Author: Wei Yuqi, Editor: Hanqing
"first-line audio Shares" lychee recently welcomed several good news after another, first appeared in the "2020 China Internet hundred list" in the third quarter and achieved its first profit.
But these two pieces of good news have not changed the fundamentals of lychee at all, which is why the stock price of lychee fell from the issue price of $11 to $2.38.
Starting from the fourth quarter and full-year financial report of 2019, the successful litchi has issued three financial reports so far. Combining these financial reports and the litchi model, it has problems in two directions. The UGC model makes it more dependent on users than other platforms; at the same time, its monthly active users, paying users, and user payment ratios are all decreasing, which may cause Litchi’s profitability to become short-lived. The
01 UGC model is more dependent on user scale and stickiness. The key to
's decision to become the "first online audio stock" is that it is different from the models of its counterparts such as Himalaya and Dragonfly FM. Divided by content attributes, whether it is early "podcasts" or today's voice live broadcasts, Lychee is dominated by UGC, while PUGC and PGC used by platforms such as Himalaya and Dragonfly FM are the mainstream models. The reason why
made Litchi choose not to follow the usual path is that the UGC model does not have to pay huge costs for purchasing professional content. For example, Himalaya, which is also the head, has an exclusive cooperation with China Reading Group, CITIC Publishing Group, Zhongnan Publishing Group, and Shanghai Translation Publishing House. Although it has consolidated its copyright advantages, it has also paid real money for this.
However, the UGC model is not "perfect". Litchi has to pay the price for choosing the UGC model, that is, to become the most user-dependent enterprise among its peers. Compared with PUGC relying on professional institutions on the content supply side, both the production and consumption sides of the UGC model come from individual users. This is why Litchi emphasizes the concept of "everyone is a host" again and again, and it will be launched this year. The "Echo Project 2.0" project aimed at increasing user participation.
At the same time, the audio entertainment business accounts for a very high revenue structure, which also increases the dependence of litchi on users. Because under such a revenue structure, only the user's activity and payment ratio continue to increase the revenue and profits of litchi will increase.
Litchi also made a related explanation in the prospectus. "Our success in monetization mainly depends on the ability to maintain and increase the size of the user base and user engagement. If the user base decreases or stops growing, users become inactive or If they are not interested, or the quality and quantity of the paying user group deteriorate, they are likely to spend less on the platform or visit the platform less.”
embarrassed Litchi that after it became the “first online audio stock”, it The user growth rate began to slow down. In the third-quarter financial report released yesterday by
, the average monthly active users of Litchi’s mobile terminal was 56.2 million, an increase of 21% year-on-year; the average number of monthly paying users was 448,300, an increase of 17% year-on-year. Compared with the previous financial reports, these two data have declined significantly, and compared with their counterparts who have benefited from the epidemic, the data of litchi is also behind.
In the fourth quarter of 2019, the monthly active users of litchi were 51.9 million, a year-on-year increase of 34%, and the average monthly paying users were 434,000, a year-on-year increase of 71%. This is the first financial report for litchi after its listing. Since the second quarter of this year, the growth rate of litchi user data has begun to decline.
In the first three quarters of this year, the growth rates of monthly active users of Litchi were 34%, 29%, and 21% respectively; the growth rates of paying users were 60%, 51%, and 17% respectively, and the number dropped from 463,000 in the second quarter. 448,000.
In the fourth quarter of 2019, the number of paying users grew by 71%, reaching 434,000, and monthly active users were 51.9 million, which was the same as the first quarter of this year. Taking Huya as an example, in the second and third quarters, the growth rate of paying users increased from 13.0% to 27%, and the monthly active user growth rate of Douyu increased from 15.3% to 26.2%.
From this we have seen a strange phenomenon, that is, in the case of a decrease in the number of paying users supporting the audio live broadcast business, which accounts for 98% of the revenue, not only did Litchi continue to maintain revenue growth, but also achieved First profit. Litchi’s explanation in the financial report is "significant improvement in operational efficiency."
's efficiency improvement can certainly improve the financial situation, but for lychee who has to treat users to "God", as the scale of paying users shrinks, how long the magic of efficiency can last requires a question mark.
