A crumbling baby tree, a "prodigy" of the rapids retreated

In 1999, a 25-year-old founded an e-commerce website in Shanghai. This is the first C2C e-commerce brand in China, called "eBay". This young man is an absolute "prodigy", began to study mathematics at the age of 3, won the first prize in the mathematics competition, refused the opportunity to directly enter Shanghai Jiao Tong University, and also won a full scholarship to Harvard University in the second year of high school. At that time, the protagonists of the e-commerce world were not Ma Yun, Huang Zheng, liu Qiangdong, but this young man - Shao Yibo.

In 2002, eBay was thriving, but Shao Yibo suddenly "retreated from the rapids" - eBay sold for nearly $200 million to sell the giant eBay. For this decision, Shao Yibo later gave the answer that "I sold eBay because of my wife."

Shao Yibo faded out of the jianghu, but the jianghu is all his legend, "If Shao Yibo had not sold eBay in 2003, I would certainly not have successfully founded Taobao," Ma Yun once commented.

In 2006, professional manager Wang Huainan announced that he would launch a new e-commerce website "Baby Tree" with a partner, and this partner was Shao Yibo. Wang has served as an executive at companies such as McKinsey, Procter & Gamble, Yahoo and Google. His experience and Shao Yibo's influence in the e-commerce world seem to be a powerful combination.

12 years later, the e-commerce website that was born with a golden key was finally repaired, and BabyTree was listed on the Hong Kong Stock Exchange.

Less than half a year after the listing, Shao Yibo once again "retreated from the rapids". In March 2019, Shao Yibo officially resigned as a non-executive director and no longer serves as a member of the audit committee. Coincidentally, also from 2019, BabyTree's performance plummeted and stagnated.

Revenue slashed, huge losses

A few days ago, BabyTree released the 2020 annual performance announcement. The full-year revenue was about 212 million yuan, a sharp decline of 40.5% year-on-year.

Looking back at the development of BabyTree in the past five years, "listing is the peak" is probably the most intuitive feeling. 2018 is like the dividing line of the baby tree, and this year it reaches its peak. In the following two years, Babytree's revenue continued to decline, and by 2020, the revenue scale was less than one-third of the original.

Dismantling the revenue composition of BabyTree, the last five years mainly rely on advertising and e-commerce revenue, but these two revenues are declining sharply. In 2020, Babytree's advertising revenue was about 190 million yuan, a significant decrease of 41.2% year-on-year. For the decline in advertising revenue, BabyTree's explanation is that due to the impact of the new crown epidemic, advertisers have significantly reduced their marketing budgets, and the epidemic has led to fierce competition in the advertising industry.

However, compared with the advertising revenue of several other platforms - Station B's annual advertising revenue increased by 126%, and Weibo's advertising and marketing business revenue fell by only 3% year-on-year. Focus Media, which is mainly based on the advertising business of buildings and elevators, only fell by less than 20% in its revenue in the first half of 2020. Babytree's advertising business fell sharply by 41% year-on-year, or declined again on the basis of a year-on-year decline of 47% in 2019, such a state may not be entirely attributable to the impact of the epidemic.

The revenue of e-commerce business was 19.9 million yuan, covering direct sales and platform revenue, down 10.4% year-on-year. In fact, BabyTree's e-commerce business has now "dropped beyond relegation". In the past two years, Babytree's e-commerce revenue is only about 20 million yuan. In 2015, its e-commerce business still had 32.7 million yuan in revenue. For more than 5 years, Babytree's e-commerce business has taken a "roller coaster".

Babytree said in its earnings report that the decline in e-commerce business is mainly due to the failure of e-commerce cooperation with strategic shareholders to achieve the expected performance, and is restoring the e-commerce platform to its own mode. The "strategic shareholder" here may refer primarily to Alibaba. In 2018, Alibaba strategically invested in BabyTree, and the two sides carried out in-depth cooperation.

However, since then, Babytree's e-commerce direct sales and e-commerce platform revenue have both declined. Today, it has publicly acknowledged that the cooperation between the two sides has not met expectations. However, moving to self-operation, Babytree's e-commerce business is probably difficult to improve, and now the direct sales revenue is far from reaching the pre-listing level.

Other revenue of $4.07 million, down 72.1% year-on-year, was the most subdued part of all businesses. This business mainly includes knowledge payment, insurance agency services and other services. Obviously, BabyTree's knowledge payment business is also continuing to slump.

