Long videos are no longer "in-volume", and iQiyi is expected to break even in 2022

On March 1, 2022, iQIYI announced its financial results for the fourth quarter and full year ended 2021. According to the financial report, iQIYI's total revenue in fiscal 2021 was 30.6 billion yuan (RMB, the same below), an increase of 3% year-on-year, of which the fourth quarter revenue was 7.4 billion yuan.

Based on non-GAAP, iQIYI's annual operating loss was 3 billion yuan, and the operating loss ratio narrowed from 15% in the same period of the previous year to 10%, of which the operating loss in the fourth quarter was 520 million yuan, and the operating loss ratio narrowed sharply from 13% in the same period of the previous year to 7%.

"Starting from the fourth quarter of 2021, we have taken a series of measures to reduce costs and increase efficiency and optimize the organizational structure, and the company's operational efficiency and return on investment have been significantly improved, with the goal of achieving breakeven at the non-GAAP operational level by 2022 and achieving breakeven at the quarterly non-GAAP operational level as soon as possible." Gong Yu, founder and CEO of iQIYI, said.

As of the close of U.S. stocks on March 2, iQiyi closed up 21.50%, and the stock price rose nearly 40% at one point.

iQIYI's Q4 and full-year operations will reduce losses, and the goal will be to achieve breakeven in 2022

The main highlight of this financial report is that iQiyi's operating losses in the whole year of 2021 and the fourth quarter have narrowed to varying degrees. At the earnings report, Gong Yu explained the issue. He said the company has taken measures to open source and reduce costs.

In terms of throttling, that is, reducing costs and expenses, iQIYI first optimized its organizational structure. In addition to reducing costs, this optimization of the organizational structure will also improve efficiency and make the organizational structure more flat, which is one of the most important measures.

Second, in terms of content at maximum cost. iQIYI will carry out refined operation and selection, and let it get more benefits through publicity under the premise that the head content will not be reduced. At the same time, iQIYI strictly controls the content that does not have a good broadcast effect, reduces procurement, and improves the level of content production.

Third, iQIYI will strengthen the operational promotion of content-related film library content and long-tail content, and generate more value to increase advertising inventory or membership revenue.

Finally, Gong Yu hopes that the platform will improve the industrialization of film and television production, improve efficiency, reduce costs through technical means, and increase the predictability of the future broadcast effect of the project. This is also iQIYI's medium- and long-term goal.

Gong Yu mentioned that we hope that shareholders can notice that iQiyi has taken the lead in opening a new stage in China's long video industry. Market competition has changed from simply pursuing quantity to focusing on quality, and the focus of operation has changed from seizing market share to improving operational efficiency, which has become the consensus of industry leaders including iQIYI.

Based on this, iQIYI also announced the next phase of the goal: "Our goal is to achieve the full year 2022 non-GAAP operation profitability, and as soon as possible to achieve the profitability of single-quarter non-GAAP operation." Wang Jun, CFO of iQiyi, said.

High-quality content drives member revenue, and iQIYI's monthly average monthly single member income increased by 14% year-on-year

In the fourth quarter of 2021, membership revenue continued to play a pillar role. In the fourth quarter, membership revenue was 4.1 billion yuan, accounting for more than 55% of the total revenue.

At the same time, iQIYI released its monthly average single member income (ARM) data for the first time, and in the fourth quarter, the average monthly single member income was 14.16 yuan, an increase of 14% year-on-year.

Gong Yu said that the core strategy of iQIYI's membership business mainly focuses on three directions: increasing the average single member income, that is, ARM; improving the retention rate of paid members; and continuing to promote new activities.

It can be seen that users will still pay for good content, and good content and models can drive positive business value.

In the fourth quarter, iQIYI launched the second season of The Mist Theater, and the influence of vertical content brands represented by theater has been expanding, becoming an important source of iQIYI's membership income and advertising revenue.

Gong Yu mentioned at the earnings report that the monetization ability of the Mist Theater series has become an important growth driver for member services, and "Who is the Murderer" has become the highest member income content among all the episodes of the Mist Theater. The success of the theatrical model has further increased advertising revenue and increased flexibility in working with advertisers, doubling the advertising revenue of the second season of Mist Theater compared to 2021.

While improving the efficiency of content investment and operation, iQIYI has ensured the new quantity of content and the quality of works. According to Yunhe data, in 2021, iQIYI ranks first in the market share in the fields of movies, dramas, variety shows, children' and animation, and the number of new dramas will rank first in the industry. Popular content including "Son-in-law", "Little Shed", "Ideal City", "Mist Theater", "Wind Rises luoyang", "Annual Comedy Competition" and other popular content are loved by the audience.

Speaking of future content planning, Gong Yu said that iQIYI will continue to enrich and enhance diversified content, improve the operation of the vertical theater model, and lengthen the content life cycle through multi-season episodes and short dramas in the vertical theater model.

At the same time, the company will continue to tap the brand value of vertical content and improve the efficiency of content investment. According to the reporter's understanding, in addition to the blockbuster TV series "Human World" that is being broadcast, iQiyi will successively launch new works of "Little Teasing Theater", as well as key dramas such as "Heart Residence", "Wind Rises longxi", "I am a criminal policeman", "Genius Basic Law" and so on.

The peak of the speed version OF DAU reached 5 million, and the average DAU of the international version tripled, which became a new point of view

Launched in early 2021 and mainly focused on domestic lower-tier cities, iQiyi Express also performed well, with a DAU peak of 5 million in the fourth quarter of 2021. In less than a year, the number of iQiyi Express Users has exploded.

Gong Yu once said that the overlap rate between iQIYI Express Edition and iQIYI APP in terms of user groups is very low, which means that the former has found an effective "recruitment" space for iQIYI's user population coverage and helped the company's business penetrate more widely into third- and fourth-tier cities.

On the other hand, continuing the good performance of overseas business in the previous quarter, iQIYI International Edition achieved substantial year-on-year growth in terms of user scale and revenue in the fiscal quarter, and the company's overseas influence is continuing to increase.

The data shows that the average number of daily active users (DAUs) of iQIYI International Edition in 2021 will triple that of the previous year. Thailand became the fastest growing market, with nearly 700% growth, while in the United States, South Korea, Australia and Southeast Asia all grew by more than 100%.

At the same time, iQIYI International's membership services and advertising revenue achieved month-on-quarter and year-on-year growth in the fourth quarter and the whole year. In the future, as iQIYI continues to expand cooperation with local partners and the launch of overseas advertising platforms, the monetization ability of the international version will be further improved.

As Gong Yu said, the Internet, big data, artificial intelligence and other technologies have boosted literary and artistic innovation, broadened the literary and artistic space, and also added new scientific and technological impetus to excellent works going abroad. At present, overseas audiences can appreciate the charm of the ancient city of China presented by "The Wind Rises in Luoyang" through the advanced online audio-visual platform of iQIYI International Edition, and through "The Silent Truth", "River God" and "Stick! Teenagers, "Invincible Deer Squad" and so on experience the creative level and high-quality production ability of China's multi-genre works, and understand the new fashions of life and the new trends of the times of Chinese people.