02 Will profit be short-lived?
Litchi once described an audio version of Instagram and YouTube in the prospectus when it went public. Although
storytelling is a fixed bridge before the listing of Internet companies, it does reflect a trajectory of the company's business development, as is the "audio version of Instagram+YouTube" of Litchi. It's just that "the fullness of the ideal is, the more skinny the reality." Litchi is actually far from the goal.
Alphabet disclosed YouTube's operating data in its 2019 annual report. Its revenue reached US$15.149 billion that year, a year-on-year increase of 36%. Among them, revenue in the fourth quarter was US$4.72 billion, a year-on-year increase of 31%. In terms of users, YouTube had 159 million users in the United States alone in 2019.
Instagram’s monthly active users exceeded the 200 million mark in 2014, and when it was acquired by Facebook in 2012, its valuation reached one billion U.S. dollars. Even at the top of the stock price, the market value of lychee is only 500 million U.S. dollars, and now only remains. 109 million US dollars. Although
's lychee is also growing in revenue, just like users, the growth rate is also declining. The year-on-year growth rate of litchi revenue in the third quarter was 10%, 42% and 56% in the first and second quarters, and the revenue scale dropped from 370 million yuan in the first quarter to 360 million yuan in the third quarter. The gap between
Litchi and Instagram+YouTube is not only reflected in users and finances, but also in the external environment of the two. Although Litchi’s self-loving Chinese market has great potential, the competition is also more intense. Since the establishment of Dragonfly FM in 2011,
has never stopped fighting online FM. At present, a three-legged situation has formed. According to iiMedia Consulting's data report, as of November 30, 2019, the MAUs of Himalaya, Lychee, and Dragonfly FM were 68,603,600, 43,671,500, and 23,086,300 respectively, ranking the top three in the industry.
According to data from iResearch, China's online audio market has reached 377 million users in 2018, which is the world's largest audio user country. It is estimated that by 2023, China's online audio users will exceed 900 million. At the same time, compared with the 89% penetration rate of online music, the penetration rate of online audio is only 45.5%, and there is still much room for improvement. The bright market prospects of
coupled with the high market share did not let lychee sit back and relax. The biggest problem has always been losses. Although lychee finally achieved profit in the third quarter, the profit method was somewhat "dangerous." Unlike iQiyi’s plan to increase revenue through price increases, Litchi’s profitability depends on the “efficiency” mentioned above. As mentioned above, Litchi’s UGC model and live broadcast business account for 98% of revenue. The reality determines that its profit depends on the growth of users' payments. In the third quarter of the first profit, the percentage of paying users and ARPU (a single user payment value) of litchi did not increase, but declined.
In the fourth quarter of 2019, the average monthly paying users of Litchi was 434,100, and the total number of mobile monthly active users in the same period was 51.9 million. According to calculations, the proportion of paying users was 0.84%; the income from audio entertainment business during the same period was 360 million, ARPU is 12 thousand yuan.
In the first three quarters of this year, these two data were 0.82%, 0.82%, 0.79%; 12,200, 13,300, and 12,200 yuan.
With the decline in the proportion of paying users, the ARPU almost unchanged, and the year-on-year decline in revenue, the net profit of litchi has changed from a loss of 29 million yuan in the fourth quarter of last year to a profit of 570,000 yuan in the third quarter of this year. Only the reason why new business has made significant progress makes sense, but it is not.
Litchi has always over-relied on the audio live broadcast business. This business accounts for 98% of the total revenue. Therefore, Litchi has also developed some new businesses, which are reflected in the financial report as broadcastCustomer, advertising and other businesses. In the fourth quarter of 2019, the revenue of this business grew by 108%, but the scale was only 4.9 million yuan. By the third quarter of this year, the growth rate of this business dropped to 61%, to 5.7 million yuan. It can be seen from
that Litchi’s first profit was not due to the rapid development of the business, but to the improvement of “efficiency”. Litchi also mentioned this in the prospectus. "Our net loss has increased further compared to the same period in 2018. The time it takes for us to finally achieve profitability depends on whether we can grow rapidly in a cost-effective manner."
At this stage, the profitability of litchi depends on whether the knife of efficiency "efficiency" can be used "steadily and accurately."
Therefore, although "efficiency" can help litchi achieve first profit, it can turn profit into Normalization is actually unknown. Litchi may be able to learn from iQiyi in the long video industry and appropriately increase the share of PUGC in content. Although the former is still losing money, its revenue structure, which is different from Netflix, also makes it possible to continue to make profits.