Compared with the decline in revenue, baby tree expenses are difficult to control. Although BabyTree has controlled some of its expenses under the epidemic, the time line has been extended to five years, and Babytree's sales and distribution expenses and administrative expenses are in a growth trend. Among them, sales and distribution expenses in 2020 increased by 100 million yuan compared with 2018, and administrative expenses also increased by nearly 100 million, but the only thing that was well controlled was research and development expenditure.

However, R&D spending itself is not BabyTree's main expense. As an advertising-focused agency, Babytree's main expenses are sales and distribution expenses. This makes BabyTree's model a big question: if growth depends on sales, how does the platform reflect its own attractiveness?

Under the difficulty of controlling the cost of expenditure, the loss of baby tree is also difficult to avoid. In the past 5 years, except for the short profit in 2018, there have been huge losses in all other years. In the past two years, Babytree's cumulative loss has approached 1 billion. At the gross profit level, baby tree's gross profit margin continued to increase before the listing. After the listing, it continued to decline, and the gross profit margin in 2020 was only 45.45%, which was not as low as the level in 2016.

In summary, BabyTree's data has declined across the board: revenue has been slashed, losses have continued, and expenses are difficult to control. Moreover, the speed of the decline also makes people wonder, what happened to the baby tree?

The "abandoned" baby tree

The founder's rapids are clearly not the main reason.

Fundamentally, BabyTree is being abandoned by users, and this trend is accelerating. In 2020, Babytree's average total monthly active users were 91.2 million, down 34.5% from 140 million in 2019. In the past two years, the number of users of BabyTree has gradually declined, and the rate of decline in 2020 is accelerating. In the first half of 2020, the average monthly active users of BabyTree still exceeded 100 million, but the average monthly active users of the whole year have fallen below 100 million.

Among them, the decline in monthly active users on the PC side and the WAP side is more serious. In 2020, it was 68.3 million, a sharp decrease of 40.5% year-on-year. In fact, the user composition of BabyTree mainly comes from the PC side and the WAP side, and the previous proportion is more than 80%. In the mobile era, although the traffic on the PC side will not disappear, it will inevitably show a downward trend. In 2020, this trend is accelerating.

At the same time, BabyTree's data on the mobile side is not optimistic - the average monthly active users are 22.9 million, down 6.5% year-on-year. Although the epidemic has brought impact, there is a certain positive for online platforms. For example, the average daily active activity of Kuaishou reached 264.6 million, an increase of 50.7% year-on-year; the average monthly active activity was 481.1 million, an increase of 45.6% year-on-year. Weibo's monthly active users were 521 million, up about 5 million year-on-year. Even iQiyi, which was hit by station B, has a total number of subscription members that are basically the same as in 2019.

When other platforms in the industry remain stable or even grow rapidly, the decline of BabyTree is very "dazzling", which poses a challenge to Babytree's business model. With the aura of "the first share of Internet mother and baby", BabyTree is known as the largest and most active maternal and infant community platform in China. But in fact, its appeal is greatly reduced.

Under the forum of Baby Tree's "Parenting Exchange", even if it is a few posts at the top, the number of readings is only thousands, and the reply is only one or two sporadic, and this forum model is now difficult to form enough attraction.

BabyTree's main solution idea is to "lay out the global traffic ecology", which mainly provides maternal and infant knowledge and information on Douyin, Kuaishou and WeChat. This proves in disguise that BabyTree's platform has been difficult to resist the impact of the above platforms, and it is necessary to expand the traffic pool through external platforms.

But even so, BabyTree is still difficult to get out of the dilemma of user loss. Taking WeChat as an example, as of the end of February this year, BabyTree has established more than 2,200 WeChat groups. Even if each group is a non-repeat user, there are only about 1.1 million users; it is still not enough to make up for the decline in PC users.

The baby tree in the PC Internet era reached its final peak after its listing in 2018. After Shao Yibo withdrew, the baby tree turned downward. The predicament he is in now is not caused by Shao Yibo's withdrawal, nor does it mean that Shao Yibo can turn the tide.

In the current era of mobile Internet, users' attention is limited, and all platforms rob users of their time. BabyTree relies on advertising and e-commerce models, and the competitors it faces are destined to be Kuaishou, Douyin, B Station and so on. In this context, positioning in the vertical group of mothers and babies is destined to make BabyTree reject wider traffic from the beginning, it is difficult to withstand the impact of comprehensive platforms, and the story of "small and beautiful" is also doomed to falter.

This article originated from Blue Whale Finance