Image source @ Visual China
Text | Cockroaches
In the hustle and bustle of the US stock market, the privatization of the Blue City quietly took a step forward.
On April 30, the former "first share of the pink economy", the Blue City Brothers (BLCT.US), announced that it had officially signed a privatization agreement. In the buyer group, we saw a particularly conspicuous figure that did not appear in the name - Akako Castle.
The outside world speculates that for Chizicheng, this is obviously not a simple financial investment, but a strategic layout. Because the two have two highly overlapping keywords in the business - "social" and "going to sea".
In the early morning of May 7, a week after the announcement of the signing of the privatization agreement, Ma Baoli, founder and chairman of Blue City Brothers, posted on his Blued account: "I'm sorry for everyone, I can't continue to guard here, another way to accompany you..."
This further confirms the conjecture of the outside world. Ma Baoli's so-called "alternative way" means that he may no longer be the one who decides the future direction of the Blue City. Not surprisingly, Akako City will become a crucial core player in the future picture of the Blue City.
As a result, a new story about Chinese social products going global is also coming out.
01 Blue City Brothers, standing at the crossroads
In this world, there are 5 to 10 LGBTQ (sexual minorities) for every 100 people. The large number of LGBTQ people with strong consumption power and strong social needs constitute the huge cake of "same-sex social networking".
According to the 2020 Global LGBTQ Platform Industry Development White Paper released by F sullivan, the number of LGBTQ people in the world was about 450 million in 2018. In 2023, this number will reach 590 million people, with a compound annual growth rate of 5.6%.
The global LGBTQ community is not only a sizable number, but also has more than average income and more substantial spending power. The report shows that the average income of the LGBTQ group is expected to reach $12,100 by 2023, which is significantly higher than the $9,500 of the pan-population. At the same time, the size of the global LGBTQ market is expected to reach $5.4 trillion.
However, on this "golden track", the Blue City brothers stumbled.
In July 2020, the Blue City Brothers knocked on the door of the New York Stock Exchange as the "first share of the global pink economy". According to the prospectus, Blued has gained 49 million users worldwide since its launch, covering more than 210 countries and regions, with an average MAU and an average DAU of 6 times and nearly 7 times that of the second largest in the same industry in China, respectively, and has become the largest online LGBTQ community in India, South Korea, Thailand and Vietnam.
That is to say, Blue City is in an absolutely first position in the domestic vertical track, and has also formed a scale in many overseas markets, which can be said to be standing on an excellent starting line.
But after the listing, the troubles of Blue City followed. On the one hand, domestic supervision and public opinion pressure follow, and it is difficult to make the plate bigger under the constraints. On the other hand, Chinese stocks have suffered wave after wave of storms in the US stock market, and Blue City has not been spared, and in the case of performance growth, the company's market value has fallen to 1/10 at the beginning of the listing.
In the latest financial report, the plight of Blue City began to appear. In 2021, the net profit of Blue City Brothers was -310 million yuan, down 1493% year-on-year. The financial report clearly pointed out that due to the obstruction of the domestic live broadcasting industry, the development of the company's related business was limited.
However, this report card of Blue City is not a bleak. First, the company's total revenue reached 1.077 billion yuan, which still maintained growth. On the other hand, although domestic development is limited, Blued's growth overseas has not stopped. Blue City also explained in the latest financial report that the paid users of the company's live broadcast service remained on the rise, mainly due to the contribution of overseas markets.
From 2019 to 2021, the overseas scale of Blue City Brothers continued to rise, and the overseas market revenue increased from 50.08 million to 128 million. In terms of user scale, the growth rate of overseas markets also far exceeds that of China.
Standing at the crossroads, where the Blue City is going next, the answer is already very obvious. Overseas market space is huge, the acceptance of LGBTQ culture is higher, the willingness of users to pay is stronger, and the policy risk is relatively low. Blue City regards overseas markets as the strategic focus of the future, which is a very reasonable choice.
However, it is undeniable that the lack of global genes, insufficient overseas localization experience, and weak commercialization capabilities have also brought great challenges to Blued's "going to sea".
The latest data shows that the number of overseas users of Blue City Brothers has reached 40%. However, in 2021, the revenue of its overseas business will account for only 12% of total revenue. That is to say, Blue City is far from learning to tap the value of overseas users, so that good products can also obtain matching income in overseas markets.
And these are precisely the places where Akako City, which has been out of the sea for ten years, is best at.
