Pengpai News reporter Chen Yuxi
iQiyi 's long-term running is finally about to reach the finish line of victory.
htmlOn February 28, iQiyi submitted a prospectus to the US Securities and Exchange Commission (SEC), intending to raise US$1.5 billion to be listed on Nasdaq with the code IQ.iQiyi was founded in 2010 and was originally called "Qiyi" and was renamed iQiyi in 2011. With the support of Baidu , iQiyi merged with Shanghai's video website PPS in 2013, and its market share increased rapidly. Currently, Youku, which is with Tencent Video and Alibaba, ranks among the top three in China's video industry.
As early as September 2017, the news of iQiyi going public in the United States alone had already spread. Bloomberg quoted anonymous sources at the time as saying that Baidu is about to start negotiations with banks and traders, hoping that iQiyi's valuation will reach US$10 billion (about RMB 63.4 billion).
At the same time, iQiyi has not yet escaped the huge losses.
In 2015, 2016 and 2017, iQiyi's net losses reached 2.575 billion yuan, 3.074 billion yuan and 3.736 billion yuan respectively. With years of losses, how can iQiyi support a valuation of 10 billion US dollars?
revenue and cost expanded, and net loss rate slowed down
In the prospectus, iQiyi only disclosed financial data for 2015, 2016 and 2017, and its operating income doubled from 5.318 billion yuan in 2015 to 11.237 billion yuan in 2016. The growth rate slowed down in 2017, a year-on-year increase of 54.6% to 17.378 billion yuan (US$2.671 billion).
In the past three years, iQiyi's revenue, cost and loss data
Some analysts believe that iQiyi has broken through among many video websites, and one thing that did the right thing is to test the paid membership model first. iQiyi's revenue is mainly composed of membership services, online advertising services, content distribution and other (live broadcasts, games and online literature). The first three items have accounted for 90% of iQiyi's revenue, and the most significant thing is that the proportion of member service income in iQiyi's total revenue continues to increase.
From 2015 to 2017, iQiyi's classified revenue ratio
From 970 million yuan in 2015, iQiyi's member revenue increased by 277.5% to 3.762 billion yuan in 2016, and continued to grow by 73.7% to 6.536 billion yuan in 2017, and its share of total revenue rose from 19% in 2015 to 38% in 2017.
advertising service is the traditional revenue model of video websites and has always been a major component of iQiyi's revenue, but its share has shrunk from 64% in 2015 to 47% in 2017, reaching 8.158 billion yuan.
It is worth mentioning that when describing competitors, in addition to Tencent Video and Youku Tudou, iQiyi also included traditional TV stations in the competition range.
It is well known that advertisers of mainstream TV stations are gradually favoring video websites.
iQiyi launched the 60-second advertising price of the last episode of the self-made variety show " China Hip Hop " in 2017 reached 45 million yuan, setting a record.
But it is worth pointing out that the revenue of iQiyi Literature, which was founded in 2015, Qixiu Live, and iQiyi Games, which was launched in 2016, has not yet reached a scale.
In addition to the video business, iQiyi is also expanding its pan-entertainment, involving in animation, literature, games, malls, live broadcasts and other businesses, but from the perspective of revenue, the effect is not obvious.
Compared with Youku and Tencent Video, iQiyi seems to be much weaker. Youku's Alibaba major entertainment groups are backed by, and has businesses such as Alibaba Pictures , Alibaba Music , Damai.com. With the collaboration of the entire major entertainment group, Youku can obtain more resource support. Behind Tencent Video are the unicorns of the online literature industry, such as Tencent Games, and other allies. Baidu, which is moving towards AI, does not provide much support to iQiyi in terms of pan-entertainment resources.
It is worth mentioning that Bilibili (B), a video website that disclosed its prospectus almost at the same time as iQiyi, has achieved exponential growth in revenue in the past two years, and the proportion of game revenue has reached 80% of the total revenue. It can be seen that iQiyi still has room for pan-entertainment expansion.
can make money and spend. iQiyi's net loss rate has narrowed.
iQiyi is also very capable of spending money. The high operating costs and expenses have increased year by year, from 2015, 2016 and 2017 to 7.746 billion yuan, 14.027 billion yuan and 21.331 billion yuan respectively. The growth rates in 2016 and 2017 were 80.7% and 52.07%, respectively, with a slowdown in growth rate, which is comparable to the revenue growth rate.
