After two years, Himalaya has hit the IPO again.
On April 12, Ximalaya, the largest audio platform in China, officially submitted a prospectus to the Hong Kong Stock Exchange to continue to promote the listing process of the Hong Kong Stock Exchange. Goldman Sachs, Morgan Stanley and CICC became the joint sponsors of Himalaya.
As early as September 2021 and March 2022, Himalaya submitted a prospectus to the Hong Kong Stock Exchange twice, but its prospectus document was invalid because it exceeded the stipulated time of 6 months. Earlier, on May 1, 2021, Himalaya submitted an IPO application in the United States. However, due to various reasons, only 4 months later, Himalaya announced that it would no longer promote its IPO plan in the United States, so as to switch to Hong Kong stocks.
This is the fourth time that Himalaya has hit the IPO. Unlike the previous three times, Ximalaya finally achieved profitability this time, but these profits were achieved at the cost of reducing costs and increasing efficiency, such as layoffs. As the leader of the audio industry, Himalaya still has the problem of difficulty in making profits, and the entire industry is also having a bright future and difficulty in making profits. Now, with the help of AI tools, can Himalaya get out of the profit dilemma?
Reduce costs and increase efficiency, and finally make a profit?
As a unicorn enterprise in the domestic audio industry, profitability is the biggest difficulty for Himalaya to go public. However, in the prospectus submitted on April 12, Himalaya gave a clear answer to profitability.
According to the prospectus, Himalaya's revenue in 2023 will be 6.16 billion yuan, with an annual income of about 3.736 billion yuan and an adjusted income of 224 million yuan, which has achieved positive profitability for five consecutive quarters.
Source: Himalaya prospectus
Since its establishment in 2012, Himalaya has received a total of 12 rounds of financing, covering domestic angel rounds to D rounds, and overseas E1 to E4 rounds, with a total financing amount of nearly 10 billion yuan. The Himalayas, which are "not bad for money", have been plagued by profit difficulties.
Source: Himalaya prospectus
Judging from the financial report data in recent years, from 2019 to 2021, Himalaya's net loss was 1.925 billion yuan, 2.882 billion yuan and 5.106 billion yuan respectively. But the turnaround came in the fourth quarter of 2022, when Himalaya achieved a single-quarter profit for the first time, which was also the first profit for Himalaya in its ten years of establishment. However, the entire 2022 year is still a loss, with a net profit of -296 million yuan.
It seems that the earnings of the fourth quarter of 2022 are off to a good start. In 2023, Himalaya's revenue will be approximately RMB6.163 billion, with a compound annual growth rate of 2.58%, gross profit will be approximately RMB3.473 billion, with a compound annual growth rate of 4.79%, and adjusted net profit will be RMB224 million. The gross profit margin remained above 50%, and the net profit margin was 60.62%.
It is not difficult to imagine that the reason for sustained profitability is the same as that of most other Internet companies: to reduce costs and increase efficiency.
The most important thing is to reduce operating costs. From 2021 to 2023, Himalaya's sales and marketing expenses as a percentage of total revenue decreased continuously, reaching 44.9% in 2021, 34.9% in 2022, and 33.6% in 2023. R&D expenditure as a percentage of total revenue decreased from 17.5% in 2021 to 15.4% in 2022 and further decreased to 15.1% in 2023, with R&D expenditure of approximately $930 million in 2023.
In addition, it is worth mentioning that layoffs are also an important way for Himalaya to achieve profitability. Administrative expenses (mainly comprising employee benefits) excluding share-based expenses decreased as a percentage of total revenue from 10.7% in 2021 to 9.2% in 2022 and 7% in 2023.
