From 2020 onwards, the concept of the "ear economy" began to catch fire. Internet giants such as Tencent Music (TME.US), NetEase Cloud Music (Cloud Music, 09899.HK), ByteDance, Kuaishou (01024. HK), Station B (09626.HK/BILI.US) and so on have laid out online audio tracks.
But is online audio really a good business?
Now, the various new platforms launched by the giants in that year basically did not stir up too much waves; and the "old players" in the industry are not living well today.
For example, China Audio's first share, Lychee (LIZI.US), was listed in the United States on January 17, 2020 at an issue price of $11 per share, but as of the close of trading on April 1, 2022, it has fallen to $1.46 per share, with a total market capitalization of only $74.0232 million.
The listing road of the industry's "big brother" Himalaya is also full of twists and turns.
Recently, Himalaya submitted a prospectus to the Hong Kong Stock Exchange. Red Star Capital noted that this is the third time that Himalaya has submitted a prospectus.
Originally, Himalaya planned to go public in the United States and submitted a listing application to nasdaq in April 2021, but then voluntarily canceled the application. In September of the same year, Himalaya transferred to the Hong Kong Stock Exchange, but there was no further action after the submission of the form, until March this year, when the prospectus expired for six months due to the expiration of the audit figures.
As for the three-world IPO, judging from the latest prospectus submitted by Himalaya, the "report card" is becoming more and more unsatisfactory.
According to the prospectus, from 2019 to 2021, Himalaya's revenue was 2.698 billion yuan, 4.076 billion yuan and 5.857 billion yuan, net losses were 1.925 billion yuan, 2.882 billion yuan and 5.106 billion yuan, and adjusted losses in the past three years were 748 million yuan, 539 million yuan and 759 million yuan, respectively. Businesses can't make money faster than they can.
Red Star Capital will explore why the Himalayas do not make money by dismantling the "revenue and expenditure" of the Himalayas, and the value of the once highly sought after "ear economy".
(i)
The "open source" dilemma of the Himalayas
According to the prospectus, the current revenue of Himalaya is mainly composed of four parts, namely subscriptions, advertising, live broadcasting, innovative products and services, and the proportion of revenue in the whole year of 2021 to total revenue is 51.1%, 25.4%, 17.1% and 6.4%, respectively. Subscription payment is currently the most important source of revenue for Himalayas.
Below, we will conduct a specific analysis of the enterprise sub-business and explore how much imagination these businesses can bring to the future of Himalaya.
Source: Prospectus, Red Star Capital Bureau
Subscription Revenue: The game between the number of payers and the amount paid
The so-called subscription revenue consists of two parts: membership subscription and paid on demand. According to the financial report, from 2019 to 2021, the revenue of Himalaya's subscription services was 1.274 billion yuan, 2.007 billion yuan and 2.992 billion yuan, accounting for 47.2%, 49.2% and 51.1% of the total revenue, respectively. In other words, Himalaya's subscription revenue is growing, and its contribution to total revenue is also increasing.
But in subscription services, paid-to-demand revenue as a percentage of total revenue has been declining, from 25.2% in 2019 to 18.1% in 2021. The growth of subscription revenue revenue was mainly driven by membership payments, which increased from 22% in 2019 to 33% in 2021.
Source: Red Star Capital Bureau
If the platform wants to get more subscription revenue, there is one premise and two methods. The premise is that the content of the platform is sufficiently high-quality; both approaches are either that the platform has enough paying users or that the amount paid by a single user is high enough.
But two methods are like "walking a tightrope": the increase in the payment rate usually requires low prices to stimulate consumers; and the choice of price increase, users will "unsubscribe", resulting in a decline in the payment rate.
According to the prospectus, from 2019 to 2021, the payment rate of Himalaya mobile paid members is 5.2%, 9.3% and 12.4%, respectively, and the payment rate is growing, which means that more and more users are willing to buy membership payment.
Looking at the monthly payment amount of single users, 2019-2021 is 11.6 yuan, 10.8 yuan and 11.2 yuan respectively, although the average income of single users in 2021 is slightly higher than in 2020, but it is also significantly lower than in 2019.
In other words, Himalaya is taking a "price reduction" strategy to attract more users to buy membership services.
