Shenrancaijing original
Author | Zou Shuai
Edit | dawn
On October 25, Huafang Group officially submitted a prospectus to the Hong Kong Stock Exchange.
Huafang Group has two online live broadcast platforms, the Sichuan Pepper Live Broadcast launched in 2015 focuses on the mobile terminal, and the six rooms that have been crawling for more than 10 years focus on the PC side. In addition, Huafang Group also operates a video chat software HOLLA overseas.
Major events of Huafang Group Source / Prospectus
According to the prospectus, in 2018, 2019, 2020 and the first eight months of 2021, the revenue of Huafang Group was 1.993 billion yuan, 2.831 billion yuan, 3.684 billion yuan and 2.96 billion yuan, respectively. Overall, the revenue of Huafang Group has risen in small steps in the past three years.
However, from 2018 to 2020, only 2019 was profitable, and the net profit of 191 million yuan was also slightly meager. In 2018 and 2020, the net loss of Huafang Group was 187 million yuan and 1.525 billion yuan, and it directly lost nearly half of the income in 2020. In the first eight months of 2021, Huafang Group made a profit of 232 million yuan.
Compared with several peers, the financial data of Huafang Group is not very good. The total revenue of Yingke Live in 2020 is 4.95 billion yuan, which is nearly 1.4 times that of huafang. The revenue of the game live broadcasting platform Douyu and Huya in 2020 is about 10 billion yuan, which is more than 3 times that of the flower house.
In terms of users, as of August 31, 2021, Huafang Group had a total of 372 million registered users, the cumulative registered users of Huajiao and Six Rooms were 207 million and 77.3 million, Respectively, Huazhu had 10.1 million anchors, and Six Rooms had 500,000 anchors.
In terms of shareholder composition, Zhou Hongyi, chairman of Qihoo 360, is the largest shareholder, holding 38.21% of the shares through several companies, and Songcheng Performing Arts is the second largest shareholder, holding 37.06% of the shares by controlling its wholly-owned subsidiary Global Bacchus Limited.
Shareholder composition of Huafang Technology Source / Prospectus
The era of online live broadcasting has long changed, the old live broadcast platform has not yet had time to gain a firm foothold, and the live broadcast products of short video platforms and social platforms have also come. Can the regrouped peppercorns and six rooms still regain their positions?
<h1 class="pgc-h-arrow-right" data-track="53" > peppercorns provoke the girder, and the profit mainly depends on live broadcast tips</h1>
Similar to other live broadcasting platforms, the revenue of the flower house is mainly from virtual tokens. According to the prospectus, almost all of the income of Huafang Group is generated from the user's purchase of virtual items in the live broadcast room and the tip to the anchor, and the platform will share this part of the income with the anchor and the brokerage company.
Before purchasing the corresponding virtual items or other membership services, users need to purchase "pepper coins" or "six coins", that is, virtual tokens. It is worth noting that Huafang Group clearly wrote in the prospectus: virtual tokens are not redeemable. This helps the flower house lock up most of the revenue.
In addition to live audio and video services, Huafang Group's revenue also comes from overseas products HOLLA's social networking services and advertising and technology services. Among them, the live broadcast part shoulders the majority of revenue, and the income of the live broadcast part in each year for three years accounts for about 99% of the total revenue.
However, it is not the old product six rooms that make money in live broadcasting, but the peppercorns.
In 2018, Peppercorn and six rooms merged. The data shows that in 2018, 2019 and 2020, the live broadcast revenue of peppercorns was 1.976 billion yuan, 2.166 billion yuan and 2.826 billion yuan, accounting for 99.2%, 76.5% and 76.7% of the total live broadcast revenue, respectively. For the eight months ended August 31, 2020 and August 31, 2021, the live broadcast revenue of peppercorns was 1.804 billion yuan and 2.23 billion yuan respectively, accounting for more than 75%.
Comparison of live revenue of peppercorns and six rooms (Note: 2018 merger, prospectus does not show 2018 six room data) Mapping / Deep Burning
The revenue growth of peppercorns may be due to the launch of voice live broadcast products that began in 2018. According to the prospectus, in 2018, 2019 and 2020, the revenue generated by voice live broadcasting was 9.2 million yuan, 193 million yuan and 523 million yuan respectively, accounting for 0.5%, 6.8% and 14.2% of the total revenue in the same period. That is to say, in addition to the average results of the year launched by the voice live broadcast, the follow-up performance is quite OK, and it has risen steadily year by year.
So, are the teenage platform six rooms still making money?
In 2019 and 2020, the live broadcast revenue of the six rooms was 654 million yuan and 844 million yuan, achieving a year-on-year increase of 30%, but the proportion of the total live broadcast revenue was only about 22%, and the sense of existence was not strong.
Holla, an overseas product, was incorporated into the financial report on December 31, 2021, and for the eight months ended August 31, 2021, HOLLA's revenue was 71.8 million yuan, accounting for 2.4% of total revenue. On the other hand, Huafang did not make much money by advertising, and the revenue of other services (such as advertising and technical services) of Huafang Group in 2018, 2019 and 2020 was 16.8 million yuan, 11.5 million yuan and 13.9 million yuan respectively, accounting for 0.8%, 0.4% and 0.4% of the total revenue in the same period, which can be regarded as a small profit.
