Question 1: Good evening management, the first question wants to ask about the macro level, to understand what is the strategic focus of our company in 2022, the second question is related to users, can you share with us our outlook for users in 2022, can you also share with us the situation of Q1 users?
CEO Chen Rui: In 2022, the company's strategy will still revolve around growth, including user growth, revenue growth, and we will continue the past healthy growth trend. We can see that in Q4 last year, our users are still maintaining a healthy and high-speed growth, our MAU is 272 million, an increase of 35% year-on-year, and more importantly behind this figure it is very good health. For example, our Q4 daily active use time has reached 82 minutes, which should be the highest value of Q4 in history.
If we look at this interaction data, the average monthly interaction in Q4 is 116% year-on-year, more than 11 billion times. Moreover, from the perspective of retention, the retention of our Q4 12-month full members is further improved, reaching 84%. And in addition to the growth in numbers, we can see that one of the quality of our user conversion payments is also very high, Q4 our paid users year-on-year growth is 37%, which is more than the growth rate of our MAU, and our average monthly payment rate for the whole year of 2021 is more than 9%, this figure is also improving every year, 8% in 2020, 6% in 2019, so we can see that in the process of continuous user growth, the quality of our users is also very good, And its paid conversions are constantly improving.
Looking ahead, we remain confident of achieving our previous target of 400 million MAU by 2023. Just past, that is, in January 2022, our MAU exceeded 300 million, and our average daily use time of a single user exceeded 90 minutes, and from this momentum, this year is still a high-speed growth momentum.
In fact, if we look back at the past, we will find that B station is a relatively unique growth model among the World's Internet products. In the 13 years since our establishment, we have been growing at a high rate and healthily every year. I think this is actually due to a growth model driven by our content ecology. And I think this growth trend will continue.
I'll talk about revenue growth, but in fact, over the past two years, we've always seen it as something as important as user growth. We can see that in the past two years, our Vas and advertising revenue has been growing at a high speed, especially our advertising revenue, which has been growing at an annual rate of more than 100%.
In 2022, revenue growth will remain at the center of the company's strategy, and it will be one of the most important jobs for our entire company. In the past, one of the balances we allocated our energy between user growth and revenue growth was seven or three, that is, user growth accounted for 70%, and revenue growth accounted for 30%. In the planning of this year's work, we will adjust the distribution ratio, we will open five to five, that is, user growth spends 50% of energy, income growth spends 50% of energy. Income growth will become more important this year than in the past.
Recently, we can see the turmoil in the capital market, although it is volatile from the perspective of stock price, but from another point of view, it has actually eased the competition in the industry to a certain extent. In the cost of each company, whether it is the input of the market, or the input of this kind of labor cost, it used to be very competitive. But this year I think the competition will be greatly alleviated, and we will also take the opportunity to control expenditure, reduce costs and increase efficiency, and control all the money that should not be spent, and at the same time, the efficiency of the money that should be spent will be higher.
That's my answer to the first question.
Question 2: Good evening to the management, can you share the current penetration rate of storymode, what kind of role do we want storymode to play in our ecology in the medium and long term, and what kind of thinking we have on monetization?
Chen Rui: The expression of storymode products has actually been around for a long time, but we didn't say to the outside world that users don't know the name storymode, because we don't actually distinguish it in the user interface. The performance of all videos is actually mixed in the user interface, and users are very accustomed to this natural form of expression.
In fact, the reason for doing storymode is because of our philosophy, I think B station has not been a tool, it is a people-centered community. Therefore, the consumption scene of Station B must be multi-scene and multi-screen, it is not limited to medium-long video, nor is it limited to the performance mode of horizontal screen. It can have relatively short videos, can have live broadcasts, can also have vertical screens, in fact, storymode is a complement to the multi-scene, multi-screen strategy I proposed earlier, storymode is an extension of our consumption to light consumption, fragmented consumption.
