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Producer / Node Finance
It is said that women and children's money is easy to earn, but founded in 2007, with more than 70 million monthly active users of the mother and baby community BabyTree Group (01761. HK), is facing serious survival challenges.
The latest financial report shows that in 2021, Babytree Group achieved operating income of 286 million yuan, an increase of 34.72% year-on-year, and the net profit continued to lose 387 million yuan, with a cumulative loss of more than 1.3 billion yuan in 2019-2021.
In the capital market, BabyTree has long been reduced to a "fairy stock". As of April 20, its share price closed at HK$0.71, with a total market capitalization of less than HK$1.2 billion, compared with more than HK$10 billion at the peak of late 2018 to early 2019, and now there is only a fraction of that left.
Why does the baby tree survive? What is his income background? Is there a second profit curve? This article will explore these issues.
/ 01 /
The revenue undertone is still advertising
BabyTree was once a star enterprise in the industry. As the largest and most active maternal and infant community platform in China, it has been supported by capitals such as Matrix Partners China, Good Future, Jumei Premium, Fosun Group and Alibaba.
Up to now, the company's largest shareholder is the founder and chairman of the board of directors Wang Huainan, and Fosun Group, Alibaba and Good Future are the second, third and fourth largest shareholders of the company respectively.
However, after 14 years of deep cultivation in the field of maternal and infant families, profitability is still the "chronic disease" of Babytree Group. Since 2015, when there are publicly available data, the company has only earned 526 million yuan in 2018, and the rest of the years have been losses.
In 2022, BabyTree upgraded its corporate development mission vision, clearly taking "building a global maternal and infant family happiness ecosystem" as its vision, and "meeting the four major needs of a new generation of maternal and infant users, eugenics, exchange and dating, healthy growth, and preferential shopping, so that global maternal and infant families can share a beautiful life journey".
This means that providing services around mothers and babies is its pursuit of career goals.
Node Finance found that in the current business composition of BabyTree, there are three sections listed in advertising, e-commerce and other businesses including knowledge payment and insurance agency services, but advertising is the absolute protagonist.
According to the financial report, in 2021, Babytree advertising revenue was 256 million yuan, an increase of 35.7% year-on-year, and the revenue accounted for more than 90%.
Although revenue recorded positive growth in the same direction, its advertising business has already jumped over the top and traveled to the downhill section of the "roller coaster" by pulling up the long-term axis.
From 2015 to 2018, riding on the "East Wind" of the digital wave, the size of the mainland Internet advertising market increased from 218.45 billion yuan to 369.4 billion yuan, a compound annual growth rate of 19%; in the same period, it was wrapped up in the industry wave, and coincided with the opening of the full second child in October 2015, Babytree advertising revenue increased from 167 million yuan to 596 million yuan, with a compound annual growth rate of 52.8%.
Since 2019, with the slowdown in the growth of the Internet advertising market and catching up with the "black swan" of the epidemic in 2020, baby tree advertising revenue has decreased significantly, which has also led to a major change in its performance in the first year of listing.
In the view of Node Finance, the income is overly dependent on advertising, and the long-term performance challenge of BabyTree is even worse.
First of all, the essence of online advertising is to chase traffic, the current number of Internet users has been close to saturation, which means that the traffic has also reached the top, the promotion effect of Internet advertising will decline, directly affecting the willingness of merchants to deliver.
Secondly, in 2021, the past "big financiers" finance, games, education and training, due to the advertising supervision once again raised the threshold, have reduced exposure, resulting in a large area of loss of customers in the Internet advertising industry, such as Tencent, Alibaba, Baidu and other large manufacturers, advertising revenue growth rate significantly slowed down.
In addition, the rapid rise of short video platforms such as Douyin, Kuaishou, and Station B has made the Internet advertising form shift from traditional display advertising to KOL advertising, and has spread in an all-round way with the "butterfly effect", squeezing the traditional platform of BabyTree.
According to QuestMobile's 2021 China Mobile Internet Annual Report, IN 2020 and 2021, KOL advertising formats have sustained growth rates of 78.1% and 128%, respectively; in contrast, display advertising ended with negative growth of 9.2% and 7.6%.
/ 02 /
E-commerce business is becoming more and more "small and transparent"
In the early days of development, BabyTree was similar to all content communities, burning money to gather traffic and then relying on advertising to monetize; at the same time, it could not escape the clichés of every Internet player, and regarded e-commerce as a new source of growth.
According to Babytree's prospectus, it has used two models of direct operation and platform to cut into the e-commerce business, and the direct operation mode recognizes all sales as operating income, and the platform model recognizes the commission charged by third-party merchants as revenue.
In 2017, Babytree e-commerce platform and directly operated GMV (transaction amount) were 1.26 billion yuan and 208 million yuan respectively, contributing a total of 333 million yuan in revenue, an increase of 37.5% year-on-year, accounting for 45.6% of the total revenue.
However, in the first half of 2018, e-commerce platforms and directly operated GMVs plummeted to 499 million and 58.6 million, a total of 558 million, down 30.9% from the first half of 2017.
Since then, Babytree no longer directly discloses the GMV data of e-commerce, actively chooses to transfer functions such as back-end e-commerce management to Alibaba, focusing on content output and user-side management and operation, and the income of e-commerce business has dropped sharply from 333 million yuan in 2017 to 0.2 billion yuan in 2020, and the proportion of revenue has shrunk from nearly half to less than 10%, becoming more and more "small and transparent".
In 2021, benefiting from community marketing and the construction of Baoma Assistant distribution system, Babytree's e-commerce revenue rarely grew positively, reaching 0.24 billion yuan, 0.04 billion yuan more than in 2020.
