The live broadcasting industry has suddenly changed, the main body of the pepper live broadcast operation has been listed in Hong Kong, and Zhou Hongyi has welcomed the IPO again

At a time when the live broadcasting industry is changing, Huafang Group recently rushed to the Hong Kong stock IPO.

This slightly unfamiliar-sounding company has live broadcasting platforms such as peppercorns and six rooms. According to the prospectus, Zhou Hongyi, founder and chairman of 360 Group, holds a total of 38.21% of the shares through several companies, which is the largest shareholder of Huafang Group, which also means that after 360, 360 Digital, and Master Lu, Zhou Hongyi is coming to another IPO.

Behind the IPO of Huafang Group, a group of VCs/PE have also gathered. According to incomplete statistics, since its inception, Huafang Group has completed at least 7 rounds of financing, investors include Qihoo 360, Songcheng Performing Arts, Ceyuan Venture Capital, Plateau Capital, Cultural Center Fund, Mango Cultural and Creative Fund, etc., of which Songcheng Performing Arts, through its wholly-owned subsidiary Global Bacchus Limited, holds 37.06% of the shares, making it the second largest shareholder.

However, the competitive landscape of the live broadcasting industry at this time is very different from that of a few years ago, YY divested from Huanju Group and invested in Baidu, Huanju Group was rumored to be privatized, returned to Hong Kong, etc.; the merger of Huya and Douyu was stopped, and the market value continued to shrink; the first share of live broadcasting on the Hong Kong Stock Exchange fell from a market value of 10 billion to more than 2 billion, and constantly looked for a new growth curve; Momo changed its name to Zhiwen Group, transforming social +... 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 such as Kuaishou and B station are also coming, how should the belated Huafang Group counterattack?

Revenue depends on live broadcasting, and peppercorns pick the beams

According to the prospectus data, Huafang Group is mainly composed of six rooms of the PC live broadcasting platform launched in 2006, the sichuan pepper live broadcast launched in 2015, and the overseas platform HOLLA Group acquired in 2020.

Huafang Group product matrix

On the entry time and product performance, the six rooms may be the predecessors of YY, Kuaishou, and Douyin, and the live broadcast of peppercorns born during the Thousand Broadcast War has also shined because of "throwing coins". But now, if it were not for huafang group's IPO in Hong Kong, the Internet circle would pay little attention to this company.

Similar to other live broadcasting platforms, Huafang Group's revenue mainly comes from the live broadcasting business. 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, of which the live broadcast part carried the bulk of the revenue, and the revenue of the live broadcast part in the three years from 2018 to 2020 accounted for about 99% of the total revenue, and in the first eight months of 2021, the proportion of live broadcast business revenue fell slightly to 97.5%. Social networks and other businesses contributed about 74 million yuan.

Nandu reporter noted that from the perspective of revenue contribution, Huafang Group relies on peppercorn live broadcasting, and peppercorn live broadcast is a merger of its 2018. 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%.

In addition, since 2019, huafang group's adjusted net profit has turned positive, and the net profit in the first eight months of 2019, 2020 and 2021 was 211 million yuan, 367 million yuan and 260 million yuan, respectively.

Competition has intensified and regulation has been strict

Compared with the revenue performance of peers in 2020, Huafang Group is lagging behind. The total revenue of Yingke in 2020 is 4.95 billion yuan, which is nearly 1.4 times that of the flower house; the revenue of Huanju Group and Momo is more than 10 billion yuan, which is more than 3 times that of the flower house.

However, according to the prospectus, the Huafang Group, which impacted the IPO, is not completely bottomless. On the one hand, live broadcast revenue is still showing a high growth state, and the proportion of anchor costs in revenue, one of the main costs of live broadcasting platforms, has also shrunk from 74.6% in 2018 to 66.1% (the first 8 months of 2021), with a positive growth momentum; on the other hand, according to iResearch reports, as of June 30, 2021, Huafang Group's revenue ranked third among all online social entertainment live broadcasting platforms in China, and the cumulative download volume on mobile devices ranked first. For the eight months ended August 31, 2021, the Company had 372 million registered users with an average of 59.9 million monthly active users.

Industry insiders pointed out that although from the dimensions of monthly active and downloads, Huafang Group's live broadcast products are at the forefront of the track, but the needs of users to use live broadcast products are companionship and "killing time", which also means that the competitors of Hua pepper and six rooms include not only live products, but also short video platforms, game social platforms and audio platforms based on Douyin and Kuaishou. More and more big manufacturers such as TikTok, Station B, Facebook and other big players are accelerating their entry into live broadcast and real-time audio and video interactive tracks, which will exacerbate the fierce competition in the market to some extent.

That is to say, Huafang Group is facing a competitive pattern of "horizontal categories, even if there is a collision between new and old", in addition, the supervision of the live broadcasting industry by relevant departments is becoming more and more stringent, and the internal content supervision of Huafang Group also needs the most attention.

On June 29 this year, Huafang Technology was punished by the Beijing Municipal Bureau of Culture and Tourism with an administrative penalty of 10,000 yuan for the vulgar performance behavior of an anchor in the six-room website, and before that, the six-room live broadcast was also reported and fined by netizens for suspected vulgar online live performances on the platform.

Written by: Nandu reporter Ye Lu