Source: Himalaya prospectus
According to media reports, starting in 2022, Himalaya has started a large-scale layoff process. But at that time, Himalaya responded to the media that it was a normal business adjustment, not a large-scale layoff. According to public data, the number of layoffs in Himalaya since 2021 is 1,705, and the layoff rate is as high as 39.26%. Internet analyst Zhang Shule once said in an interview with a reporter from the China Times, "Layoffs are the simplest and crudest way to reduce costs and increase efficiency, but they can only be a temporary strategy." ”
"It's not that important how much you make a profit. The significance of making a profit itself is very important, which shows that Himalaya can make its own blood without external forces. In August 2022, Yu Jianjun, founder and CEO of Himalaya, said at an internal staff meeting, "I hope to achieve annual profitability in 2023, and in five years, achieve annual revenue of 20 billion yuan and profit of 4 billion yuan." ”
At present, the small goal of profitability for the whole year of 2023 has been achieved, but whether it can be sustainable in the future is still a question.
The audio industry has a bright future, but it is difficult to make a profit?
With the popularization of mobile Internet and the formation of digital media consumption habits, the audio content market has ushered in a period of rapid development. With its deep cultivation in the audio field, Himalaya occupies a favorable position in the market, showing great growth potential and market prospects.
According to the "2023-2028 China Online Audio Industry Investment Planning and Prospect Forecast Report" released by Ruiguan Industry Research Institute, China's online audio market has grown from 4 billion yuan in 2018 to 25 billion yuan in 2023, and is expected to further grow to 51 billion yuan by 2028.
In addition, the revenue growth of the IoT and in-vehicle online audio market is even more significant, from 58.6 million yuan in 2018 to 1 billion yuan in 2023, and is expected to reach 2.5 billion yuan by 2028.
According to Himalaya's prospectus, in 2023, Himalaya's average monthly active users will reach 300 million, including 133 million average mobile users and 170 million average monthly active users who listen to its audio content through the Internet of Things and other third-party platforms. In the same year, its mobile users spent a total of 1,787.3 billion minutes listening to Himalayan audio content, accounting for about 60.5% of the total mobile listening time of all online audio platforms in China. In terms of domestic online audio revenue in 2023 alone, Himalaya occupies nearly 25% of the market share.
Source: Himalaya prospectus
The domestic audio market track cake is big enough, and the prospects are also optimistic about the outside world, which is also an important reason why Himalaya can continue to attract investment. Despite the large market, it is not easy to make money from it.
At present, Himalaya's revenue channels mainly include subscriptions, advertising, live streaming, and other innovative products and services.
Subscription revenue is both the moat of the Himalayas and the ceiling of its revenue growth. The number of active users is quite stable. According to the prospectus, from 2021 to 2023, the average number of monthly active users of Himalaya will be 267 million, 291 million and 302 million respectively, and the average daily active users of mobile terminals will be 31.5 million in 2021 and 30.26 million in 2023, far ahead of its peers.
From 2021 to 2023, the average monthly active paying users of Ximalaya mobile will be about 14.9 million, 15.7 million and 15.8 million, respectively, and the growth has slowed down significantly. From 2021 to 2023, its payment rates will be 12.9%, 12.9% and 11.9%, respectively, with negative growth in the last two years. This also determines that subscription revenue, which accounts for the decisive revenue of Himalaya, seems to have seen the ceiling.
In addition to subscriptions, Himalaya's second largest revenue is through advertising. According to the prospectus, from 2021 to 2023, Himalaya's advertising revenue will be 1.488 billion yuan, 1.469 billion yuan and 1.423 billion yuan respectively, accounting for 25.4%, 24.2% and 23.1% of the total revenue respectively. Advertising revenue and the proportion of total revenue are showing a downward trend, and the current environment of limited budgets of domestic advertising industry brands, the continued growth of advertising revenue in the future does not seem optimistic.
Source: Himalaya prospectus
As for the revenue from live streaming services, it mainly comes from the sale of consumable virtual gifts and items. In 2019, 2020 and 2021, Himalaya's live streaming revenue accounted for 22.9%, 17.6% and 17.1% of total revenue, respectively.
