In the era of information explosion, APP based on the "eyeball economy" attracts people's attention all the time, and the short messages that vibrate from time to time, the short videos that are overwhelmed, and various hot searches.
However, people also need an audio APP to relieve sore eyeballs and loosen stiff cervical spine. On the noisy subway, on a solo drive, in the middle of the night, there is always a need for pure sound to give people an immersive leisure feeling.
This is the "ear economy" that distinguishes it from the "eyeball economy". Himalaya is such an audio leader that provides rich audio content such as audio books, cross-talk reviews, business and wealth workplaces, suspense science fiction, comedy podcasts, and audio live broadcasts. According to China Insight Consulting, himalaya mobile users spent a total of 1,744.1 billion minutes listening to their audio content in 2021, accounting for about 68.3% of the total mobile listening time of all online audio platforms in China.
Key: Gross margin growth
2021 is a year of rapid growth in Himalaya's revenue, and the company has made full efforts in many fields such as subscription revenue, advertising revenue, and live broadcast revenue. In the same year, Himalaya's revenue reached 5.86 billion yuan, an increase of 43.7% year-on-year. Among them, subscription revenue was 2.99 billion yuan, an increase of 49.0% year-on-year; advertising revenue was 1.49 billion yuan, an increase of 38.8% year-on-year; live broadcast revenue was 1 billion yuan, an increase of 39.6% year-on-year.
However, many self-media have criticized Himalaya's losses. According to the prospectus, Himalaya's net profit in 2021 is -5.11 billion yuan. However, this loss figure is not the real operating performance of Himalaya. Among the Internet companies with Hong Kong IPOs, convertible redeemable preferred shares have a greater financial impact, but have less impact on the actual operation of the company, only changes on the books.
In 2021, the fair value change of Himalaya convertible redeemable preferred shares was -3.41 billion yuan. It can be seen that the loss on the books of The himalayas is largely caused by the change in the fair value of the convertible redeemable preferred stock.
Generally speaking, these convertible redeemable preferred shares are treated as liabilities on the books prior to listing, and after listing, they are reclassified from liabilities to equity. In fact, when Meituan, Xiaomi and other companies went public in Hong Kong, there were also a large number of losses caused by convertible redeemable preferred shares.
Compared with the net profit indicator, the gross profit and gross profit margin indicators can better reflect the actual operating conditions of Himalaya. Himalaya gross margins in 2019, 2020 and 2021 were 44.5%, 49.1% and 54.0%, respectively. For the increase in gross margin, Himalaya said it was mainly due to efficiency improvements and economies of scale.
It can be seen that with the reduction of unit costs brought about by economies of scale, The performance of Himalaya is expected to become more and more brilliant. In addition to the convertible redeemable preferred shares, another factor affecting The net profit performance of Himalaya is the sales expense, which was $2.63 billion in 2021, representing a sales expense ratio of 44.9%.
Himalaya costs and expenses are mainly revenue sharing costs and content costs, including payments to ip providers and content creators. Sales and marketing expenses are mainly related to user acquisition costs. As the scale continues to grow, Himalaya expects to further benefit from leveraged operations and economies of scale on the platform, thereby reducing total operating expenses as a percentage of total revenue.
A decrease in the proportion of operating expenses does not mean a decrease in the quality of content. Himalaya said our ability to maintain the quality of our content while continuously managing and controlling revenue-sharing costs and content costs will affect our operating results. We expect the absolute amount of revenue share costs and content costs to increase as our business grows.
The content ecology is becoming more and more abundant, and the monthly activity continues to improve
For platform-based Internet companies, losses are not terrible, what is terrible is the loss of growth, and what is terrible is forgotten by users. Some Internet companies have lost money for a long time, but these Internet companies have maintained growth and have remained at the center of the Internet industry.
Zhou Wei, an early investor in Himalaya and founding partner of CCV of Genesis Partners Capital, said: "Focusing on profits too early can result in the loss of competitive advantage. ”
The answer to the need to consistently invest large sums of money to acquire customers lies in Mindshare (Mind Market Share). Even if Alibaba and Jingdong do not spend money on advertising now, people buy clothes for the first time to think of Taobao, and buying 3C products is the first time to think of JD.com, which is Mindshare.
Zhou Wei explained: "Mindshare, it is very, very important, it determines the native traffic, and you don't have to spend money to buy traffic. For example, from 2013 to 2015, there were a large number of clothing brands on Taobao, especially Korean independent clothing brands, who were keen to 'go out of Tao', that is, to establish independent stations. But these brands later found it difficult. Assuming that its unit customer acquisition cost on Taobao is 100 yuan, the unit customer acquisition cost of independent station construction is likely to rise to 300 yuan. This is why, and the reason why Taobao has taken over the mind world of people. ”
Therefore, when the concept of choosing audio is Himalaya is deeply implanted in people's minds, the cost of traffic will drop significantly, and its profits will naturally improve.