Red Star Capital Bureau browsed the Himalaya APP and found that on the joint membership page, Himalaya has related joint member activities with Baidu, Tencent Music, Youku members, iQiyi, keep, Dingdong Grocery Shopping, WPS, JD.com, etc. Through similar various promotional means, the user finally feels "worthy".
Of course, the payment rate will not go all the way up, and even this ceiling is still relatively low.
Taking the mainland long video streaming media as an example, the current payment wall of the industry is already very high, and the user penetration rate is also very high. But even so, long-form video streaming platforms don't have a payout rate of more than 25 percent.
When The Himalayas' payment rate peaks, companies may increase revenue (similar to iQiyi) through price increases. But as mentioned earlier, this is a game between the number of payers and the amount of payment, and after the price increase, many members will "run away". It may also be difficult for companies to find the optimal balance between the two.
Advertising revenue: can not support the future of the enterprise
The essence of advertising is the monetization of traffic economy, and Himalaya advertising is mainly in the form of display advertising, audio advertising and brand promotion activities.
Obviously, audio platforms such as Himalaya will be subject to more natural limitations when doing advertising business.
First of all, from the perspective of platform characteristics, unlike video ads, audio ads have a single form of presentation and poor advertising effect, so the bargaining power of advertising is also low. Secondly, the experience brought by audio ads to users is also relatively poor, and it is more difficult for users to accept audio ads. Many netizens said that when they are concentrating on listening to content, as soon as the advertisement appears, it will disturb their thoughts.
All of the above belong to the "natural defects" of Himalaya advertising, which will also affect the willingness of advertisers to deliver.
According to the prospectus, Himalaya introduced programmatic advertising in 2019, and from 2019 to 2021, advertising revenue accounted for 22.8%, 26.3% and 25.4% of total revenue, respectively. Himalaya's advertising revenue is generally relatively stable, and of course it may be more "conservative".
From the perspective of the enterprise, the advertising service revenue and user portraits, the number of users, user stickiness and other related, if the enterprise only cares about "boring money" will greatly affect the user experience, trigger user disgust, and eventually be "abandoned" by the user. Red Star Capital Bureau found that in terms of knowledge, there are many high-praise answers related to "too many Himalayan advertisements", and many users have expressed dissatisfaction with this.
To sum up, advertising can indeed bring a certain amount of revenue to Himalaya, but for pure content platforms, advertising is at most "icing on the cake", and its power space is limited. If Himalaya really uses advertising as its main source of revenue, then the company may also be on the verge of "finishing".
Live revenue: "Basic Skills" is still unstable
According to the prospectus, from 2019 to 2021, the average monthly payment amount of each live broadcast user is 493.4 yuan, 559.6 yuan and 637.3 yuan, respectively, and the amount of paid users in the live broadcast room to the anchor is increasing. However, at the same time, the proportion of Himalayan live broadcast revenue to total revenue is declining, at 22.9%, 17.6% and 17.1% respectively.
This actually shows that although the amount of payment for a single user has gone up, the total number of people willing to pay is less than expected, resulting in the contribution of This revenue to revenue of Himalaya from 2019 is not ideal.
According to the prospectus, the average himalaya mobile live monthly active users in 2021 accounted for only 4.7% of the total average monthly active mobile users. The live broadcast business may not be attractive enough for users.
Source: Himalayas
When it comes to live audio, we have to mention lychees. According to the financial report, for a long time, more than 98% of Lychee's total revenue came from audio entertainment. But now Lychee is also facing the embarrassing situation of fewer and fewer "local tycoons" who tip, and the amount of tips is also declining.
In addition, as far as the live broadcasting business itself is concerned, the business model also has many problems. For example, over-reliance on "people" often occurs in the case of "main broadcast away", resulting in the platform itself being more passive. Finally, the regulatory level is also facing greater challenges, many anchors on the platform in order to win eyeballs, often play a variety of edge balls, before the national K song was interviewed by the relevant parts because of the yellow, bringing a worse impact to the platform.
