The Internet is an industry that does not lack miracles. In late October, when the news of Baidu’s acquisition of Huanju’s domestic business YY Live came out, many people found it unbelievable. My opinion at the time was: “In the Internet industry, there are basically few rumors about mergers/acquisitions of large companies. Even if there are no boots in the end, it may only be due to price issues. I believe that Baidu’s contact with Huanju is a high probability event. From the business logic point of view, Baidu’s acquisition of YY Live is justified."
November 17, Baidu and Huanju Group on the same day After the financial report was released, it was officially announced that the two companies had signed a final agreement. Baidu would acquire Huanju’s domestic video entertainment live broadcast business ("YY Live") for approximately US$3.6 billion in cash (adjusted according to the agreement or consideration), including but not limited to YY mobile applications, YY.com website and YY PC, etc., the transaction settlement depends on the settlement conditions agreed in the agreement and is expected to be completed in the first half of 2021. The result of
is inseparable from the rumors in late October. What is worth paying attention to is the price: Baidu spent 3.6 billion US dollars to win the live broadcast of YY. Is it a loss?
Regarding the estimation of the value of YY's live broadcast, I previously proposed a model: benchmarking the market value of the listed live broadcast platforms. From the perspective of live broadcast revenue, YY has always been the largest pan-entertainment live broadcast platform in China, Momo second, and Momo's latest market value of 30 More than US$ billion; Huya, which was incubated from YY and focused on game live broadcast, has a market value of US$5.1 billion; Huya’s previous direct competition is about to integrate with the latest market value of US$4.535 billion in Douyu—their main business is in China, and YY Live broadcast itself is Profitable, and not just focusing on game live broadcasts. In contrast, the valuation of YY Live Broadcasting business of US$3.6 billion is not expensive.
But as I have been talking about a point of view, acquisition is buying and selling, the value of the price depends on the two sides of the transaction "I think". A can of Coke sells for 2 yuan in the supermarket, 5 yuan in the restaurant, and 20 yuan in the hotel. The price depends on the use value in different scenarios. For Baidu, the use value of YY live broadcast at this moment is extremely large. Baidu is a listed company, and its growth capabilities and future stories directly determine its valuation by the capital market. The acquisition of YY Live will benefit Baidu's "today" and "tomorrow".
Observable direct income
acquires YY Live now, Baidu can obtain observable direct income.
first is the revenue plate to get cash flow supplement.
In the third quarter, Huanju’s net income increased by 36.1% year-on-year to 6.28864 billion yuan, but there are contributions from overseas businesses such as BIGO. YY Live broadcast is the bulk of Huanju’s overall revenue. Revenue in 2019 is about 12 billion, which is equivalent to 2019 Baidu's annual revenue is 12% of 107.4 billion yuan. If Baidu merges with YY live broadcast, at least 10 billion new money each year.
followed by the revenue structure will be effectively improved.
In the third quarter of 2020, Baidu achieved 28.2 billion yuan in revenue and 13.7 billion yuan in net profit attributable to Baidu. Among them, the core business revenue is 21.4 billion yuan, which is the main force driving Baidu's revenue growth. The core online advertising revenue is 18.4 billion yuan. At present, 86% of Baidu core revenue comes from advertising. It should be said that it is highly dependent, but this piece of revenue this year It has been declining, mainly due to the division of Toutiao and Kuaishou platforms.
Baidu has 300 million high-frequency users, there is no shortage of traffic, what is lacking is the efficiency of traffic realization. If you rely on marketing, you are playing a zero-sum game with Douyin. Baidu is naturally unwilling to keep it. Baidu has been exploring revenue diversification. In 2013, it established a "forward charging business group" to explore the business of user payment. It has made online disk, library and other businesses. Now the forward revenue of the acquisition of YY Live will exceed 10 %, Baidu will reduce its dependence on marketing income . Moreover, live broadcast is the focus of Bytedance and Kuaishou. After Baidu acquires YY Live, it will compete with these opponents in an all-round way. On November 17th, Robin Li also stated in his earnings letter that the acquisition of YY is Baidu’s "offensive move" in the mobile ecosystem .
Finally, the pressure on revenue growth will decrease.
