"Self-discipline gives me freedom. ”
As the opening prompt tone of the fitness software APP Keep, this sentence accompanies tens of millions of online fitness users to adhere to their own fitness path.
A few days ago, Keep of nugget online fitness track for 7 years officially submitted a prospectus to the Hong Kong Stock Exchange to sprint to the "first share of online fitness", with Goldman Sachs and CICC as the co-sponsors of the IPO.
"Burning money" to gain customers to promote growth The company's loss gap has widened
According to the prospectus, Keep achieved revenue of 663 million yuan, 1.107 billion yuan and 1.159 billion yuan in the first three quarters of 2019, 2020 and 2021, respectively, an increase of 66.9% and 41.3% year-on-year.
However, Keep's losses for the same period continued to expand, and in the first three quarters of 2019, 2020 and 2021, Keep recorded losses of $735 million, $2,244 million and $2,458 million, with adjusted net losses of $366 million, $106 million and $696 million, respectively, with a cumulative loss of $1,169 million.
Regarding the increase in revenue and no increase in profits, Keep explained in the prospectus that in order to further acquire, activate and retain users, the platform has increased spending on traffic acquisition and brand promotion. In other words, the main reason why Keep's revenue is not proportional to profits is the surge in marketing costs under the "burning money" expansion.
According to prospectus data, the largest of the expenditure items is sales and marketing expenses. In 2019 and 2020, its marketing expenditure for the whole year was about 300 million yuan, and in the first nine months of 2021, this expenditure directly soared to 820 million yuan.
With the vision of "becoming the world's largest smart fitness platform," user data is critical to Keep.
The data shows that the average monthly paid membership of Keep in 2021 will increase from 1.91 million in 2020 to 3.28 million, and the membership penetration rate will increase from 6.4% in 2020 to 9.5% in 2021. At the same time, the average monthly active users of the Keep platform in 2020 and 2021 were 29.73 million and 34.36 million, respectively, of which the average number of monthly active users (MAUs) in the third quarter of 2021 reached 41.75 million.
According to the China Insight Consulting report, Keep ranks first among China's online fitness platforms in terms of average monthly active users and average monthly subscription members in 2021, and the average number of monthly active users and subscription members is more than twice that of competitors; in terms of the number of exercises in 2021, Keep also ranks first in online fitness platforms.
In addition, Keep has the highest market share in the online fitness application market and the smart fitness equipment market for fitness people in China, with 44.7% and 38.8% respectively.
Selling goods, advertising, and paid content in parallel Self-operated brand revenue accounts for more than half
In the prospectus, Keep divides its main business into three core modules: online fitness content, intelligent fitness equipment, and supporting sports products.
According to the data, its online fitness content is mainly based on internal development and third-party created recorded and live classes, and by the end of 2021, Keep provides a total of 2600 internally developed recorded courses and 2900 recorded courses provided by fitness experts and professionals. Compared with recorded classes, Keep's live classes emphasize interaction and communication, and the scope is also limited to subscription members, covering fitness categories such as indoor cycling, dance fitness, fat loss, aerobics, strength training, boxing and yoga. As of 2021, Keep has delivered more than 13,000 live lessons.
According to financial data, Keep brings revenue to its own brand products, membership paid and online paid content, advertising and other services.
Among them, the revenue of private brand products represented by the two major businesses of intelligent fitness equipment and supporting sports products accounts for half of Keep's revenue. In the first three quarters of 2021, Keep's private label goods business generated revenue of $638 million, accounting for 55.1% of the company's business revenue, followed by membership subscriptions and online paid content revenue of $380 million, and finally advertising and other services of nearly $139 million, with the latter two contributing 32.8% and 12.1% respectively.
However, Ebang Power found that in the first three quarters of 2021, Keep's advertising and other services had the highest gross profit margin of 59.6%, followed by membership subscriptions and online paid content, with 58.8% and finally its own brand fitness products, with a gross profit margin of only 29.3%.
Keep mentioned in the prospectus that as of December 31, 2021, keep smart bike sales ranked first in China in terms of total commodity transactions; Keep is also the largest yoga mat brand in China in 2021, with a market share of 14.9%. Keep has the highest market share in the online fitness application market and the smart fitness equipment market for fitness people in China, with 44.7% and 38.8% respectively.
From all aspects of the prospectus, it can be seen that Keep has been actively seeking a business model of monetizing fitness content, but the current result is that the sales of sports equipment and equipment account for more than half of the revenue, compared with other platform attribute companies, such a revenue structure seems to be uncommon.
Positioning, stop loss, growth Keep all figured out?
According to the china consulting report, China's fitness population will be 303 million in 2021 and is expected to reach 420 million by 2026. In 2021, the average annual expenditure of The Chinese fitness population is 2596 yuan per person, which is much lower than the 14268 yuan per person expenditure in the United States, which means that the potential demand in the Chinese fitness market has not yet been fully released. In addition, China's online fitness market will grow from 371 billion yuan in 2021 to 895.8 billion yuan in 2026, with a compound annual growth rate of 19.3%.
The online fitness market has considerable prospects, and online fitness platforms such as Keep have sufficient space for cultivation. But in such a market environment, Keep still increases revenue and does not increase profits, what is the problem?
First, the prospectus made it clear that the loss was due to "increased spending on traffic acquisition and branding by the platform."
According to reports, keep's specific marketing methods are mainly based on talent marketing and brand promotion. In terms of talent marketing, Keep will work closely with KOLs on the platform and online to produce fitness-related content, and carry out brand promotion through fitness activities, outdoor billboards, TV commercials and offline fitness centers.
It is worth mentioning that Keep also provides users with offline fitness experiences by operating keepland fitness centers to deepen brand engagement and loyalty, expand user base, and further promote the conversion of subscription members. Keepland currently has 9 self-operated fitness centers in Beijing.
However, from the perspective of financial data, after the promotion investment, the average monthly active users of Keep have increased from 29.73 million to 34.36 million, but the corresponding overall revenue is in the order of 1.1 billion yuan, and there is no significant increase. Does Keep realize that such marketing investments are not bringing new user value? Have you thought of other lower-cost ways to get traffic?
Secondly, in terms of revenue, compared with "private label sales" with more than half of the revenue, in fact, "membership subscription and online paid content" is the business with higher gross profit margin and belongs to the more potential growth business. However, from the perspective of business proportion, it is still free brands that can occupy the main position, which means that Keep still has room to improve in terms of increasing the proportion of high-margin business. So, has Keep already thought of ways to boost content conversions? Are you ready to deal with the impact of short video and live broadcast platforms in fitness content, and find the irreplaceable value of Keep in terms of content?
One thing that cannot be ignored is that the revenue structure is left to the observer on the other hand, the key question is, if private label products become Keep's main revenue-generating business, then should it be positioned as a content company or a brand company? When investors look at its development, it is more accurate to use the model of platform or brand?