In the prospectus, iQiyi introduced that the cost mainly comes from content costs and bandwidth costs, of which the content costs were in 2016 and 2017, accounting for about 70% of the revenue that year.
Changes in iQiyi's content costs and bandwidth costs
iQiyi said, "In the visible future, our costs will continue to increase because we will continue to produce and obtain high-quality content, and the user base and usage scale will continue to increase."
Correspondingly, iQiyi's net losses reached 2.575 billion yuan, 3.074 billion yuan and 3.736 billion yuan in 2015, 2016 and 2017, respectively, with a net loss rate of -48%, -27%, and -22%, respectively, showing a narrowing trend. Among them, the net loss growth rate in 2016 and 2017 was around 20%, which was significantly lower than the growth rate of total revenue, which proves that iQiyi's capital use efficiency has been improved.
But iQiyi has not given the expected profit time, "We cannot provide the exact time for profit." In the risk warning, iQiyi said that it has been in a loss state since the company was founded and may continue in this state in the future.
The number of paid users has increased 4 times in three years to 50.8 million
Expanding paid members and increasing membership income is the main means of generating income that video websites and even other Internet content providers are exploring.
iQiyi's paid membership has increased significantly in the past three years, with 10.7 million in 2015, 30.2 million in 2016, and 50.8 million in 2017. The number in 2017 was four times that in 2015.
Number of paid members
iQiyi can be said to be one of the earliest video websites to cultivate the video payment habits of Chinese Internet users. "Hot products" and differentiated broadcasting strategies have become the key to attracting paid users.
In June 2015, iQiyi launched the self-made online drama "Grave Robbers' Chronicles". Members can watch the entire content of "Grave Robbers' Chronicles" in advance, while non-members can only watch one episode a week. This is the first online drama in China that adopts the differentiated member broadcasting model. "The Tomb Raiders' Chronicles" gathered a group of popular actors: Li Yifeng , Yang Yang, Tang Yan, etc. Data provided by iQiyi shows that "The Tomb Raiders' Chronicles" generated more than 100 million views within 24 hours of its release, successfully attracting 3.3 million new paid members.
In early 2016, the Korean drama " Descendants of the Sun" exclusively introduced by iQiyi became popular in China, adopting the strategy of free members to broadcast simultaneously and non-members delay viewing for one week. The success of this drama has enabled more users to become iQiyi members. Nowadays, whether it is iQiyi, , Tencent, , or Youku, most of the high-quality movies, exclusive TV series and other content need to be purchased to watch. The concept of paying for high-quality content has also spawned various knowledge economies in the outward extension.
iQiyi also wants to further expand the penetration rate of paid members to expand revenue scale. In response, iQiyi said that it will expand from a single membership package to a multi-level payment model, and members can choose to pay for different vertical content to solve the diverse needs of members. At the same time, iQiyi said that it will pay more attention to content resources with huge profitability, such as education, ACGN and sports.
.421 billion monthly active users and 126 million daily active users
iQiyi's monthly active users (MAUs) were 360 million, 405 million and 421 million in 2015, 2016 and 2017, respectively, while the daily active users (DAUs) were 88 million, 125 million and 126 million respectively.
iQiyi Active User Data
From the above data, it can be seen that the penetration rate of paid members in the monthly active users reached 2.97%, 7.4% and 12%, respectively, showing a continuous improvement trend. The time users spent on iQiyi reached an average of 1.7 hours per day in 2017.
In June 2017, iQiyi founder Gong Yu introduced in his speech that among all China Mobile Internet APPs, iQiyi ranked third in the number of monthly devices covered by devices, and WeChat and QQ ranked first and second respectively. Gong Yu, who graduated from Tsinghua University's major in engineering, has always been low-key and calm, also spoke in this speech that iQiyi's goal is to surpass WeChat to become the first app with the number of devices covered.
