

Among them, among the subscription paid mobile phone users, the payment rate is 12.8%, although it is significantly higher than 2.7% in 2018, but the user's payment rate is not very high compared with video streaming.

It is worth mentioning that most of Himalaya's users come from mobile phones (111 million), while IoT (Internet of Things) and other third-party platforms have 151 million monthly active users, including in-vehicle devices, smart speakers, etc.

Some voices believe that this reflects the current market characteristics of audio content: the diversification of consumption scenarios. Compared with other content such as videos and games, the "companion attribute" of audio is stronger and has more application scenarios.

Himalaya also mentioned in the prospectus that audio and the Internet of Things are the "golden partner", smart wearable devices, in-vehicle devices, etc. can be used as its content carrier, and from the perspective of future development to demonstrate the possibility of audio, even if the future mobile terminal traffic reaches the "ceiling", Himalaya can also further achieve growth with the Internet of Things.

However, at present, Himalaya's users on IoT platforms such as smart speakers have not yet generated significant revenue.

Profitability is still difficult

Despite being in the first echelon of online audio, Himalaya still can't get around the loss.

According to the prospectus, in 2018, 2019, 2020 and the first half of 2021, Himalaya lost 755 million yuan, 747 million yuan, 539 million yuan and 324 million yuan respectively, with a total loss of nearly 2.4 billion yuan in three and a half years.

In the first half of 2021, Himalaya's sales and marketing expenses soared, with a total amount of 1.233 billion yuan, an increase of 95% year-on-year, accounting for 49.1% of the total revenue.

According to the prospectus, sales and marketing expenses are mainly used for channel promotion, brand promotion and advertising, as well as commissions paid to distributors and other platforms. Himalaya also said that in the future, it plans to carry out more marketing and promotion activities to attract users and advertisers, increase brand awareness and content penetration, and continue to increase sales and marketing expenses.

In addition to marketing expenses, Himalayas' operating costs are also high, mainly based on content creator sharing and copyright fees.

According to its prospectus, the revenue share paid by Himalaya to content creators and signatories in 2020 reached 1.293 billion yuan, accounting for about 31.7% of the total revenue.

In terms of copyright purchase expenses, Himalaya signed contracts with more than 140 publishers, and also cooperated with content production teams such as Deyunshe, Wu Xiaobo, Yu Qiuyu, etc. In 2020, the company's content cost of purchasing copyrights was 255 million yuan, accounting for 6.3% of the total revenue.

Overall, in order to enhance brand influence and user stickiness, Himalaya continues to spend a lot of money in channel promotion fees, brand promotion and advertising; at the same time, in order to have continuous high-quality content and enhance users' paid conversions, Himalaya's operating costs will remain high for a long time. In the future, Himalaya will continue to invest more money, but whether more users are willing to pay for it and realize the positive cycle of corporate income and expenditure is the key problem facing Himalaya today.

The dilemma of the ear economy

Although the audio industry has received market attention in recent years, because the audio is not intuitive enough and not impactful enough, the penetration rate of the audio industry is much lower than that of the video industry. At present, the overall penetration rate of online audio in china's streaming media industry is only 16.1%, and the video industry has reached more than 70%.

At the same time, China's user paid education is late, and even if it is a long video streaming platform, its user payment rate is less than 25%, and it is difficult to break through. For less "impactful" online audio, its user-paying ceiling or lower.

In the eyes of industry insiders, the dilemma faced by audio is very similar to that of music streaming, with a single income, a low C-end payment rate, and user payment habits have not yet been formed.

Specifically, the difference in the product model of the audio market can be analogous to the difference between Youaiteng and B station, the content of B station is mainly network PGC, and the content production cost is low; the content of Youaiteng is mainly purchased, the production cost is too high, and it belongs to the network of satellite TV; the content base of overseas audio platform Soundcloud and Spotify is also online, the cost is lower, and the profitability is stronger.

In addition, this business is not profitable, from a shallow point of view, because of the cost of content and marketing, but the real reason is that the products offered by the Himalayas are neither just needed, nor addictive and scarce.

Himalaya's prospectus cites 24-hour all-day coverage as one of the advantages of online audio, which is not accurate. Online audio, music, video, and games are essentially competing for up to eight hours of leisure time outside of work and sleep.

Compared with other entertainment methods, the stickiness of audio to keep users staying is not high.

Short videos have the magic of constantly making you laugh, long videos have variety shows and good dramas, and there are virtual magic worlds in games, all of which are more stimulating dopamine than listening to books, which is why the penetration rate of videos has always been higher than that of the online audio industry.

Of course, audio also has an incomparable advantage, that is, it can free hands and eyes, and it will be more popular in scenes such as driving, doing housework, and taking the subway. But the overlap between this fragmented scene and online music can be said to be 100%, so the Opponents of the Himalayas, in addition to dragonflies, lychees, penguins, lazy people listening to books, etc. on the same track, there are also online music platforms that compete for users' ears.

Overall, with 262 million monthly active users, Himalaya is at the "pinnacle" of the online audio track. However, compared with the current more popular short videos, the audio field is still niche, and the commercialization model is relatively single, how to play more new tricks of the "ear economy"? The Himalayas still need to think.