"On the one hand, the industry is involved in the bayonet, and on the other hand, the enviable high gross profit margin, such a contradictory phenomenon, it happens to e-commerce." And the short video that is hot on the track does not make money as imagined. "
Written by | Wang Haitian
Kuaishou and Pinduoduo have both handed over their 2021 financial results, although placed in the vertical timeline, their financial reports have their own advantages and strengths, and they have reached the previous market expectations. But pulling out a part of the specific data and putting it in the field of e-commerce and short video where they are located, you will find some new information.
From Pinduoduo's 2021 Q4 financial report, we can see that sales and marketing expenses continue to decline, and in the fourth quarter of 2021, they have fallen to 42%, at an all-time low. Secondly, the R&D and management expense ratios are also at historically low levels, at 7% and 1.5% respectively. The total cost ratio of these three expenses of Pinduoduo is 50.5%.
Due to the short time to market of Kuaishou, we can only see the annual rate situation of the last four years, and we cannot split it down to each quarter, but this does not affect the analysis results.
As can be seen from the figure, in the "three fees" of Kuaishou, in addition to the slight decline in the management and R&D expense rate in 2019, 2020 and 2021 have shown a continuous upward trend. In particular, the sales expense ratio has been on the rise for the past four years. For the whole of 2021, Kuaishou's three expense rates were 54.5%, 18.4%, and 4.2%, adding up to 77.1%.
Look at the data in another dimension. Compare the gross profit margins of Pinduoduo and Kuaishou: Pinduoduo is 76.1%; Kuaishou is 42%. After deducting three fees, Pinduoduo easily achieves a profit margin of more than 20%, while Kuaishou can easily fall into negative numbers. In 2021, Kuaishou's operating margin is -34.2%, compared to -17% in 2020.
Even for a long time, in the past 12 quarters, Pinduoduo's gross profit margin was less than 60% in only two quarters, and the remaining ten quarters exceeded 60%. The gross profit margin of Alibaba's core e-commerce has also been more than 60% in the past ten quarters, and the group's operating profit margin has remained at 20% for many years.
A more intuitive data is that Pinduoduo's operating profit for the whole year of 2021 was 6.9 billion yuan, an increase of 173.5% year-on-year, and Kuaishou's operating loss in the same period was 27.7 billion yuan.
On the one hand, the industry is rolled into the bayonet, and on the other hand, the enviable high gross profit margin, such a contradictory phenomenon, it happens to e-commerce. And the short video that is hot on the track does not make money as imagined.
This result seems to be the opposite of the public's sensory impression: it is said that e-commerce is rolled in, and short videos are popular. Reflected in the data, it is short video burning money, e-commerce profits.
What went wrong with the gap between facts and imagination?
Judging from the financial report data of Pinduoduo and Kuaishou alone, one of the important reasons is that the cost of maintaining platform content of Kuaishou is much higher than that of Pinduoduo.
Merchants come to Pinduoduo to open stores, and the platform does not need to give subsidies. For some strategic categories, such as agricultural products, the company does not charge merchant commissions. Ten billion subsidies such as such a promotional method, Pinduoduo to give more traffic subsidies, only in some categories, Pinduoduo to give merchants cash subsidies, such as Apple mobile phones and other popular products.
The expenditure of tens of billions of subsidies, for Pinduoduo, is reflected in the report, which is basically negligible. Because the company's gross profit margin and net profit margin are almost the same as Ali's core e-commerce.
A large part of Kuaishou's sales costs are incentives and shares for creators. If Kuaishou wants to enrich the content, it needs to introduce a large number of creators.
For the full year of 2021, Kuaishou's "revenue sharing costs and related taxes" expenses amounted to $24.7 billion, accounting for 30% of revenue. The high cost of this part directly leads to the low gross profit margin of Kuaishou.
The core reason for the high cost of sharing is that Kuaishou has weak pricing power over content creators. That is to say, Pinduoduo's pricing power over merchants is higher than Kuaishou's pricing power over creators.
This part of the cost is difficult for Kuaishou to save. With no or fewer points, the amount of content for creators will decrease or flock to other platforms. This is all the result that Kuaishou can't bear.
Of course, the most important reason is that in the short video track, there is a more powerful company in front of Kuaishou: ByteDance. In addition to byte vibrato, there are also B stations, Weibo and so on. The competition for short videos caused by many players is extremely fierce. And everyone's content costs are frighteningly high.