It is worth mentioning that Ximalaya is not only facing fierce competition from companies in the same industry such as Dragonfly FM and Lizhi, but also companies such as ByteDance, Tencent and Kuaishou are also competing with Himalaya for users in emerging scenarios such as the Internet of Things and in-vehicle equipment. In addition, there are also listening apps such as Lazy Listening, Penguin FM, Palm Reading Listening, and Tomato Listening, as well as podcast and radio products such as NetEase Cloud Music, QQ Music, and Kuwo Music as its competitors. Many of these competitors have strong products, and the Himalayan moat is not stable.
In particular, ByteDance's Tomato Novel and the derivative Tomato Listening. Tomato Novel and Tomato Listening, with the new model of "free" + "watching ads to make money", entered the online text and audiobook market, and accurately captured the huge users in the sinking market, known as "Pinduoduo in the online text and long audio industry".
According to the Yuehu data report, as of 2023Q2, Tomato Novel is far ahead of the online reading track with 175 million MAU, and the user time also ranks second. According to Wired Insight, the DAU of the Tomato Listening App has reached tens of millions, and in just 3 years, it has caught up with the 11 years of efforts of Himalaya.
Source: Yuehu Data "2023 Mobile Advertising Traffic White Paper"
And with the sluggish growth of Himalaya subscribers, the growth of new members in the later period was placed in the traditional AM/FM market. However, with the rise of new energy vehicle manufacturers and the improvement of intelligence, Huawei, Xiaomi, Tencent and other manufacturers have already snatched Himalayan users in this market.
Under the alternation of internal and external troubles, it is a difficult challenge for Himalaya to continue to make profits.
AI has become the new grasp?
Audio is one of the first content areas to break through by AI, and it is also the one that has gone the farthest so far. There is no shortage of AI-synthesized singers on various short video platforms, and the new Suno has raised the technology of Wensheng Music to a new level.
As a leader in the audio field, Himalaya certainly won't miss out on AI.
According to the prospectus, Himalaya attaches great importance to investment in AI and other technologies, with R&D expenses of 930 million in 2023, accounting for 15.1% of total revenue, and its technology and R&D team accounting for 44.3% of the total number of employees. In 2023, AI-enabled automated content filtering coverage increased from 25.7% in 2022 to 41.8%, and in December 2023, the coverage reached 72.2%, which greatly improved operational efficiency.
"The proceeds will be used to enhance content and empower content creators, while strengthening the operational efficiency of online audio around next-generation technologies, AI and big data capabilities. So stated in the prospectus.
For example, the total number of views of the TTS (speech synthesis) album produced by Ximalaya using Shan Tianfang's AI synthesized sound has exceeded 100 million, which indicates that Ximalaya has achieved significant user growth through AIGC technology in addition to the existing "UGC + PGC + PUGC" content ecosystem.
Source: Weibo @Himalaya
Not only Shan Tianfang's albums, but AI technology is also widely used in the production of news, novels, financial albums and other content. Himalaya has contracted and produced different TTS tones to adapt to different content and meet the diverse needs of users.
In addition, Himalaya's "Everest Lab" uses AI technology to drive the production of audiobooks, and has established a timbre library composed of 535 synthetic sounds, which is adapted to human feelings and emotions in different scenarios. AI technology runs through the whole process of pre-recording, recording, and post-production of audiobooks, which is more than 50 times more efficient than manual production. AI technology is used to develop "panoramic sound" and applied it to many high-quality audio drama works, creating a 3D theater that shows the ultimate effect of immersive space surrounding, which greatly improves the user experience.
Source: Weibo @Himalaya
In general, Ximalaya mainly applies AI technology to the improvement of production capacity, and there are no more creative outputs that can bring qualitative changes to the content supply for the time being. Therefore, it is difficult to imagine whether the addition of AI can help Himalaya open up new business models and profit margins. As a "battleground", AI will also make the competition in the audio track more intense.