<h1 class="pgc-h-arrow-right" data-track="28" > spend money on marketing and money on anchors</h1>
Let's start with the cost.
The cost of sales includes anchor costs, employee expenses, loan expenses, etc., the largest of which is the anchor cost, which accounts for 87.9%, 90.3% and 91.5% of the total cost of sales from 2018 to 2020, respectively.
The cost of anchors is also gradually increasing. In 2018, 2019 and 2020, the cost of anchors was 1.487 billion yuan, 1.92 billion yuan and 2.446 billion yuan respectively, mainly due to the increase in the number of anchors, and the reason why the growth rate of anchor costs from 2019 to 2020 was lower than the growth rate of revenue was that Huafang Group negotiated a favorable revenue sharing clause with the anchor brokerage company.
Let's look at the expenses.
Promotional and advertising spending accounts for a higher proportion of the most spent sales and marketing expenses. According to the data, in 2018, 2019 and 2020, the expenditure on promotion and advertising of Huafang Group was 288 million yuan, 315 million yuan and 410 million yuan respectively, accounting for 84.6%, 87% and 90.9% of the total expenditure. In general, the money spent on the flower house is basically spent on publicity.
As a live broadcast platform supported by content, the cost of this part is beyond reproach. The prospectus explains that promotion and advertising expenses are the costs of online user traffic referrals, offline marketing activities, and the related costs of specially produced content, such as the self-made online talent contest "Battle of the Peak" and "Freshman Meeting" made by the pepper platform, etc., most of which are in the form of offline competitions and online live broadcasts.
In addition, from the spending on suppliers, we can also see some changes in the Flower House Group. The prospectus discloses five major suppliers, mainly providing anchor brokerage company services, mobile application marketing services, Internet marketing services, etc.
In 2018, the highest purchase amount of 61.51 million yuan spent by Huafang Group was spent on a supplier that provided marketing services. In the subsequent 2019, 2020 and the first eight months of 2021, the highest procurement volume of Huafang Group was shifted to the services of anchor brokerage companies, with amounts of 131 million yuan, 119 million yuan and 118 million yuan respectively.
In the procurement of suppliers, Huafang Group has gradually shifted from heavy marketing to heavy anchor brokerage services, which is also in line with the gradual increase in anchor costs. Fighting the anchor war and the content war is perhaps the most important battle for the live broadcast platform.
<h1 class="pgc-h-arrow-right" data-track="40" > multiple pinch, can the flower room still be full? </h1>
Launched in 2006, Six Rooms is one of the earliest live streaming platforms in China, and a few years ago, Hua Pepper also made a splash with the Q&A live broadcast.
This market is huge. According to data, the revenue of China's online cultural and entertainment market increased from 289.3 billion yuan in 2016 to 877.7 billion yuan in 2020, with a compound annual growth rate of 32%, and will reach 2071.1 billion yuan in 2026. China's online audio and video social entertainment market will increase from 37 billion yuan in 2016 to 363.8 billion yuan at the end of 2020, and will reach 1235 billion yuan in 2026. Revenue from China's live video market is expected to reach 591 billion yuan by 2026.
But the competition in this market is also fierce. First of all, the PC live broadcast was separated by the mobile end of a group of users, Yingke, YY, a live broadcast and other latecomers continued to exert efforts; then the live broadcast category is more and more diverse, the live broadcast of the show and entertainment live broadcast is no longer fresh, the game live broadcast, music live broadcast and other forms of crazy preemptive share; and finally the short video platform, social media platform, shopping software, etc. are not the companies that do live broadcast products, do the content and the origin of the community, so that these platforms can open the live broadcast room more comfortably.
Even if there is a collision between the old and the new, the relevant departments are becoming more and more strict in the supervision of the live broadcast industry, and it may be difficult for the six rooms to come up with the prestige of the year today.
However, according to the prospectus, the Huafang Group, which impacted the IPO, is not completely bottomless. According to iResearch' report, for the six months ended June 30, 2021, Huafang Group ranked third among all online social entertainment live streaming platforms in China, and ranked first in the cumulative download volume of mobile devices. For the eight months ended 31 August 2021, the average monthly active users of Huafang Group were 59.9 million. Compared with similar competitors, this month's active number is still gratifying.
There are dangerous beaches outside, and there are also content supervision issues that need the most attention inside the Huafang Group.
A few years ago, the anchors in the six rooms were permanently banned for involving pornography, and the pepper live broadcast was also caught in the storm of the fake Forbidden City live broadcast. Just on June 29 this year, Huafang Technology was also punished by the Beijing Municipal Bureau of Culture and Tourism with an administrative penalty of 10,000 yuan. According to the investigation, this penalty is due to the vulgar performance behavior of an anchor in the six-room website in the performance. Prior to this, the six-room live broadcast was also reported and fined by netizens for the platform's suspected vulgar online live broadcast performance. Of course, this is not just a problem of the flower house, but a problem of the entire live broadcasting industry.
Domestic and external difficulties, Huafang Group chose to sprint IPO at this time node, can it really make it flourish again?
*The caption and the accompanying images in the text are from Pexels.