The Himalayas, which grew up quietly, burned 13 billion

Author/ Author of "Finance and Economics" Weekly Ming Xiaotian

Editor/ Dong Yuqing

On March 29, 2022, Himalaya, the "largest audio platform in China", submitted its IPO prospectus for the third time, with a valuation of more than 20 billion yuan.

In 2018, there were media reports that Himalaya expected to go public in Hong Kong, but it was denied by Himalayas. Subsequently, in 2021, it formally submitted a prospectus to the U.S. Securities and Exchange Commission, but it was unsuccessful. In September 2021, it resubmitted its IPO application on the Hong Kong Stock Exchange, but due to more than 6 months, its prospectus documents showed that it was invalid not long ago. This update to the prospectus is also the third sprint IPO of Himalaya.

Since its inception in 2012, after 9 rounds of financing, Himalaya has stood behind the luxurious circle of investors - Tencent, Yuwen, Baidu, Xiaomi, Good Future and Sony Music are all strategic investors. Of course, Himalaya tells a good growth story in the field of online audio, and its monthly active users have grown from 140 million in 2019 to 267 million in 2021.

However, behind the growth is a more violent burning momentum. According to the prospectus, between 2018 and 2021, Himalaya has accumulated losses of 13.055 billion yuan. The difficulty of making profits is a common pain point faced by the online audio industry at present. Such a situation is quite similar to the current domestic online video industry.

This also makes the repeated defeats of Himalaya have to sprint for the IPO again, this time, can it successfully land on the Hong Kong Stock Exchange? Even if the listing is successful, can it get out of the bloody dilemma of online audio?

I want to do the Taobao of the audio industry

In 2012, Yu Jianjun, an entrepreneur from Pucheng, Fujian Province, met his nobleman, Dai Zhikang, the head of Zendai Group, who started his career in the real estate industry. At that time, Yu Jianjun told Dai Zhikang about his new entrepreneurial direction - to create a "Taobao" in the audio field.

At that time, Yu Jianjun was 35 years old, had several entrepreneurial experiences, and belonged to the serial entrepreneurs favored by capital at that time. Several of his ventures are closely related to technology, such as making a three-dimensional panoramic software as soon as he graduated from college. Later, Yu Jianjun made a three-dimensional real-life map search website "City Bar". In simple terms, he is going to make a three-dimensional real-life electronic map. At that time, because Baidu also wanted to create a street view map, it simply bought the city bar from Yu Jianjun.

It was the entrepreneurial experience of the city bar that made Dai Zhikang interested in Yu Jianjun. With a big wave of his hand, he gave Yu Jianjun 20 million yuan of start-up funds, and the predecessor of the Himalayas, "The World There", was born. Chen Xiaoyu, the co-founder of the world there, was Dai Zhikang's assistant at the time and the investment director of Zendai Group.

At that time, the idea of "the world there" was too advanced, using a panoramic picture as a background to project the user's avatar into a virtual world and implant audio and video into it. Burning money is not to say, more importantly, the user demand has not yet reached such a high level.

Therefore, in the two years of "The World There", 20 million people burned out, and the team of 80 people who started a business together only had less than 10 people left.

At that time, the mobile Internet quietly rose, the information reading field today's headlines flourished, the video field Youku network and Tudou network in the form of a share exchange to complete the merger just won the absolute leading position.

But the audio field is still blank, yu Jianjun, who aims at the online audio market, surveyed more than 100 people, but 60 or 70 people did not believe that audio had a future. Yu Jianjun explained to the media: "We were very excited at the time, and many people thought so, which meant that BAT would also think like this, which meant that our living space was longer." ”

In August 2012, Himalaya was officially established.

However, it has also been involved in a long online audio war since then, and the number of similar products has reached more than 30 at most. Products such as lychee FM, Dragonfly FM, Koala FM, Multi-Listen FM, and Domi Radio have also been launched. But because the product is too replaceable, soon there are only three players left in the industry - namely lychee, dragonfly and Himalaya, and Himalaya occupies the first place with an absolute lead in the share.

According to statistics, since 2012, Himalaya has received a total of 9 rounds of financing. The last Series E financing occurred in 2018, raising 4 billion yuan and the post-investment valuation reached 24 billion yuan. So far, Himalaya's investor lineup has been extremely luxurious, from Internet giants to international investment banks, all of which are its platforms. Also in this year, it is said that Himalaya has built a VIE structure and is expected to go public in the United States.