These platforms have no choice but to continue to burn money on creators.
In addition to the cost of content, there is another obvious difference between the two companies, which is sales and marketing expenses. Of the three fees of the two companies, the largest is the sales and marketing expenses (S&A). From the perspective of the rate trend of the two companies, Pinduoduo continued to decline, while Kuaishou continued to rise. The reason behind this is also thought-provoking.
In 2019, Pinduoduo had two quarters of S&A fees exceeding 100%. It can be seen that the company's core appeal at that time was still to pursue user growth. The growth of Pinduoduo, MAU and DAU in 2019 is the most important thing for the company.
Facts have also proved that in the first quarter of 2019, Pinduoduo's monthly active customers were 290 million, and the annual active buyers were 443 million. Now the two figures are 733 million and 868 million, respectively. At that time, the user size was only half that of the current one.
Since the company's core priority is to pursue user growth, it makes sense that sales and marketing expenses account for 100% of revenue. Among the Internet listed companies, marketing and sales expenses accounted for 100% of the company's revenue in the current quarter, and only Pinduoduo has done so.
Pinduoduo dares to do this, which is the judgment made by Huang Zheng and the company's management based on industry trends. The capital market has also responded positively to this risky move, as exemplified by the continuous rise in stock prices. It is also the recognition of pinduoduo shareholders and investors to the company's strategy and strategy. Even looking back at 2019's marketing expenses today, it is an investment with a very high cost performance ratio and a higher ROI.
In contrast, Kuaishou's marketing and sales expenses in 2018 and 2019 were unusually conservative, accounting for only 21% and 25% of revenue. And in the past year, the year-on-year growth rate of DAU has continued to decline, indicating that the slowdown in user growth is already a fact.
One of the reasons why Kuaishou's strategy was more conservative at that time was that Kuaishou preferred to achieve organic growth in users. In Su Hua's interview, we can see the expression and attitude of "natural growth" many times. From Kuaishou's early slogan "Record the world, record you" can also see Kuaishou's product philosophy. Suhua believes that a good product, users will get a good natural growth. Including community and distribution mechanisms, Kuaishou also adheres to more inclusive values, and the algorithm minimizes interference with users.
Another reason is that in the context of the competition of Douyin turning out to be a continuous harvest of users, management may feel that the number of users of short videos has peaked, and there is no need to grow by spending money to buy volume. At that time, the CEO of Kuaishou was Su Hua.
This situation was transformed in the K3 campaign of the Spring Festival in 2020. Perhaps it was the surge in the size of Douyin and Pinduoduo users that made them realize that the situation was tense. So he bid farewell to the Buddhist system and quickly joined the war passively.
For the whole of 2019, Kuaishou's marketing and sales expenses were only 9.8 billion yuan, corresponding to 58 million yuan for the new DAU, equivalent to a new DAU acquisition cost of 168 yuan.
For the whole of 2020, Kuaishou's expenditure surged to 26.6 billion yuan, corresponding to 151 million new DAUs. Equivalent to one DAU, the new acquisition cost is 176 yuan. This year is also the moment for Kuaishou to complete 300 million DAUs.
At this time, Kuaishou's investment for growth strategy was barely established, and it was the mission of Su Hua and Cheng Yixiao to keep the position of the second oldest in the short video track. With the continuous expansion of the scale of Douyin and the entry of WeChat video numbers, 2021 is not friendly to Kuaishou.
In 2021, Kuaishou's marketing and sales expenses continued to rise, reaching 44.1 billion yuan. This includes the cost of launching and naming the Olympic Games, as well as the expenses for overseas business expansion. Corresponding to the new DAU is 44 million. Kuaishou also admitted in the financial report that it is partly because of the fierce competition for traffic acquisition. Equivalently, at this time, the acquisition cost of a new DAU has increased many times, and it is ridiculously expensive.
If marketing expenses are also understood as an investment, it is obvious that Huang Zheng has a deeper understanding than Su Hua. He has elaborated on the relationship between fees and assets:
"When Buffett talks about investment targets, he often mentions a concept: moats of business, if we treat various decisions in the entrepreneurial process as investment decisions, then we have to distinguish which assets and which are costs that we exchange for time and money, and those that are beneficial to the moat that deepen business over time are often "assets", and those that are more unfavorable to ourselves over time can be regarded as expenses."
Pinduoduo and Kuaishou have put in the past, who spends money is the fee, who exchanges it for assets, the capital market knows, and their management knows better.