Recently, Yisou Technology Holdings Limited (hereinafter referred to as "Yisou Technology") submitted a prospectus to the Hong Kong Stock Exchange to list on the main board of the Hong Kong Stock Exchange, with BOCI as its sole sponsor.
It is worth noting that Yisou Technology has been in the capital market for many years. The company submitted a listing application to the New York Stock Exchange in 2014, and after unsuccessful listing, it landed on the New Third Board in March 2017 with the stock code "870926". In June 2019, Yisou Technology was delisted from the New Third Board.
Three months later, Yisou Technology invested its listing target on the Science and Technology Innovation Board, submitted IPO application materials in September 2019, and voluntarily withdrew it in 2020. The submission to the Hong Kong Stock Exchange this time is another impact on the listing of Yisou Technology after the two submissions on February 27 and September 29, 2023.
In this sprint to the market, can Yisou Technology get its wish?
First, the performance growth trend is not obvious, and the search engine is no longer brilliant
According to the prospectus, Yisou Technology was founded in 2005, focusing on the Yisou-powered recommendation engine to drive the network platform, and is committed to applying the engine to the application scenarios of "data and human connection", including digital reading recommendations, digital marketing, online game publishing and other digital content, and plans to explore business opportunities for the application of Yisou recommendation engine in other scenarios.
Under the recommendation system of multiple business lines in parallel, the performance growth rate of Yisou Technology is not significant, with revenue of 433 million yuan, 456 million yuan and 559 million yuan in 2021, 2022 and 2023 respectively, with a compound annual growth rate of only 13.61%. As early as 2016, Yisou Technology's revenue was close to 400 million yuan.
Not only that, the profitability of Yisou Technology also continued to narrow, with net profit falling from 50.011 million yuan in 2021 to 44.448 million yuan in 2022, and further falling to 25.011 million yuan in 2023, and the corresponding net profit margin also decreased from 11.5% in 2021 to 4.5% in 2023.
Yisou explained in the prospectus that the decline in net profit was due to the company's re-launch of the online game publishing business, which led to an increase in sales and distribution expenses under the business. In addition, the sharp decline in profits in 2023 was related to an increase in the fair value loss of financial assets at fair value through profit or loss arising from the Fund's investments.
As the name suggests, Yisou Technology started by relying on "search". The company launched the wireless search engine easou.com in 2005. At that time, it was reported by the media that Yisou once became the largest wireless search engine in China in 2010 with a market share of more than 60% by virtue of the advance layout of the mobile search market.
But among Yisou's four business lines today, digital reading recommendation services have become its main source of revenue. During the same period of the reporting period, the company's revenue from digital reading recommendation services was 218 million yuan, 245 million yuan and 249 million yuan, accounting for 50.4%, 53.6% and 44.5% of the total revenue, respectively.
According to Analysys data, the average monthly active person of Yisou Novel Software from 2018 to 2023 ranked among the top five in China's digital reading market. Among them, the average monthly active number in 2023 is about 20 million, and the average usage time is 112.7 minutes, ranking fourth in terms of daily usage time.
At present, Yisoutech has accumulated a huge user base under the digital reading platform service. The company revealed in the prospectus that the cumulative number of registered users of the Yisou series of reading apps as of the end of 2023 reached 44.7 million, an increase of 71.92% from 26 million at the end of 2022, and user activity is increasing.
2. Positioning content distribution, advertising "dependence" still exists
As a third-party digital reading platform, Yisou does not participate in the creation of digital content, but only manages and distributes third-party content, and recommends literary content to meet the needs of its users through two services: paid reading and advertising reading.
Due to the lack of independent content support, Yisou's digital reading platform faces more uncertainty. The most intuitive reflection is that under the premise that the number of monthly active users has increased from 23.9 million in 2021 to 26 million in 2023, the company's paid digital reading service has declined in various indicators.
In 2021, 2022 and 2023, the number of monthly payers for Yisou's digital reading services will be 68,400, 42,200 and 21,500 respectively, narrowing by nearly half in just three years. In addition, the average monthly revenue per paying user of the Yisou series of reading apps is 45.2 yuan, 54.8 yuan and 42.1 yuan respectively, and it will also drop significantly in 2023.
In the digital reading platform services of Yisou Technology, the revenue of digital reading services including advertisements was 186 million yuan, 220 million yuan and 229 million yuan respectively, accounting for 85.25%, 89.91% and 92.16% of the total revenue of the service. In other words, what really brings economic benefits to Yisou is the advertising placed in digital reading.
In addition, digital marketing services, which are comparable to digital reading platform services, are essentially profitable in the form of advertising and promotion. According to the prospectus, the digital marketing services it provides are based on the proprietary advertising platform Yitui, including in-feed advertising, splash screen advertising, and search promotion services provided by mobile app stores.
During the same period of the reporting period, Yisou's digital marketing services achieved revenue of 202 million yuan, 201 million yuan and 289 million yuan respectively, accounting for 46.5%, 44.0% and 51.7% of the total revenue, respectively. It is not difficult to find that in the company's business model, the advertising and marketing effect plays a pivotal role in the performance.
It is worth noting that Yisou Technology has also repeatedly mentioned the importance of AIGC to its development in the prospectus. In the company's view, expanding the application scenarios of the Yisou recommendation engine, actively exploring cutting-edge technologies, and keeping up with mainstream technology trends such as AIGC and metaverse games are the main directions for future expansion in the basic data layer.
Yisou said it will use its accumulated experience in the field of artificial intelligence recommendation to expand its business to AIGC. Based on its experience in the digital reading industry, the company plans to apply AI to create literary works as a first step towards AIGC applications.
Will the linkage with AIGC change the status quo of Yisou's "non-participation in digital content creation" and further affect its business structure?