In general, the current himalayas live broadcasting business is not well recognized by users in its own acres and three-quarters of land. Although the company said that "it will continue to cultivate the interaction between users and anchors and fan circles in the future", the high cost of live broadcasting anchor sharing, fierce market competition, many uncertainties for anchors, and stricter supervision have made Himalaya still face great pressure.
(ii)
Marketing and content costs are the most "money burning"
After talking about the "open source" dilemma of the Himalayas, let's talk about "throttling". It is very conspicuous that judging from the ever-expanding loss amount of Himalaya, the company is currently difficult to "throttle".
Himalaya's continued losses were mainly due to significant expenses such as sales and marketing activities and content purchases.
Burning money to smash marketing, the platform can not quit the addiction
The new and retention of users is inseparable from the marketing investment of enterprises, which often becomes an addiction that the platform cannot quit.
According to the prospectus, from 2019 to 2021, Himalaya's sales and marketing expenditure was 1.219 billion yuan, 1.707 billion yuan and 2.630 billion yuan respectively; in 2021, the proportion of sales and marketing expenses to total revenue returned to about 45% again.
Sales and marketing spending rose again in 2021, with Himalaya saying it was mainly due to increased channel promotion spending to attract and retain mobile users, as well as increased branding and advertising for brand and subscription content promotion.
For Himalaya, although it has become the largest online audio platform in China, the current market competition is fierce, user attention is easily diverted, it is not easy to attract and retain users, and the cost of customer acquisition is probably only getting higher and higher.
In addition, Himalaya also said that it plans to carry out more marketing and promotion activities in the future to attract users and advertisers, increase brand awareness and content penetration, and sales and marketing expenses will continue to increase.
The high cost of content
Content costs remain high, and it's always been a cliché for online audio platforms.
Unlike Litchi, which focuses on UGC (user-generated content), Himalaya takes a diversified approach to content monetization, with its content consisting of PGC (professional user-produced content), PUGC (professional user-produced content) and UGC.
In the specific operation, PGC is mainly composed of publishing houses, online literature platforms, professional content institutions such as Deyun Society, and professionals with IP value such as Wu Xiaobo and Yu Qiuyu.
PUGC is mainly a creator with professional capabilities in the platform, and the platform matches them with appropriate copyright content, which in turn helps them produce professional content. UCG is user-generated content production.
Therefore, Himalaya has two forms of cost in content: one is revenue sharing fee, and the other is copyright, that is, content cost.
Revenue share cost refers to The cost of Himalaya's payment to content creators and third-party IP partners based on the agreed percentage of revenue, which is 33.3%, 31.7% and 27.3% of total revenue from 2019 to 2021, respectively.
Content costs mainly refer to the amortization expenses of licensed copyrights, accounting for 6.2%, 6.3% and 5.7% of total revenue from 2019 to 2021, respectively.
The reason why Himalaya can sit in this position is that the content is rich and high-quality. As a platform that relies heavily on quality content, Himalaya's later investment in this area should probably not be ignored.
However, investing too much will weaken the profitability of the platform, and too low will not attract users with high-quality content creation capabilities, which is a dilemma. According to the prospectus, Himalaya has signed contracts with more than 140 publishers and continues to move forward on the road of IP cooperation.
In summary, in order to enhance brand influence and user stickiness, Himalaya continues to spend a lot of money in channel promotion fees, brand promotion and advertising; at the same time, in order to have a steady stream of high-quality content and enhance users' paid conversions, Himalaya's content costs will remain high for a long time.
brief summary
By dismantling the "income and expenditure" of the Himalayas, it is possible to more intuitively understand why the Himalayas are in a continuous loss.
In the future, Himalaya will continue to invest more money, but whether more users are willing to pay for it and realize the positive cycle of corporate revenue and expenditure is the key problem facing Himalayas today.
Looking at the online audio track objectively, it does release the user's "hands and eyes" very well, but the business model itself also has some problems, such as lack of scarcity and user addiction. For example, users can choose short videos, long videos or games when they are entertained; when driving or doing housework, they can also choose to listen to music; how many opportunities are left for online audio?
Nowadays, the Internet giants are struggling to grab the user time, and the Himalayas, which lack "impact", may be really difficult to win this game.
Red Star News reporter Yu Yao Liu Mi
Edited by Yu Dongmei
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