Behind the major adjustment of the internal organizational structure of youzu network

Economic Observation Network reporter Huang Yifan at the end of 2020 Youzu Network (002174. SZ) The ripples caused by the turmoil are slowly dissipating.

On April 30, Youzu Network's 2021 performance was submitted. According to the disclosure, the company's operating income in 2021 was 3.204 billion yuan, a year-on-year decrease of 31.87%. In terms of profit, the company achieved a turnaround, with a net profit of 168 million yuan, an increase of 356 million yuan compared with last year.

According to the financial report, there are several major factors in the decline in youzu's revenue last year, in addition to the high revenue base caused by the impact of the epidemic in 2020, due to the focus on the main projects, the key new game products that were originally scheduled to be launched in the reporting period have received more resource investment and extended the development cycle, while the company has terminated some non-strategic non-boutique products; in addition, the company has reduced the amount of inefficient advertising last year.

The reporter learned from Youzu Network on May 3 that due to the company's implementation of focus and lean growth strategy, advertising has paid more attention to precision, and Youzu has improved the gross profit margin of products. In addition, during the reporting period, the company reduced the debt ratio, optimized the capital structure, and reduced the debt interest expense and thus reduced the financial expense. The above two factors have enabled the company's net profit to increase year-on-year and achieve a turnaround.

It is worth noting that in the fourth quarter of last year, Youzu upgraded its strategy, including focusing on the integration of card tracks and global research and transportation in research and development.

In order to break the regional boundaries and accumulate diversified distribution means, following the adjustment of the R&D structure, Youzu has adjusted the distribution structure. It is understood that this year, Youzu expects to have 4 new games launched in the global market throughout the year.

Organizational structure and incentive adjustment

Last year, after clarifying the "focus" strategy, Youzu Network tilted its internal resources to game research and development.

Subsequently, in the first half of last year, Youzu adjusted the organizational structure of the R&D department, upgrading the five major studios of The Youth Studio, the War Studio, the Qianlong Studio, the Baichuan Studio, and the Rice Ball Studio to the first-level departments, reporting directly to the CEO and the management committee, with more independent operation and decision-making power.

As for the number of people in the above five studios, the company did not disclose too much. It is understood that the number of R & D personnel is dynamically adjusted with the different stages of product research and development.

In June, Youzu established the Innovation Institute, which is responsible for technological breakthroughs, artistic exploration, innovation category extension, and support for studios and tracks. The company has made it clear that it will invest no less than 10% of its gross investment in the research and development and investment of next-generation technology products, innovative projects and products every year.

"The innovation institute is set up to lay out the layout for the future, improve the quality and differentiated competitiveness of self-developed products for a long time, and look forward to launching innovative game products." The Youzu side told reporters.

In September last year, when accepting institutional surveys, company executives revealed at the meeting that in addition to the above 6 R & D output institutions, including Germany's Big Point, Youzu has a total of 7 R & D output institutions, the smallest team also has nearly 100 people, each team can support the research and development of 2 products, forming at least 12 product pipelines.

In the second half of the year, after the management determined the strategy of "global card +", Youzu immediately adjusted the structure of the distribution department and established the global distribution division.

According to the reporter's understanding, the purpose and purpose of youzu's adjustment of the distribution system structure are mainly two: First, break the boundaries of the region, so that the distribution talents who were originally limited to the region have a larger global market stage. Second, accumulate diversified means of distribution, and ensure the vitality of the organization and the diversity of distribution capabilities through the integration and reorganization of different types of teams.

At the same time, on the basis of the change of organizational structure, Youzu has introduced a series of supporting mechanisms for releasing the vitality of innovation, such as a new award incentive system for employees within the company. In June last year, Youzu announced the "20+X" incentive policy on the company's 12th anniversary, promising no less than 20% of the operating profit to the business team. In addition, the Company passed the 2021 Stock Option Incentive Plan as well as the Second Phase of the Employee Stock Ownership Plan.

How to understand the new strategy

Globalization and going to sea are not the strategies that nomads have only proposed this year.

As one of the earliest domestic manufacturers to launch games abroad, the proportion of overseas revenue of Youzu Network in the past year has accounted for 62.71% of the total revenue, an increase of 7.60 percentage points over last year. The gross profit margin of overseas business revenue was 44.33%, an increase of 7.66 percentage points year-on-year.

According to the "2021 China Game Industry Report" released by the Game Working Committee (GPC) of the China Music and Digital Association and the China Game Industry Research Institute, in 2021, the actual sales revenue of China's game market was 296.513 billion yuan, an increase of 6.40% year-on-year. Among them, the mobile game market revenue was 225.538 billion yuan, an increase of 7.57% year-on-year, accounting for 76.06% of the overall market. In addition, the revenue of China's overseas game market was 18.013 billion US dollars, an increase of 16.59% year-on-year.

There is no doubt that globalization is already the trend of the times in the current industrial development. On this basis, in the fourth quarter of last year, the management of Youzu Network proposed a new strategy of "global card +", and at the same time adjusted the internal issuance structure to adapt to the current situation.

Chen Fang, CEO of Youzu Network, has said that under the new structure, there may be different distribution teams to bid on the same product, and finally the winning team will be responsible for the issuance and operation of the global region.

For the new strategy, CEO Chen Fang explained that the so-called globalization is not a desperate bet to develop overseas. He believes that Chinese mainland is still the world's largest mobile market, and with the increasing standardization of industrial supervision, the increasing demand for quality of domestic players, and the continuous matching and upgrading of the supply capacity of domestic manufacturers, the ceiling of the domestic market will continue to increase.

In the "Letter to the Highest Priority Investors" released by the official public account platform of Youzu Network in early November last year, Chen Fang said, "The benefits are directly proportional to the difficulty." But if we do overseas market development because we are avoiding the difficulty of the domestic market, it may be the same as choosing to change another lane that looks more smooth when traffic jams — the result is to be stuck in a more congested lane with a group of people with the same luck mentality. ”

This is also the reason why Youzu has adjusted its distribution structure.

At the same time, the proposal of card +" means that the youzu are aware of their own accumulation and strengths, and want to strengthen the moat of their products through gameplay, performance, and combination with other products. Youzu said that "card +" has two meanings, on the one hand, the evolution of cards (Plus), that is, continuous optimization and improvement in terms of gameplay and performance interaction; on the other hand, the integration of cards (Mix), the design concept and fun of cards are combined with other types of products to integrate and innovate. "Let users enjoy the core fun of the card, but not stick to the form of the card, this familiarity plus freshness, this is the card +."

According to the financial report, there are currently more than a dozen products in the research of Youzu, and there will be a series of R&D or agent game reserves in line with the strategy in the future, including self-developed games including the first global theme card game "CodeName J" of Juvenile Studio, the placement card game "CodeName IW", the innovative card game "Codename Walker", the card + SLG game "Codename G", the shooter game "Codename Dawn", the card + action game "Codename T3" and so on.