02 Patch up the puzzle, the "Yang Plot" of Akako Castle
Similar to the American stranger social giant Match Group, the basic way of playing Naked City is the "product matrix". Multi-product, multi-country, multi-population to meet a variety of differentiated segmentation needs. The LGBTQ population is its currently untapped area.
According to the data, in 2023, the global LGBTQ online social market will reach $3.842 billion, and the MAU will reach 1.03 billion (including pan-social platforms and LGBTQ community vertical social platforms).
In the face of such an attractive cake of LGBTQ social networking, Blue City, which has been working in the industry for many years, has a highly viscous user base disk in the world, and has been killed in a special market environment, has naturally become an excellent starting point for Naked City to cut into this track.
For Akatsuki, if it finally wins the Blue City in the valuation depression, it means that at a very low cost, it has obtained a business segment with a monthly income of 7.5 million yuan and an annual income of more than 1 billion, and quickly opened up a new growth space of billions of dollars.
Therefore, the puzzle of using the Blue City Brothers to supplement LGBTQ social networking is a clear and clear "yang plot".
Moreover, the development of this "Yang Conspiracy" has a foreseeable direction, because similar plots have already appeared once.
In the past few years, Chizicheng has invested in the open social platform MICO several times, completed the merger of it in 2020, and continuously used its own technology and traffic advantages to support the development of IXO, making MICO bigger and achieving a leap in its own performance.
From 2017 to 2019, MICO's annual revenue rose from 58 million yuan to 382 million yuan, maintaining an explosive growth trend. After the official incorporation into Akako City in 2020, MICO's revenue continued to "take off", and some analysts said that it is now a product with an income of more than 1 billion.
At present, MICO's business covers the world, with more than 100 million users in more than 150 countries and regions, topping the social app download list in more than 70 countries and regions, and ranking in the top 10 in the non-game app overseas revenue list released by data.ai.
Like an "engine" that drives social products to go to sea, Naked City has made products run at high speed overseas. Last year, it successfully sent a newly developed product of its own overseas. This product, called Yumy, began operations in March 2021, and has exceeded 50 million global downloads in less than a year, and has shown good commercial potential. At present, Yumy has entered the top 10 of the social app best-seller list in 49 countries and regions.
Obviously, this "social engine" has precipitated a mature set of playing methods, which can make one social product after another shine overseas.
"Product replication" is based on the research and development capabilities of its technical middle office and a deep understanding of various overseas markets, constantly introducing new products to meet the differentiated needs of various regions and various groups of people; "national replication" is based on the precipitation of its operation middle office, and the localization team of overseas markets, so that a product continues to open up more countries.
More specifically, this "replicable" capability includes customer acquisition ability, monetization ability, operation ability, brand building ability, industrial chain ability, content review ability, customer service ability, risk prevention and control ability and so on in overseas markets.
It is conceivable that if Blue City really becomes the "puzzle" of Akako City, these abilities will quickly plug the wings of Blue City to fly overseas.
03 A new story of socializing
Judging from the pricing of the agreement signed, this is an extremely cost-effective transaction for Akako Castle.
According to the announcement, the purchase price of Blue City is about 1.6USD/ADS, which is about $59.95 million based on a total share capital of 37.467 million shares. The financial report disclosed by Blue City shows that its operating income in 2021 reached 169 million US dollars, and the acquisition price-to-sales ratio was as low as 0.37 times.
Comparing the price of Kunlun Wanwei's acquisition of Grindr, we can see the high cost performance of this transaction.
From 2016 to 2017, Kunlun Wanwei invested a total of $245 million to acquire a full stake in the LGBTQ social platform Grindr and sold it for $620 million in March 2020. At the end of 2019, Grindr had a global MAU of 10 million, which calculated that Grindr's single active user value for that year was about $62.
The price of blue city privatization is about $60 million, calculated by its newly disclosed 7.5 million MAU, the single active user value is only about $8, less than 1/7 of the former, which shows that its price is low.
Back to Grindr, although Kunlun Wanwei was eventually forced to sell it, the world's largest LGBTQ social platform also allowed its investors to obtain investment returns of up to nearly 3 billion yuan. In addition, Grindr's continuous growth in performance and extremely high user value also confirm the huge potential of the LGBTQ social track from another dimension.
A question that comes with this is that in the past two years, China's Internet products are challenging European and American giants in various segments of the track, and have repeatedly succeeded, so does Blue City have any hope of challenging Grindr?
If the end game of the story is the return of the puzzle and the Blue City has received the blessing of the Naked City, then what kind of chemical reaction will occur when "China's largest LGBTQ social platform" plus "China's largest social overseas company"?
In any case, the result of 1+1>2 is obviously worth looking forward to.