B station Q3 financial report interpretation: advertising strategy adjustment, channel purchase increase, loss of 4.06 record

text | Duckweed.

Revenue exceeded expectations and losses also exceeded expectations.

This is a better summary of B station earnings data statement, although at the business level, B station's existing market share and future layout are favored by the outside world, but also can get at the same time AT two giants investment, but B stand on the earnings performance is controversial.

According to the latest Q3 2019 financial results, B Station Q3's revenue for the quarter was RMB1,859 million, up 72.3% YoY from Q3 in 2018, while its net loss widened further to RMB406 million, up 64.9% from RMB246 million in 2018.

The market's better-than-expected results quickly translated into worries about losses, as reflected directly in Station B's share price, which closed the next day down 3.97 per cent at $15.73 a share.

B Station financial results highlights

Ad strategy changes are effective

Ali's stake led to a surge in e-commerce revenue

Behind Station B's overall better-than-expected revenue was an increase in revenue across all sectors.

In terms of gaming, Q3 achieved revenue of 933 million yuan, up 25% from the same period in 2018, but little growth from Q2's 920 million yuan in 2019. At present, Station B has about 30 games online, of which the best performance is "FGO", contributing the largest piece of game revenue.

After Station B set up its own game team, the future period will also increase the supply of games, to provide some secondary quality games to continue to maintain performance growth.

In terms of advertising, Q3's advertising revenue was RMB247 million, up 80% from the same period in 2018, and up 47% from Q2's RMB168 million in 2019.

The rapid growth of advertising revenue this quarter is closely linked to the adjustment of B-station advertising strategy. According to Li Wei, Vice Chairman and Chief Operating Officer (COO) of Station B, at the analyst communication meeting, Station B has formed a complete chain of brand marketing and UP master marketing. Mainly through brand advertising to establish brand awareness, through up main content ecology to complete product grass, follow-up can also be through the effect of advertising to complete the transformation of the entire sales chain, while in the algorithm and advertiser accuracy made some efforts to enhance commercial capacity.

In terms of live streaming and value-added services, Q3 achieved revenue of $453 million in the Q3 quarter, up 167% from the same period in 2018, while live streaming revenue in partnership with trade unions grew faster, driving growth across the sector. At present, Station B provides pan-entertainment payment business, including games, B Station Chairman and CEO (CEO) Chen Rui said because the user base is too large, some users have live demand.

In terms of e-commerce, this is the fastest growing business segment of B Station, Q3 year-on-year growth of 703% to 226 million yuan, which is closely linked to the introduction of Taobao cooperation.

On February 14th Taobao China, Ali's wholly owned subsidiary, officially bought about 24m shares, with Taobao holding 10.8 per cent of the Class Z common share of Station B, or about 8 per cent of the total share capital. Immediately after may Taobao B station officially announced cooperation with foreign officials, the two sides will rely on their respective resource advantages, in B station's own IP commercial operation, UP main content e-commerce and other aspects of extensive cooperation.

Q3 2019 is the second official cooperation between the two sides announced financial results, it can be seen that Ali e-commerce for the commercialization of B station to change the existing certain pull role, with the continued deepening of cooperation between the two sides, B-station e-commerce value will be gradually released.

A record loss of $406 million was recorded in a single quarter

Channel buying and home-made content drag

In addition to the better-than-expected revenue, MAU and the loss-making business also exceeded expectations, although the former was good and the latter was losing money.

In terms of MAU data, Station B's MAU reached $128 million in the quarter, up 38% from the same period in 2018, while Mobile's MAU reached $114 million, up 43% from the same period in 2018.

The rapid growth of Station B MAU this season has been driven by two factors, one of which is the contribution of Station B Comics and Cat Ears FM.

In November, several media outlets reported that Bilibili's wholisted acquisition of the secondary audio community Cat's Ear FM was worth about 1 billion yuan, slightly less than expected. It was later revealed in Station B's official annual report that in December 2018, Station B increased its stake in MissEvan, a secondary audio community, to 80.5 per cent, but the exact price is unknown.

Also in November last year, Station B quietly launched Station B comics, layout comic platform, and then acquired NetEase Comics, more comic copyright content, is one of Station B's key incubation business.

These two community platforms contributed a large part of the new MAU to Station B, with financial results showing that 6.1 million MAU was contributed in the Q3 quarter, compared with 3.7 million in Q2 2019, indicating that the two platforms are beginning to gradually get on track to contribute data to the main Station B;

On the other hand, Station B has also been more active and proactive in acquiring traffic since the beginning of the quarter, including cooperation in application stores, as well as in-depth strategic cooperation in the traffic platform, which has a double increase in MAU and payment rate for Station B. Li said at the earnings conference that the rate of new user payments in the most recent quarter was significantly higher than that of new users. Regarding the growth of new users' retention time at Station B and the willingness to pay for products, there will actually be a higher and higher level of improvement.

Buying brings data growth, but it also creates a huge cost burden. Station B recorded a single-quarter loss of $406 million in the quarter, largely due to a surge in sales and marketing costs, from $192 million in Q3 in 2018 to $364 million, an increase of nearly 90%.

The loss margin of Station B has also accelerated in the quarter, with previous losses of 187 million yuan and 315 million yuan, respectively, which means that Station B has lost 916 million yuan in the first three quarters of 2019, equivalent to 1.6 times the 2018 loss of 565 million yuan for the whole of 2018.

Another important reason for station B's loss increase is the drag on its home-made content strategy.

From the second half of 2018, Station B has placed more and more emphasis on content self-control, in variety, documentaries and other home-made content put a lot of energy, produced a variety of "Story King 2", the documentary "Life String" and many national works. Just two days before the release of the financial results, Station B held the 2019-2020 National Animation Productions Launch Conference, launched 40 animation works in one go, 29 of which were produced by Station B, including the world-class sci-fi IP "Three Body" animated version.

This means that Station B is taking the route of Aeten, with high-quality content to attract potential users, retain paying users, increase the use of membership stickiness, etc. , but this road is destined to be long-term investment, three or five years or even ten years it is difficult to see the hope of self-made sector profitability.

This will increasingly drag down Station B's earnings figures.

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