For mothers, the name of the baby bus may not be unfamiliar, in the stage of the baby's teeth and teeth, the baby bus enlightenment video begins to accompany it, its content not only includes children's songs, behavior habits, etc., but also includes addition and subtraction, English enlightenment, Chinese character learning and other early education content for 3 to 6-year-old children.
Because of this, under the curtain of "double subtraction", there is great uncertainty in the IPO process of Baby Bus. At the end of June last year, Baby Bus's IPO application on the ChiNext Board was accepted by the Shenzhen Stock Exchange, and after updating a version of the prospectus at the end of the year, it is currently in the inquiry stage.
The prospectus shows that baby bus "envelops" a group of small babies and moms and dads with content, but what really brings revenue to baby bus is not these contents, but obtains massive Internet user resources through free content, and then monetizes traffic in the form of advertising.
How to continue to attract small users and the big users behind small users is related to the sustainable profitability of Baby Bus.
How much does "double subtraction" affect?
Baby Bus, which is known to serve 500 million household users around the world, mainly targets children aged 0 to 8 and their parents as the main target users, and has created IP images such as "Strange", "Wonderful", "Super Baby JoJo", "Monkey Sheriff" and so on.
According to the prospectus: Baby Bus intends to publicly issue no more than 41 million shares, and the expected financing amount is 1.84805 billion yuan, which will be used for animation product research and development projects, APP product research and development upgrade projects, children's story research and upgrading projects, kindergarten shell research and development projects, derivatives industrialization and its supporting projects, operation system upgrade projects, big data analysis system upgrade projects, Fuzhou R&D center projects, and the sponsoring institution is CITIC Construction Investment Securities.
At present, the Baby Bus APP has achieved multi-scenario coverage in smart terminals such as mobile phones, PADs, smart cars, and smart speakers, and the global average MAU (monthly active users) from January to June 2021 is 93.5927 million.
Baby Bus was established on June 5, 2009, funded by Tang Guangyu, and the legal representative is Tang Guangyu, however, at the time of its initial establishment, considering the restrictions on the one-person limited company to continue to set up subsidiaries, Tang Guangyu had entrusted Lu Xueming to hold 5% of the equity, and after 2012, it had built a red-chip structure and issued preferred shares overseas, and dismantled the red-chip structure before changing the joint-stock company.
In December 2020, Baby Bus was changed to a joint-stock company, and it is worth noting that from 2018 to before the change of shareholders, baby bus's equity changes frequently, and in 3 years, the issuer's share capital and shareholders changed 12 times, mainly for the equity held by the former foreign shareholders to be mirrored and reflected in China.
On the road to the IPO of Baby Bus, the biggest uncertainty faced is the depth of the "double subtraction".
Last year, Baby Bus filed 6 education apps with the Fujian Provincial Department of Education, involving mathematics, English and other education fields, and then took the initiative to apply for removal of related products.
According to relevant policies, it is necessary to make overall plans for the governance of off-campus training for preschool children aged 3 to 6 and ordinary high school students, and must not carry out online training for preschool children, and it is strictly forbidden to carry out offline subject (including foreign language) training for preschool children in the name of preschool classes, early childhood bridging classes, thinking training classes, etc.
On February 16, the Beijing Municipal Commission of Education issued the Notice on Further Improving the Filing and Management of Educational Mobile Internet Applications (Draft for Solicitation of Comments) (hereinafter referred to as the Draft for Comments), which proposes that all educational mobile applications for the training of preschool children will be discontinued.
In order to avoid the suspicion of "education", Baby Bus also positioned it as a child's enlightenment in the prospectus.
The traffic anxiety behind the revenue model
From the perspective of revenue model, Baby Bus mainly provides users with enlightenment audio and video, APP in a free way, and the resulting Internet user resources, and then realizes traffic monetization by connecting the APP to advertising network customers (Baidu, Google, etc.) for cooperation and promotion, and authorizing audio and video to third-party network audio and video media to obtain authorization shares.
