On January 25, Weimob Group announced that Sun Taoyong, the company's chief executive officer, increased his holdings again, and increased his holdings of 1.5 million shares of the company at an average price of HK$1.95 per share through the entity controlled by Yomi.sun Holding Limited, and on January 24, Sun Taoyong has increased his holdings by 2.454 million shares, with a cumulative increase of 3.954 million shares in two days, and the shareholding ratio rose to 11.63%.
The founder's increase in holdings was supposed to be a sign of confidence, but combined with the two previous changes, the move had the effect of reassuring stunned investors.
On January 16, Weimob released a potential business restructuring plan, considering selling more than 50% of the company's equity based on the overall valuation of Shanghai Weimob Culture Media Co., Ltd. of no less than 3.6 billion yuan, and Weimob's stock price fell sharply the next day. Five days later, on the 21st, Weimob announced that the company had received a series of constructive feedback from shareholders on the potential transaction, and after careful consideration, had decided to terminate the potential business restructuring plan. Decisions can be terminated, but investors' lost confidence can never be regained.
The big move and the withdrawal at the speed of light have delayed between major decisions, making it more difficult for the market to figure out Weimob's plans. More importantly, as CEO, how does Sun Taoyong plan for several major businesses, and as the founder, he changes his orders in such a major decision because of the opinions of which shareholders, will this exacerbate investors' concerns about Weimob's dependence on Tencent's traffic at the business level?
The main business, it is difficult to survive with a broken arm
According to the announcement on the 16th, Weimob Group's business is divided into two sectors:
Weimob Enterprise Service as a Subscription Solution (provides SaaS software for e-commerce retail, catering, local life and other industries to help merchants operate private domain traffic)
Weimob Marketing as a Merchant Solution (on the basis of the former, it provides customers with one-stop marketing operation services on multiple social networking service platforms)
Shanghai Weimob Culture Media Co., Ltd., a subsidiary originally planned to be sold, is the domestic operating entity of Weimob Marketing.
According to the announcement, in 2022, Weimob Enterprise Service and Weimob marketing revenue accounted for about 70.2% and 29.8% of the Group's total revenue, respectively. However, according to its 2023 interim report, in the first half of last year, Weimob's enterprise service business revenue accounted for 58.3%, and marketing business accounted for 41.7%. The proportion of revenue from marketing business is still rising, and the video account is in the bonus period, the growth rate and profit performance of this business are also outstanding, and the importance to the company's overall operation is self-evident.
Weimob's explanation of this transaction plan is that it is currently conducive to reducing the impact of Weimob's marketing working capital on the Group's cash flow, and in the long run, it is beneficial for the target company to obtain valuation and financing channels in the domestic capital market as an independent entity. To put it bluntly, it is the group itself that needs to solve the current capital turnover, and the future subsidiaries will be more convenient for market financing, which is a signal of "lack of money".
This plan can be seen in connection with the organizational change that took place last October. At that time, Sun Taoyong announced through a letter to all employees that Weimob had changed from a group business group system to a business subgroup system, and established three sub-groups: Weimob Enterprise Service, Weimob Marketing, and Weimob International, to promote the independent accounting, decision-making and development of each business system, and fully explore the different operating mechanisms and market possibilities of each business system.
Combined with the official explanation, the company believes that the restructuring plan will help the company focus its resources on the long-term development of the enterprise service business, which shows the importance of the future growth of the SaaS business, although the current revenue growth rate of the enterprise service is far less than marketing.
Regarding the abrupt suspension of the transaction, the announcement stated that "a series of constructive feedback received from shareholders on a potential transaction" did not reveal much information, but it is almost certain that it will be difficult to part with either side.
On the one hand, marketing services are Weimob's current most hematopoietic business, and the cost of selling part of its core business is too great. More importantly, "New Position" has reminded in the previous article "Weimob Marketing: Unwilling to Hang Tencent Alone, Dare Not Get Close to Douyin" that Weimob needs to pay attention to the risks caused by relying too much on Tencent's ecosystem. This also makes people wonder if the shareholders who put forward the above opinions will be Tencent, one of the major shareholders.
On the other hand, "New Position" has discussed in the article that the moat of Weimob marketing is not high, and there is a risk of over-reliance on the external ecology. In the second half of the Internet, the competition for advertising agencies is becoming increasingly fierce, and the growth prospects of marketing services may not be as technical as SaaS in the long run. It is also important to revitalize the company's various business lines.
Obviously, if Weimob wants to save the confidence of investors, it needs to at least answer who is "swaying" Weimob and which way it is ready to lead Weimob to run.
There is still a long way to go for new business
The outside world generally understands the original sale plan as an emergency, but Weimob is facing another urgent problem.
First of all, the sword of loss hanging over the enterprise is still dazzling.
From 2020 to 2022, the company's losses were recorded at 1.16 billion yuan, 780 million yuan, and 1.83 billion yuan respectively, plus a loss of 450 million yuan in the first half of 2023, with a cumulative total of more than 4 billion. Weimob's sales expenses in the first half of 2023 will be 844 million yuan, a year-on-year increase of 7.80%, twice as much as R&D expenses.
On the other hand, Weimob's current "rescue plan" still needs to test its effectiveness for a certain period of time.
The shift to large customers is in line with the general trend of the industry. Due to the business environment, small and medium-sized enterprises have generally reduced their budgets in the past two years, especially SaaS-related spending, so Weimob has chosen to focus on serving "industry leading users with a lighthouse effect", and improve revenue by increasing the average customer value, which can be regarded as taking advantage of the trend.
In the first half of the year, Weimob's smart retail revenue was 312 million yuan, accounting for 44% of the subscription solution revenue, of which the average order revenue per user of brand merchants reached 224,000 yuan, and the year-on-year growth rate of group customers was 12%.
The "AI+SaaS" solution, which is more incremental and aims to use AI to enrich application scenarios and give customers more functional options based on new technologies, can be regarded as catching up with the current technology trend.
However, it should be pointed out that Weimob still has a big gap with cloud vendors such as Baidu and Ali that have invested heavily in large model training at the underlying technical level, and it has room to design the final solution according to the use scenario. At present, neither the giants nor the mid-waist have given a particularly convincing case on the proposition of AI-enabled marketing scenarios.
In addition, Weimob listed its international business as a potential new business growth point for the company in the announcement, especially in the Middle East, where there are a number of projects to be signed. Combined with the previous restructuring of the company, the international business is separated into one of the three major sub-groups, which shows that the importance of this sector is rising.
At present, cross-border e-commerce is in the wind, and the international business direction of SaaS can not only help international merchants "localize" and access the domestic digital business system, but also provide cross-border digital solutions for domestic merchants going overseas. If we can seize this wave of traffic going to sea, we may be able to find a new growth engine.
According to IDC data, the size of the mainland enterprise-level SaaS market in 2022 will be 57.6 billion yuan, with a slight year-on-year growth rate, but the long-term positive trend remains unchanged. The industry's average gross profit margin still has room for improvement by more than 10 percentage points compared to the global average. The overall industry trend is that the cost of customer acquisition is high, the voice of end users is increasing, and the importance of product-driven is gradually higher than that of sales-driven.
In other words, Weimob's direction of focusing on products and expanding customers is in line with the logic of the long-term development of the industry, but the problem is how to turn around all parties and survive the current pressure while waiting for profit returns.
Weimob may be able to regret the move out of prudence, but the frightened investors may not afford to toss too much.
*The title picture and the accompanying pictures in the article are from the Internet.