If you have used the product form of storymode of station B, you will find that although it is a vertical screen playback on the interface, the actual experience of its use is 100% characteristic of station B. For example, most of the video in storymode is a minute-level video, similar to one-minute, two-minute, three-minute video, and it is quality-oriented, and it is floating with bullet screens.
Then in terms of content categories, we can think of storymode as an extension of our PUGV ecosystem. The creators of a large number of storymodes such vertical video are the UP masters of our PUGV. In this case, it is equivalent to our creators using another way to create vertical video with a shorter time.
Our product development concept has always been user-centric, so in fact, we follow the needs of users in the progress of storymode. From the current point of view, our users' acceptance of storymode is very high. Now storymode it has more than 20% of the DAU penetration, and more importantly, it has reached 30% in the proportion of user likes, in fact, this shows that users are accepting, and even like, the storymode of the B station.
I have always believed that a user's choice of content consumption follows the category and community atmosphere, rather than saying that he must choose a form of expression, or the length of a video. Just like a person who likes to drink Coke, he doesn't care whether the Coke is canned or bottled, or like a person who likes to drink carbonated drinks, he doesn't care whether Coke is black or white, what he likes is actually the category, the atmosphere of the community. So I think in the future storymode it will be fully integrated into our category content and community. In my opinion, its penetration rate will exceed 50% or even higher in the future, because the user likes to watch a type of content, and does not care whether it is 1 minute or 3 minutes, or whether it is vertical or horizontal.
Finally, let's talk about commercialization, because storymode is a vertical screen display method of mobile phones, and its business model includes the mode of advertising distribution, including the mode of interpolation and live broadcasting in the middle, I think in the form of products, in fact, it has become more mature in the industry. So in the process of our practice, the commercialization of this product is very natural. And judging from the proportion of our current practice, it is still quite efficient for advertising distribution and the like.
Question 3: I would like to ask what is our plan for breakeven? What will be the gross margin trend for Q1-4 2022? In the absence of a game version number, what are the changes in the gross profit margin of each sector, including advertising, live broadcasting, employee growth, etc.? What is the timeline for achieving breakeven?
CFO Fan Xin: Profitability is an important goal for all enterprises. What we have been thinking about is a balance between choosing a profitable time point and investing in long-term development opportunities. In 2022, we are confident that under the premise of maintaining healthy user growth, by increasing the realization rate of individual MAU and controlling operating expenses, we will achieve a year-on-year narrowing of the non-GAAP operating loss ratio in 2022, and the medium-term goal is to achieve non GAAP breakeven by 2024.
In terms of controlling operating expenses, market expenses are controllable and quantifiable, if you only look at the cost of buying, the growth rate of user growth costs in 2021 is lower than the increase in revenue by 61%, and there is still room for further optimization under the premise of ensuring that the target of 400 million users will be reached in 2023, and the proportion of the entire marketing expenses in revenue will begin to decline in 2022.
R&D costs are personnel expenses associated with developing new games, improving data capabilities, and optimizing new product features, which are critical to increasing productivity and generating more efficient revenue. We always adhere to the principle of efficiency first, the introduction of talents, attaches great importance to R & D-related input, as well as R & D input output. We will continue to invest in R&D for 22 years, focusing on the return on investment, and then from 2023 onwards, the proportion of R&D expenses to revenue will decrease year by year.
In terms of improving the efficiency of single-user monetization, we are still in the early stages of monetization, and the revenue brought by single-month active users will increase by 20% in 2021, of which the value-added service revenue brought by single-user will increase by 34%, and the advertising revenue brought by single-month active users will increase by 83%, and the single-user income of value-added services and advertising business will more than double in the future.
In terms of gross profit trends, the 22-year game business is still in a period of transformation from the perspective of the overall industry development, and the revenue improvement and gross profit improvement of the value-added service business will be promoted simultaneously, and the gross profit margin for the whole year is expected to be about 19-20%, showing a trend of low and high throughout the year.