During the reporting period (2018-2021, the same below), the operating income was 254 million yuan, 526 million yuan, 649 million yuan and 395 million yuan, and the net profit was 111 million yuan, 268 million yuan, 261 million yuan and 133 million yuan.
Baby Bus's main business income is mainly divided into three categories: APP cooperation promotion income, audio and video licensing revenue, and other income, of which APP cooperation promotion revenue accounts for about 60% to 70%.
During the reporting period, baby bus operating income from the top five customers accounted for about 90%, customer concentration is high, the main customers include Baidu, Google and other advertising alliances, in 2019, 2020, baby bus from Baidu operating income accounted for 57.12%, 50.74%, 2018 nearly 50%.
During the reporting period, baby bus's period expenses (sales expenses, management expenses, research and development expenses and financial expenses) were 122 million yuan, 212 million yuan, 350 million yuan and 223 million yuan, accounting for 48.03%, 40.28%, 53.89% and 56.57% of the operating income, respectively, and the amount of expenses in each period increased year by year.
During the period of expenses, sales expenses accounted for the "big head", with the expansion of business scale, the proportion of sales expenses is also increasing, and sales expenses, mainly business promotion costs, that is, advertising expenditure in the APP application market.
In this regard, Baby Bus said that the rapid increase in business promotion fees is mainly due to the continuous expansion of business scale and the increasing number of products, the company's advertising in the APP application market has increased; in 2019, it has increased its promotion efforts in today's headlines, OPPO and other channels, and in 2020, it has increased its promotion efforts in application markets such as Huawei, vivo and OPPO.
In addition, the gross profit margin of baby bus is extremely high, comparable to Guizhou Moutai, the prospectus shows that during the reporting period, the gross profit margin of the company's main business was 94.76%, 96.55%, 95.24%, 92.71%, and the gross profit margin performance could even squeeze into the top ten in the A-share market (excluding the financial industry).
Baby Bus said that due to the company's continuous development and production of new products and the need to promote them, it generally presents the characteristics of low cost rate and high period expense rate, which is consistent with the company's own business characteristics and business model.
Behind the continuous push for new, is the traffic anxiety of the baby bus, traffic is the basis of its survival, only to maintain traffic, always maintain customer stickiness, there is a basis for monetization.
Therefore, on the one hand, Baby Bus promotes by increasing advertising efforts, on the other hand, it increases the research and development of new products and launches more content. The prospectus shows that during the reporting period, its R&D investment accounted for more than 20% of its operating income.
There are still overseas lawsuits
In addition, it is worth noting that in August 2021, BabyBus Network, a subsidiary of BabyBus, was sued by Moonbug Entertainment Limited and Treasure Studio, Inc. in the U.S. District Court for the Northern District of California, alleging that the "Super JoJo" image and related videos intentionally infringed their intellectual property rights.
Baby Bus said that the "Super JoJo" image and major works are independently created by the company and launched in 2019, and its image can be traced back to the 2D version of the character cartoon image "Doudou" created and launched by the company in 2016. The company's "SuperJoJo" is relatively delicate and compact in terms of bones and facial features, which is the image of an oriental boy, which is quite different from the plaintiff's "JJ" European and American style, and the image features claimed by the plaintiff are the common settings of the cartoon image of young children, which have appeared in large quantities before the plaintiff used it.
At present, the litigation case is still in the trial stage, Baby Bus has submitted a reply and filed a counterclaim, but if the lawsuit is lost, Baby Bus may no longer be able to use the "Super JoJo" image and face compensation to the plaintiff, which may have a certain adverse impact on the issuer.
Baby Bus also said in the prospectus that there are a small number of links in the research and development process that need to use the copyright of others, and the company has established a set of copyright management processes to obtain the permission of the right holder before using it as much as possible. The Company has taken a series of measures to avoid infringement of the relevant rights and interests of copyright owners, but does not exclude the possibility of third parties accusing the Company of infringing its intellectual property rights, thereby adversely affecting the Company.