But after that, Himalaya's road to listing was quite unsuccessful, and even friends whose market share was not as good as its have been successfully listed. In January 2020, Lychee FM changed its name to Lychee and officially landed on the NASDAQ at an issue price of 11 US dollars per share. However, on the second trading day alone, Lychee's share price fell 6.45% to $10.88 per share, falling below the issue price. Until today, its stock price has been bearish for many years, and as of the close of trading on April 1, it has fallen to $1.53 per share, a decline of more than 80%.

Not only overseas capital is not optimistic about the domestic audio business, but even domestic Internet manufacturers have no intention of getting involved.

In China, in addition to Tencent's start to lay out the long audio field after 2020, Internet giants such as Baidu and Ali have not yet made much progress in the long audio field. This in turn makes Himalaya look comfortable in the long audio market, and this is reflected in its prospectus - active users and payment rate data are eye-catching.

According to the Himalaya Prospectus, from 2019 to 2021, Himalaya's monthly active users grew from 140 million and 215 million to 267 million, with 24% year-on-year growth in 2021 compared with 2020.

It is worth noting that the ratio of daily active and monthly active users in The Himalayas is very stable, and it will remain at about 27%-28% in 2019-2021. A senior Internet product manager told Caijing Weekly that this ratio is one of the important factors used to measure whether their products are healthy, and in the social track, this ratio of more than 20% is a good product, but "if the ratio is less than 20%, you need to consider whether to continue to do it."

Corresponding to the growth of users is the continuous growth of Revenue of Himalaya. Historically, Himalayas' revenue streams have mainly included subscriptions, advertising, live streaming and other innovative products and services. According to the prospectus, From 2019 to 2021, Himalaya's revenue will be 2.698 billion yuan, 4.076 billion yuan and 5.857 billion yuan, respectively. Subscriptions are one of the fastest growing monetization models, with Himalaya's subscriptions including two main revenue channels, namely membership subscriptions and pay-per-view listening services. From 2019 to 2021, Himalaya's subscription revenue grew from 1.2 billion to nearly 3 billion, and the proportion of revenue increased from 47.2% to 51.1%.

Himalaya's subscription growth is also strongly correlated with the overall market. According to China Insight Consulting, the revenue of online audio subscriptions has grown from 500 million yuan in 2016 to 9.1 billion yuan in 2021, with a compound annual growth rate of 77.8%, and is expected to grow further at a compound annual growth rate of 49.6% from 2021 to 2026.

The growth of subscription payment has further promoted the increase of user stickiness, and is ultimately reflected in the daily active and monthly active user data, realizing the positive cycle of the entire Himalaya platform ecology.

A number of paying members who purchased Himalaya told Caijing Weekly that the usage rate increased significantly after payment. One member said that he "usually only opens it once every few months", but since buying a Himalaya membership, the open rate has further increased, and he has almost become a daily active user. Users are spending more and more time on Himalayas, penetration rates are further increased, and users' ability to "pay money" is further improved, which has been verified in Himalaya's IPO.

According to the data, Himalaya mobile users spent a total of 1,744.1 billion minutes listening to audio content in 2021, and the average daily listening time of mobile users was 144 minutes. The number of paid members was 14.4 million, an increase of 52% year-on-year, and the average monthly revenue contribution of each monthly active user on mobile increased from 2.7 yuan in 2019 to 4.2 yuan in 2021, nearly doubling the amount of payment.

Profitability is far away

Even if Himalaya's user growth and revenue data growth in 2021 is strong, the problem of profitability cannot be ignored.

According to Himalaya's latest disclosure prospectus, its losses from 2019 to 2020 were 1.9248 billion yuan and 2.8821 billion yuan, respectively, and in 2021, the loss during the year was as high as 5.106 billion yuan. Even after adjustment, its net loss from 2019 to 2021 was 749 million yuan, 539 million yuan and 759 million yuan, respectively. From this point of view, the situation of the Himalayas that is difficult to make a profit is likely to last for a long time, and even Yu Jianjun himself said that "there is no profit schedule."

One of the reasons for the loss was that Himalayas' sales and marketing expenses accounted for too much. According to the prospectus, from 2019 to 2021, The proportion of Himalaya-related expenses to revenue was 45.2%, 41.9% and 44.9%, respectively, although the related proportion in 2021 decreased compared with 2019, but due to the expansion of revenue fundamentals, sales and marketing expenses also increased, at 1.218 billion yuan, 1.707 billion yuan and 2.63 billion yuan, respectively.