Advertising as a share of revenue rose from 13% in 2020 to 23% in 21 years. In the long run, the proportion of advertising will continue to increase. In addition, we expect to introduce more value-added services and further improve the gross margin of value-added services. In the next 3 years, with the improvement of monetization capacity, the overall gross profit margin will improve in the direction of 30%.
Question 4: Good evening management, thank you for taking my question. I would like to ask about our outlook for the Q4 quarter and 2022 advertising business, especially given the recent market concerns about the macro economy and the game version. In addition, can you share the form of our advertising commercialization, as well as the strategy, what new updates will emerge in 2022?
Chen Rui: I just took this opportunity to say what is the driving force for the growth of advertising in Station B. Station B advertising in the past two years, including the last quarter, has had a very bright growth. Before there were a few people who doubted, just say that the B station user experience is so good, a product with a good user experience is not advertising can not do. But in fact, our advertising growth is still quite fast. I would also like to take this opportunity to say this.
I think first of all, the users of Station B are growing, and the single-user monetization efficiency of the advertising end is also growing. As I mentioned just now, our DAU has been growing continuously in the past few years, in the fourth quarter of last year, our DAU growth was 34%, while the advertising efficiency of MAU is also growing, and the monetization efficiency of MAU in 2021 is 83% higher than that of the previous year, which is a higher ad growth rate.
The second driving force for growth, I think, is the user value of Station B and the influence of the platform, which is increasingly recognized by the market. We can see that in the past few years, the number of users of B station horizontally is growing, and in the vertical direction, users are actually breaking the circle, expanding from a circle layer to more circles. As users break the circle, more and more industry advertisers will find us. For example, before it was a game, 3C, then it became food, beverage, into beauty and beauty, and last year and this year, industries like automobiles will also become key advertisers. Last year, Q4 cars became the top five advertiser industries in Station B, which is also closely related to the process of users breaking the circle.
The third driving force I think is the trend of advertising video, more and more advertisements will be displayed in the form of video, so Station B will develop a model similar to TopView according to the expression of the product, and we will also have the form of video advertising. Story-Mode's future promotion of products will also bring about a vertical advertising model, so the video of advertising is the third driving force for our advertising growth.
I think the fourth driving force is that station B has its own unique form of advertising, that is, native advertising, because most of the videos of station B are made by UP masters, and they will integrate their own creativity into the advertisement and add customized advertising to the video they create. We internally call this UP main business order advertisement. I think in 2021, it is obvious that this kind of native advertising has been accepted by more and more advertisers, our fireworks platform at the end of 2021 more than 4200 brands settled, the re-investment rate reached 75%, more and more UP owners into the fireworks platform, to pick up these ads. In 2021, 22,000 UP owners have already settled on the Fireworks platform to advertise for these advertisers.
I have always thought that native advertising, that is, the fireworks system, is a very important advantage for station B, why, because it is a reservoir of advertisers, tens of thousands of UP owners will leave many brand advertisers in this reservoir, we can think of more ways to let native advertising and existing various forms of advertising to open. After opening up, you can make the plate more lively.
I think the fifth driving force is just mentioned, the multi-scene, multi-screen characteristics of Station B, which also helps to open up more advertising scenarios. We can see that from a data point of view, while the traditional PUGV is growing rapidly, the newly expanded TV screen and Story-Mode are also growing rapidly, which is equivalent to having more scenes, more video content, and more ads can be added.
I've always argued that ad revenue and user experience are not in conflict, and in the long run, they're even consistent. Because of the effect of the final advertisement, it needs to be achieved by influencing the user's mind, and a good platform, the user's favorite platform, can affect the user's mind.
Finally, let's talk about the outlook for 2022. The industry generally believes that the macro economy is still under pressure in 2022, and the growth of the entire digital advertising market is slowing down. But because we just mentioned the five driving forces for the growth of advertising on Station B, I think that even in such an environment, we are still confident in the steady and healthy growth of the advertising business in 2022. We are confident of achieving above-average growth.
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