Therefore, the most important thing for Himalayas today is to increase the scale of revenue, improve efficiency and reduce unit costs through economies of scale. And through continuous customer acquisition, seize the share of people's brain-centered spirit market.
In 2021, Himalayas had an average monthly active user of 268 million, including 116 million mobile users and 152 million average monthly active users listening to audio content through the Internet of Things and other open platforms.
Not only the user, but also the audio content of Himalaya is becoming more and more comprehensive and rich. According to CCI Consulting, Himalaya has a relatively comprehensive audio content ecosystem in China, including a leading audio content library and a leading number of audio content creators.
As of December 31, 2021, Himalaya has more than 340 million audio content, corresponding to a duration of about 2.4 billion minutes, covering a wide range of 101 categories of audio content, including personal growth, history and humanities, parent-child emotions, business finance, and entertainment content. In 2021, Himalaya has 13.51 million content creators. Rich content provisioning in turn accumulates a large, highly sticky and highly active user base. In 2021, the average monthly active users of Himalaya's mobile main app ranked first among online audio apps in China.
Audio: Good companion
From the perspective of capital, the Himalayas are gradually occupying the share of the spiritual market. From the user's point of view, Himalaya is a companion. The channels through which people absorb knowledge and enjoy life are not only the eyeballs, but also the ears. Audio has more companion properties than "light and shadow". Audio is a good friend who accompanies users when driving a car, when doing housework, when working out, when the eyes are tired.
With the eyeballs focused on the world of "light and shadow", we need to focus our attention on the screen. The audio can also be played when the phone is on the screen and does not prevent the user from doing other work.
In the prospectus, Himalaya said that we have built a platform for content creators and users to connect and interact with each other, and through this platform, we advocate a new way of life and provide spiritual food for a family for a lifetime. We are committed to redefining the production, sharing and consumption of knowledge, information and entertainment.
Zhou Wei said: "I think audio, as a companion product, has its unique position. In a person's day, it is impossible to be awake and 100% focused on the screen. Then audio, naturally has its value. It's just that its advertising value is lower than video, but it also costs less. Therefore, when the audio finds a competitive equilibrium and enters the 'intensive farming', the profit naturally appears. ”
Zhou Wei stressed: "I only need to determine two points, the first is to determine that its service is valuable; the second is to determine that it is most likely to become a platform." ”
From the value level, audio, as a good companion, has the irreplaceable value of "light and shadow" content. At the platform level, Himalaya has a larger user base in China, and monthly active data continues to rise. In terms of content ecology, Himalaya has a huge content of 2.4 billion minutes in 101 categories.
Since the value of audio exists, and Himalaya is the leading audio platform in China, the value of its platform is beyond doubt.
Diversified traffic monetization
It can be seen that Himalaya's current efforts are to create a valuable audio platform.
These efforts are necessary during the period of platform ecological construction. For example, in order to attract traffic into the Himalaya platform, it will provide users with part of the audio for free, such as sales and marketing expenses to obtain customers, such as increasing investment in scientific research and technology, consolidating infrastructure capabilities, and strengthening the construction of AI and big data.
So when exactly will Himalayas start pursuing profits? From the analysis of content costs, audio is mostly divided into ways, cash flow pressure is small, and content creators and copyright owners are win-win, and content costs are low. This can be seen in the high gross profit of 54% of the Himalayas. In terms of losses, under non-IFRS measures, Himalaya's adjusted net losses for 2019, 2020 and 2021 were 749 million yuan, 539 million yuan and 759 million yuan, and the net adjusted net profit margins were -27.8%, -13.2% and -13.0%, respectively, and the net loss ratio narrowed year by year. According to this trend, Himalaya is expected to achieve breakeven in the next 1 to 2 years.
The ability to monetize traffic determines whether Himalaya has enough "food storage" to defeat competitors.
Currently, Himalaya's main ways to monetize traffic include subscriptions, advertising and live streaming. In 2021, subscriptions, advertising and live streaming revenue accounted for 51.1%, 25.4% and 17.1% respectively. Himalaya has established a diversified monetization model that is highly compatible with products and services. We plan to take a number of initiatives to enhance our financial position, including but not limited to providing users with more customized products and services, improving our monetization capabilities, and notifying the creation of more monetization channels.
Recently, Himalaya and Houlang Publishing Company reached a cooperation to empower each other to promote the multiple monetization of high-quality content and the integrated development of the publishing industry. Copyright cooperation is at the heart of Himalaya's cooperation with publishers. Whether it is the audioization of text or the introduction of e-books through TTS voice technology to achieve "listening and seeing", it aims to maximize the value of content through various forms.
As of December 31, 2021, Himalaya has established business cooperation with about 160 head publishing houses such as CITIC Publishing House, Motie Books, Guomai Culture, Yilin Publishing House, Qingdao Publishing House, China Women's Publishing House, and Shanxi Publishing Group. Text/Mu Yangxin
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