Related expenses in 2021 increased by 54% compared to 2020, while in 2021, monthly active users increased by 24% year-on-year compared to 2020. That said, Himalaya is investing more money in 2021, but the number of users has not achieved the same growth.

However, Himalaya does not intend to stop spending on marketing, and in its prospectus, Himalaya stated that "in order to increase brand awareness and expand the user base, sales and marketing expenses and other factors" ..."We expect to continue to record operating losses and adjusted losses (not measured by IFRS)" in the future."

Behind the profitability difficulty, it is also related to the single business of Himalayas. Over-reliance on paid subscription business, with more than half of revenue accounting for subscription revenue, means that Himalaya's monetization ability is relatively single. According to the prospectus, although its advertising and live broadcast revenue also has a certain proportion, the proportion is weakening. Advertising and live streaming revenue accounted for 25.4% and 17.1% of Himalaya's full-year revenue in 2021, respectively.

This is because the education business, which was once regarded as the "second growth curve" of Himalaya's revenue, has also been affected by the double reduction policy. In 2021, on the eve of the "double subtraction", Himalaya's prospectus at the SEC showed that education services revenue accounted for only 0.5% in 2019, and 5.6% in 2020, contributing more than 200 million yuan of revenue to Himalaya. ”

In the risk disclosure, Himalaya said that in order to avoid being considered a "training institution" for providing subject training content on the platform, "we stopped providing products and services involving all related content, and the revenue of this content accounted for 1.5%, 0.9% and 0.4% of our total revenue in 2019, 2020 and 2021, respectively." It is worth noting that in the prospectus submitted by Himalaya on the Hong Kong Stock Exchange this time, the "education service" in the revenue part has been deleted.

Many transformations, one chicken feather

Less than a year after its launch, Himalaya gained tens of millions of users, and soon exceeded 50 million. By the end of 2014, The Number of Himalaya users exceeded 100 million. In order to make a profit, Himalaya has tried many transformations.

At the beginning of its establishment, Yu Jianjun positioned the Himalayas as a "radio station". In an interview with the media, Yu Jianjun once said that Himalaya is not only an ordinary sound platform, but also a radio station that touches and shares and transmits individual voices from time to time. Focusing on the attribute of "radio", Yu Jianjun compared the difference between Himalayas and traditional media, and unlike traditional radio stations, which are all live broadcasts, geographical restrictions, and PGC content, Himalaya achieves the goal of "reinventing radio" through the combination of user-defined sound, PGC, PUGC and UGC.

During this period, both the head of the Deyun Society and the grassroots players have gained more attention with the Himalayas and have been talked about by the Himalayas. For example, the anchor "Sound Purple Placket", which has been updating in the Himalayas since 2013, has more than 20 million followers as of December 31, 2021, and its program has been listened to more than 64 billion times. In 2014, Himalaya began to cooperate with Deyun Society, according to media reports, Guo Degang's many cross-talk programs have been broadcast in Himalayas, of which the album "Guo Degang's 21 Years of Crosstalk Selection" has been played more than 1.9 billion.

Although the majority of Himalaya's profit is subscriptions today, advertising revenue accounts for only 25.4%, but in the "radio" stage, Yu Jianjun believes that Himalaya's monetization method is advertising, "similar to the 9158 show model, fast monetization, but more suitable for live broadcast or video." ”

In the process of the gradual expansion of the Himalayas, Yu Jianjun has gradually set his sights on the audiobook market. In an interview, Yu Jianjun said that in the European and American markets, audio publishing is already a very mature industry. In the United States, 80 million people use their driving time to and from work to enjoy audiobooks, with an average of three or four hours of "listening" to books per week, and its annual output value of the audiobook market can reach $70 billion; in 2014, the value of the Uk's audiobook market also increased by nearly 25%. He believes that domestic audio publishing can reach a market of 300 billion yuan.

Subsequently, Himalaya also exerted its strength in the audiobook track. In July 2015, Himalaya and Reading Group signed a 20-year online audio copyright agreement, according to the cooperation agreement, with the help of Reading Group's copyright resources, Himalaya will obtain a large number of online literature audio adaptations, expanding the industry status and influence.