Baidu Brand
As the biggest supporter of iQiyi, Baidu holds 69.6% of iQiyi's equity, Xiaomi holds 8.4% of the shares, HH RSV-V Holdings Limited, a subsidiary of Hillhouse Capital, holds 5.7% of the shares, while Gong Yu, founder and CEO of iQiyi, holds only 1.8% of the shares. According to the prospectus, Baidu has more than 50% of iQiyi's voting rights and has the right to appoint most of the directors. Baidu's founders Robin Li , CFO Yu Zhengjun and COO Lu Qi are all on the iQiyi's board of directors.
According to the prospectus, in the cooperation signed by iQiyi and Baidu, the two companies will cooperate in AI, smart devices/DuerOS, cloud, online advertising, traffic, etc. There is a section in the prospectus that specifically talks about the relationship between the company and Baidu. iQiyi said that Baidu provides iQiyi with technical, infrastructure and financial support. After
was launched independently, how iQiyi coexists with Baidu is also the focus of attention from the outside world. Despite its imminent listing, Baidu is still providing financial support for iQiyi. Baidu reached an agreement with iQiyi on January 19, 2018 to provide iQiyi with an interest-free loan of 650 million yuan (approximately US$99.9 million). iQiyi said that as the company continues to grow and go public, it hopes to reduce its financial dependence on Baidu in the future and gradually turn to cash generated by operating activities, capital market and financial support from banks.
htmlHow far is iQiyi, with a valuation of US$110 billion, from Netflix with a market value of US$100 billion?
Although iQiyi's penetration ratio of paid users in the monthly active users has reached 12%, it is still far from the industry benchmark Netflix. In the prospectus, iQiyi said that as of the end of 2016, Netflix's domestic paid membership accounted for 28.1% of the total Internet video users in the United States in 2016.
iQiyi, Youku, and Tencent Video will continue to enjoy the dividends brought by China's huge Internet population base. According to iResearch's report, the number of online video users in China increased from 372 million in 2012 to 545 million in 2016, and is expected to reach 766 million in in 2022. With the increase in total number, expanding penetration of paid members will bring considerable revenue to these video sites that pay high costs for content. iQiyi quoted iResearch as saying that the payment ratio of Internet video users in China increased from 1.2% in 2012 to 13.2% in 2016, and is expected to further increase to 40.0% in 2022.
At the same time, the online advertising market also has huge room for expansion. According to iResearch's report, the size of China's online advertising market increased from 77.3 billion yuan in 2012 to 290.2 billion yuan in 2016, and is expected to reach 103.23 billion yuan in 2022. Among them, the Internet video advertising market accounts for the overall online advertising market size from 1.4% in 2012 to 5.0% in 2016, and is expected to further increase to 9.6% by 2022. These are all opportunities for iQiyi.
Netflix's stock price trend chart since its listing
In the US capital market, the most beautiful story of video websites is undoubtedly Netflix. Founded in 1997, Netflix is already the world's largest video website, with paid members worldwide reaching 110 million, operating income reached US$5.089 billion in 2017 and net profit reached US$558 million. When Netflix went public in 2002, it was just a DVD rental. Its stock price has been rising steadily since it went public in 2002. By March 2, 2018, it had reached US$301.05 and had a market value of US$130.64 billion.
Compared with the comparison, iQiyi's paid users is only half of that of Netflix, and more importantly, iQiyi has not yet achieved profitability. iQiyi is not the first Chinese video website to hit the listing in the United States. In 2010, Youku took the lead in listing in the United States, but was acquired by Alibaba five years later and delisted. In addition, Kuliu.com also voluntarily delisted from the United States before being delisted.However, China's video market structure has not stabilized until the past two years, and the user scale has also undergone rapid changes in the past two years. The revenue model has become healthy. With the pressure of supervision, issues such as pirated infringement have gradually been clarified. China's video websites have already taken a new look.
Can iQiyi achieve better results on Wall Street? At least the surge in Netflix's stock price in the past three years proves that Wall Street has gradually recognized such video websites that rely on advertising and membership business.
This issue edited Xingtan