In the capital market, the company’s revenue growth ability is more important than the absolute value of revenue. Baidu’s revenue plate is large, but the growth rate is very slow. In the third quarter, revenue was 28.2 billion yuan, a year-on-year increase of only 1%. YY’s live broadcast revenue is still growing. After it merges with Baidu’s 300 million DAU,There will be more possibilities in terms of revenue. Live broadcast can be grafted to business models such as show, e-commerce, marketing, tourism, knowledge payment, education, etc., and there is greater room for integration with Baidu's original business ecology. Therefore, Baidu not only has more than 10 billion turnover supplement, but also has revenue acceleration.
Foreseeable strategic value
First, by acquiring YY Live, Baidu's live broadcast strategy can be better implemented.
This year, Baidu is very interested in live broadcasting. In March, Baidu built a live broadcast team and launched the live broadcast function; in April, Baidu launched a series of self-made boutique live broadcast programs; in May, Baidu released the "Baidu Live Broadcasting Energy Concentration Plan", and Robin Li was his new live broadcast business station ; In June, Baidu invited Gu Feng, the former founder of Huya, as the head of the live broadcast business to build a live broadcast center; in the third quarter, the number of live broadcasts of Baidu's knowledge products was eight times that of the previous quarter. However, compared with rivals such as Bytedance, Baidu's live broadcast progress has been a bit slower, and the focus on knowledge live broadcast space is also relatively limited.
YY live broadcast is the largest pan-entertainment live broadcast platform, with 41.3 million monthly active in the third quarter, a year-on-year increase of 3.4%. "Marrying" Baidu can bring in large-scale ready-made live broadcast users. More importantly, the YY live broadcast launched in 2010 is The originator of live broadcast rewards the mountain. In the past 10 years, it has accumulated strong audio and video technology, anchor guild and other resources, and talent operation capabilities. In the live broadcast industry that is besieged by Kuaishou and Douyin, YY is the only platform that remains stable and shows its strength. For Baidu, the acquisition of YY Live Broadcast bought the industry’s No. 1 entertainment live broadcast ecosystem. is of great value to Baidu’s live broadcast. Li Yanhong also said in the financial report: “YY is a very large live broadcast. The platform has accumulated a wealth of experience, and Baidu Live has a lot to learn from and learn from.”
Secondly, the acquisition of YY Live, Baidu completes an important part of the content ecology.
In the mobile era, search engines lack content. This year Sogou was wholly-owned by Tencent. This is the failure of search engines and the victory of content engines. Li Yanhong has always said that Baidu does content, and any ambitious search engine is hungry for good content. Baidu has been consolidating its own content ecology. On the one hand, it has its own tradition of making great efforts to build a content platform, from Tieba, Know, Encyclopedia, Library, Experience to Baijiahao, good-looking videos, and small videos for all; on the other hand, it invests in professional content platforms. Such as Kuaishou, Zhihu, Guo Ke, Uncle Kai's Storytelling, Qi Mao Novels, Netease Cloud Music, and earlier iQiyi.
Baidu, which is eager for high-quality content, naturally does not want to let go of such "time black hole" content such as live broadcast. After YY Live Broadcast is integrated into Baidu, it can be highly collaborative with video services such as iQiyi, Goodview Video, and National Small Video. At the same time, it will be integrated with Tieba, Novel, Encyclopedia, Know, Library, Experience, Netdisk and other scenes, and finally make Live Broadcast become Baidu The infrastructure of the entire mobile content ecosystem.
Finally, the acquisition of YY Live, Baidu's future search for the 5G era.
When 5G comes, live broadcast is facing a new round of opportunities. Alibaba and Tencent are both strategically deploying. Live broadcast is particularly important for Baidu, because the core of search is information. Live broadcast used to be non-mainstream content. Today is mainstream content, but it may be possible in the future. It is the ultimate form of content, so Baidu must strategically deploy this ultimate content. Baidu internally regards live broadcast as a "must win battle." After
is integrated into the live broadcast, the search engine may have great changes. The results of the user search will contain a large amount of live content, such as entertainment, knowledge, education, medical care, scenic spots, shopping malls, shopping guide live rooms, traffic scenes, etc. The search engine of the future will be very different from today's search engine. Live broadcast will definitely have a strong sense of existence. Therefore, the acquisition of YY Live Broadcast and the implementation of the live broadcast strategy are Baidu's actions to consolidate its core business of search in the 5G era.
Baidu’s acquisition of YY Live will not only have tangible direct benefits, but also have predictable strategic value. For Baidu at this moment, 's US$3.6 billion acquisition of YY Live seems to be a big deal, but in fact it is worth the money.
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