In 2016, Himalaya signed contracts with a number of publishing houses, and Himalaya said that on its platform, audiobooks have become one of the most popular listening categories, and the cumulative number of listeners of popular audiobooks can generally reach more than 20 million. According to the prospectus, by the end of 2021, Himalaya has established business cooperation with about 160 head publishing houses such as CITIC Publishing House and more than 140 head online literature platforms, with about 4.9 million books.

Along with the increase in audiobook listening, there are also infringement cases on the Himalaya platform. In 2021, Shanghai Himalaya Technology Co., Ltd., the parent company of Himalayas, has more than 1,000 disputes over the right to disseminate works on the information network, such as writers Zeng Pengyu, Cai Chun pig, Tang Xiaodian, Slow San, screenwriter Zhang Yao, etc. have all made Himalaya infringement and other related remarks.

In 2016, with the wave of knowledge payment, Himalaya aimed at the knowledge payment track and began its own layout in the field of knowledge payment. Ma Dong's "Speak Well" is known as the first attempt to pay for Himalayan knowledge, selling 25,000 sets within 24 hours of the Himalaya launch, with sales exceeding 5 million yuan, sales exceeding 10 million yuan 10 days later, and the knowledge carnival launched in the same year received 50.88 million sales. In an interview with the media, Zhang Yongchang, vice president of Himalaya, said, "In the second half of 2016, we found that the revenue of content payment has exceeded the sum of traffic advertising, community and hardware. ”

These undoubtedly give Himalayas the determination to continue to pay for knowledge. Himalaya introduced Yu Qiuyu, Wu Xiaobo and other celebrities to pay for knowledge, according to its prospectus, the proportion of Himalaya paid content increased from 24.5% in 2019 to 42.1% in 2021, at present, Himalaya has more than 50,000 album content that needs to be opened to listen to, which is comparable to the number of PGC album content disclosed in its prospectus.

In its prospectus, Himalaya also expressed its expectations for PGC content, but the content ecology needs to rely on high-quality content as a support, and whether Himalaya has enough high-quality content still needs to be questioned. According to its prospectus, in 2019, its PGC production albums were 21,400, the number of annual production albums was more than 14.47 million, PGC production albums accounted for 0.14% of the annual production albums, by 2021, the number of PGC production albums was 53,700, the number of annual production albums was more than 25.42 million, and the number of PGC production albums accounted for 0.21% of the annual production albums. The proportion of PGC content is too low, which is bound to damage user perception. A Himalaya member user told Caijing Weekly that "now Himalaya's paid content is becoming more and more chicken", and this user has begun to switch to other platforms to listen to audio.

Paying for knowledge requires not only users to pay the platform, but also requires the platform to pay high copyright fees to the copyright owner. Whether Himalaya can control costs is also an important factor in its profitability.

It can be said that where there is an outlet, there is a Himalaya. In 2017, the tireless Himalaya began to explore the live broadcast and smart device track, and launched equipment such as AI smart speakers, and in 2019, Himalaya launched intelligent robots. In recent years, Himalaya has turned to the technology track and challenged voice technology. In 2021, Himalaya also used TTS speech synthesis technology to launch the "Shan Tian Fang Sound Reproduction" series of albums, and this year launched two speech technology achievements that were included in the "IEEE International Conference on Audio, Speech and Signal Processing". In addition, Himalaya has also tried on pan-entertainment audio, podcast and other tracks, but it has not aroused much splash.

The Himalayas, which are constantly transforming on the outlet, have never been able to "rely on the power of good winds".

Internal and external troubles, the situation is difficult

In fact, the pain points that are difficult to make profits in the domestic long audio industry have long existed. Not only the Himalayas, but also the life of lychees is not good.

On March 10, Lychee released its 2021 annual financial report, which showed that Lychee achieved growth in net income, monthly active users and the average number of monthly paid users, such as its net income of 2.1195 billion yuan (about 332.6 million US dollars), an increase of 41% from 1.5029 billion yuan in the previous year. The average total number of mobile monthly active users was 58.4 million, up 4% from 2020. But even so, lychee's losses have continued as consistently as the Himalayas, with net losses of 150 million yuan, 9.342 million yuan, 130 million yuan, 82.18 million yuan and 127 million yuan from 2017 to 2021, respectively.

Similar to the Himalayas, Lychee's business model is also very single. According to its financial report, in fiscal 2021, audio entertainment revenue was 2.1 billion yuan, accounting for more than 99% of the annual revenue, while podcast, advertising and other revenue was only more than 18 million yuan. The growth model is too simple, which is one of the reasons why it cannot form a scale effect.