Overall, the company's "e-commerce dream" has failed. Behind it, its most valuable asset- active users have encountered bottlenecks and lost every year.
According to the financial report, from 2016 to 2021, the average number of monthly active users of Babytree changed from 165 million to 76 million, and nearly 90 million users were lost in six years.
In fact, in order to get out of the predicament, BabyTree has also made many attempts, such as paying for knowledge, laying out offline early education, building a financial and health service system, and acquiring a smart hardware company Future Chaser...
However, reflected in the finances, the impact of these moves on the performance of BabyTree is minimal, and other revenue in 2021 is 0.02 billion yuan, compared with 0.04 billion yuan in 2020.
On the other hand, however, Babytree's monthly active users continue to grow, that is, the core monetization user traffic it identified in its earnings report increased from 18.9 million in 2019 to 19.9 million in 2020, and further increased to 21.6 million in 2021.
According to the latest report published by Bida Consulting, Babytree Pregnancy App is the mobile application with the highest overall satisfaction, the number of monthly active users in the industry, and the widest user coverage rate; according to the NIELSEN IQ data of the world's famous market monitoring and data analysis company, Babytree has won the leading position in the maternal and infant industry such as brand recognition, user share and reputation.
However, in the view of Node Finance, no matter what kind of "killer weapon" is held, in addition to advertising, the current baby tree has not found a clear profit curve.
The reason is that, aside from the macro population birth rate is low, some of the people covered by the mother and baby APP have a strong life cycle, and the high stickiness of the pregnant partner may be up to 10 months, generally only before the child is 2 years old, frequently in and out of the community, and then slowly fade out, it is difficult to cultivate user loyalty.
/ 03 /
Can betting on C2M break growth?
Faced with the pressure of profitability, Babytree said in the financial report that it wants to create a second growth curve: C2M and O2O business models, and plans to launch an exclusive selection in 2022.
The so-called C2M (customer-to-factory model), simply put, is to link the supply side at one end, and link the majority of consumer groups at the other end, short-circuiting the intermediate links such as inventory, logistics, total sales, distribution, etc., so that users can buy high-quality and personalized products at low prices.
Theoretically, based on the huge number of users, rich operational experience and good reputation precipitated for more than ten years, the endorsement of the global brand of Fosun Group, the strong endorsement of the global brand of the major shareholder Fosun Group, the priority docking of multi-industry empowerment, overseas project opportunities, research and development, manufacturing, logistics and other aspects of assistance, Babytree Power C2M has multiple advantages.
However, in practice, C2M is not a new theme, the necessary mall, NetEase Yanxuan, Taobao special edition, Pinduoduo's previous "new brand plan" are all this model, and the inherent defects are also obvious.
In the context of Industry 4.0, in the era of excess economy, the level of productivity has been developed enough, the contradiction between supply and demand has changed from unification to differentiation, the manufacturing process has changed from merchant-driven to customer-driven, and design resources are the main bottlenecks.
In addition, C2M personalized products are often linked to pre-sales, and the waiting time is long, which is obviously not in line with the user's consumer psychology, and there are natural shortcomings in terms of timeliness.
Back to the essence, no matter how the form is transformed, it is actually selling things, which is equivalent to putting a "vest" for the previous e-commerce model.
Node Finance noted that under the trend of consumption upgrading, after the liberalization and implementation of the three-child birth policy, the maternal and infant category has become another sunrise business opportunity in the field of e-commerce segmentation. Zhongtai Securities predicts that the trading scale of the mainland maternal and infant commodity market will exceed 5 trillion yuan in 2023.
Smelling the breath of making money, the current comprehensive e-commerce platforms such as Taobao, Tmall, JD.com, Pinduoduo, Vipshop, Dangdang and so on are all competing for the mother and baby track without exception; and the mother and baby communities such as the parent network, the Pacific parent-child network, and the mother network that compete in parallel with Babytree also bet on e-commerce; as well as the e-commerce platform that specializes in selling mother and baby products, such as Beibei network, hot mother mall, good child, mother and baby home, honey bud...
In other words, the C2M that BabyTree is now committed to is only "old bottle of old wine", and the market space is basically filled, and it is naturally difficult to bring new imagination space for its performance in the capital market.
Or BabyTree can also try other subdivisions of mother and baby, such as the Confinement Club.
According to the Frost & Sullivan report, the market penetration rate of Chinese mainland confinement center is less than 5%, while the penetration rate of the mature market of The confinement center in Taiwan is as high as 60%, and the "long slope" characteristics are prominent, and it is currently in a period of rapid development, and the market size is predicted to reach 16.78 billion yuan in 2025.
A senior investor in the maternal and infant health track told Node Finance: "With its first-mover customer advantage and precipitated user base advantage of the mother and baby community, and the word-of-mouth effect under the blessing of the brand community dividend, BabyTree stands in the boom "outlet" to further extend to the back end, lays out or acquires offline high-value-added confinement clubs, and is accompanied by refined operation, focusing on professional service capabilities, and is expected to build a full-link connection development mode from mother and baby to family." ”
In addition, in recent years, the decline in real estate, hotel properties and other vacancy rates have climbed, and the confinement center is a necessary consumption under the trend of a better life, and the two matching will help reduce the pressure of heavy assets at the cost of confinement.
However, we should also see that although the vision is beautiful, the reality of the baby tree at this stage is still very cruel. The capital market pays attention to profits, and how to turn around losses is still a "difficult problem" for companies to rack their brains.
Node Finance Statement: The content of the article is for reference only, the information in the article or the opinions expressed do not constitute any investment advice, and Node Finance does not assume any responsibility for any action taken as a result of using this article.