At the same time, players in the online music field have begun to be unwilling to be simple "players" and move towards the long audio field.

Liang Zhu, CEO of TME (Tencent Music Entertainment Group), said in TME's 2021 financial report, "Long audio has also proved to be an excellent complement to our strong music portfolio, helping to expand the scale of users, with long audio MAU reaching more than 150 million, an increase of 65% year-on-year." TME's earnings report also disclosed that its online music services revenue in the fourth quarter of 2021 increased by 4.3% from RMB2.76 billion in the same period of 2020 to RMB2.88 billion (US$452 million). This growth was driven by music subscription revenue and long audio, while revenue from sub-licensing, digital album sales and advertising declined.

It can be found that in the TME business that forms a scale effect, long audio and other services complement each other in content, balance the development of Tencent's music ecosystem, and play a very important role in differentiating promotion channels.

However, the large-scale business ecology cannot be refined overnight, and the reason why the online audio industry has a single revenue and cannot be profitable is also related to the basic disk of the relevant market. Zhang Yongchang, vice president of Himalaya, also admitted in an interview that the audio industry is still niche. According to Ai Media Consulting's "2020-2021 China Online Audio Industry Research Report", the scale of online audio users in 2020 is 570 million, but compared with the scale of online music in 2020, the scale of mobile phone clients alone reached 618 million, and the number of online audio users is still quite different.

On this basis, the originally small market was further divided. Various vertical platforms have occupied the audio track, such as the social audio platform Tiya, the podcast platform small universe, the vertical audio platform Jin Yong listening to the book App, as well as cloud listening, listening to FM and other products, and the follow-up Internet giants have seized the online audio market, making the originally not spacious track more crowded. In addition to Tencent Music's large-scale layout of related tracks to launch lazy listening, ByteDance has also made a layout in related fields and launched Tomato Listening.

In the eyes of industry insiders, the major platforms have rushed to the top, but they have created products with serious homogenization, resulting in strong product substitution, and content producers have not gained more benefits because of multi-platforms. In fact, the head creators can not make much money on the long audio platform, and the founder of the popular podcast company JustPod once said in an interview with the media, "At present, our annual revenue on commercial podcasts is about a few million, basically invested in the operation of original podcasts, which can equal the current expenditure." "In contrast, there is the myth of practitioners making riches that continue to emerge on short video platforms.

This will further deepen the lack of excellent talents. This is also reflected in Himalaya's prospectus risk disclosure: "The cost of retaining our competitors may increase if our competitors' platforms offer more attractive compensation packages to attract our popular content creators." "Once the excellent creators are lost, it will further reduce the user payment rate and eventually dampen the long audio platform with a single profit model."

However, foreign cases may provide more space for domestic practitioners to think. Spotify has been laying out the long audio field in recent years, and since 2019, it has acquired a multi-parent audio company.

Similar to the domestic long audio platform, Spotify has also failed to achieve profitability. In February this year, Spotify released its 2021 financial report showing that in the fourth quarter, Spotify's advanced users increased from 155 million to 180 million, an increase of 16% year-on-year, and Spotify achieved a full-year revenue of 8.46 billion euros, with a net loss of 34 million euros.

Advertising support increased from 199 million to 236 million, an increase of 19% year-on-year, and achieved revenue of 1.21 billion euros. The platform has a total of 418 million monthly active users and a total revenue of 9.67 billion euros. Although the entire fiscal year is still losing money, the market is still optimistic about it, and JPMorgan analysts have been optimistic that Spotify will have more new users.

The reason is that Spotify has a large number of global users, and the proportion of paid users is high. According to its financial report, as of December 31, 2021, it had 406 million monthly active users in 184 countries and regions, including 180 million premium subscribers, accounting for 44.3% of the total number of monthly active users, but these users contributed 8.46 billion euros in revenue, accounting for 87.5%, compared with Spotify's advertising revenue of only 1.21 billion euros. Some analysts said that Spotify's business plan is to turn free users into paid users. In contrast, Himalaya disclosed that the number of paid members in 2021 was only 14.4 million, and the payment rate of mobile users was 12.9%.

In fact, there is still a huge audio market waiting for practitioners to tap, but user education is a slow process, and it may take practitioners to invest more time and energy to see a glimmer of effect. But before that, Himalaya needs to carry through the cold winter, and going public may be its last chance.

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