Source: Wall Street News (ID: wallstreetcn)Bit Yuxiang，The views expressed in this paper do not represent the position of the hearse and do not constitute investment proposals.

Come back across the year, a lot of people around me are filling a class called "B station party".

Station B hosts a party called "The Most Beautiful Night" from the World of Warcraft dance show:

Not only are there new and old memories of harry potter symphonies, "Which One" and so on that are loved after the 80s and 90s:

There are other New Year's Eve parties rarely seen, by the veterans choir performed by the "Bright Sword" theme song "Chinese Army Soul" and other exciting programs.

Here's howSome of the clips from the party, you can feel:

Unexpectedly, a combination of Chinese and Western musical instruments feast, even won a big victory, B station party was boasted of crazy.

Live online at the same time to watch 80 million, so far, the total number of broadcasts more than 43 million times, the total number of impeachment close to 1.3 million, almost all in the "sleeper cattle forced" and "crash tears" repeatedly switch, there are countless "water" spontaneous Amway this "most understanding of young people's party."

People's Daily official WeChat headline reprinted the Communist Youth League Central Article "Netizens: This New Year's Eve Party" is very understanding of young people!Comment that most of the TV stations are asking stars to sing pop singles, they take the interest of young people as a cut-in, through the content of the program planning, to meet the fans remember the most delicate emotions.After 80, 90 has become the backbone of society, they have a strong common memory of many things in the party.When it opens, you'll be surprised, it's the voice of the young, it's the voice of a generation.

On January 2nd, the first trading day of 2020, the share price of B Station surged more than 15% after the opening, narrowing slightly to 12.51% at the close, and the share price was at $20.95, the highest since the end of February last year.The market value increased by nearly $730 million to $6,535.3 million.

Not long ago, B station also 800 million "big money" to seize the first race LOL global final three-year solo broadcast rights, the high price scared away the electric race professional household fast hand, tiger teeth, fighting fish.

Just when the iron powder worried about the future accounting of the small break station, consider whether to "for love power generation", B station made big news, "live one sister" Feng Timo airborne small break station, the legendary signature fee as high as 50 million!

Why is Station B so ferocious?And see the audio video for you to answer:

Is Station B burning money?We'll tell you later, the business logic behind all this and the anxiety of the big guys.

01

Love Youteng's heart is also bitter?

Everyone agrees that with the advent of the 5G era, download speeds are getting faster and faster, and video will be a must-have for the Internet industry, and naturally a place for giants to pile up.

After years of fighting, the video of the track's current state of war is like this:The two most worthy battlefields, long video "Love YouTeng"(Ai Qiyi, Youku, Tencent Video)Three-legged stand, short video "shake the sound of fast hands" the two countries compete for supremacy.Previously neglected in the field of video, "B station" style is strange, out of the air, while the giants are also in the eye.

However, different lives, the giants also have a good and miserable life, all from their own business models and the competitive landscape of the industry.

From the earliest Batch of Chinese Internet companies, from Wall Street to Lujiazui, investors were keen to find American companies. No way, so foreigners can understand, convenient for American leeks to take a stake. But as times change, China's Internet companies are taking their own path.

From the product model, "Ai Youteng" is the target of Nai fei, and B station is the Chinese version of Youtube. This pairing comes from similar content patterns on both sides, with Nai Fei focusing on high-quality episodes, while Youtube also starts with a variety of "cat" and ghost videos.

But behind the huge differences in business models between the U.S. and Chinese versions is the huge differences in market and corporate capabilities between the two countries.

Nye's main source of income is only one: membership pay income, and his business logic is fairly straightforward, making or buying more House of Cards, and then expanding its membership base to drive higher pay-per-view revenues, which in turn can make more big plays. And Ai Qiyi and other "Ai Youten" are basically advertising and membership of the dual engine-driven, and even advertising still dominates.Ai Qiyi's membership revenue only exceeded advertising revenue in the last three quarters, but the core reason is the decline in advertising.

Why is this happening? Ai Qiyi's heart is also bitter ah. The payment habits of American users are deeply rooted, and the content payment habits of Chinese users have been cultivated over the years. When Ai Qiyi ventured to launch a paid service in 2011, the war-torn company ordered a monthly price of 20 yuan. How did the price come about?

Yu Yu: The price of a pirated DVD that year was 5 yuan, and users watch an average of four movies a month on the Internet, in order to compete with pirated DVDs, so the monthly price is 20 yuan.

Ai Qiyi's current monthly membership package price is 19.8 yuan / month, but combined with the continuous package year of 14.8 / month, the first month of new customers 8 yuan / month, plus Ai Qiyi will also join forces with other brands preferential activities, the real user pays the membership fee is much less than 19.8 yuan / month. In the third quarter, the average monthly ARPU value (average revenue per user) was 11.7 yuan per person.

This membership fee has not increased for eight years, in the words of CEO Yu Yu: even piracy is not as good!

We are targeting pirated DVDs, now the average person on the Internet has been watching 8 movies a month, 7 years doubled, pirated DVD prices have also increased, our price has not increased.

It's really sad.... 

What's even more heart-tinging is that since 2010, Nye has increased its price five times.

Can not do enough content differentiation is certainly on the one hand, today's three video platforms for users is more of a tool, which platform has popular content to go to which to see, no loyalty. Users drift, that platform price increase means pushing their users to others.

The competitive landscape is the harder battle. After years of money-burning war (don't forget Jia Yueting was also the main player) finally dust settled, hold on to the last love qi art did not have time to celebrate, bitterly found that there are still two opponents standing around, they have two huge shadows behind them - two horse dads!

Ai Qiyi himself is also rich second generation origin (dad is Baidu), when we all have "money ability", as the saying goes, a rich second generation pick water to drink, two rich second generation to drink water, three rich second generation no water to drink.

No one dares to raise prices, everyone has money to lose, so they all carry the dragonfly, see who dies first!

Since there is no overall price increase, it is only to maximize the value of popular episodes, 薅 all wool. Chen Love Order, Qingyu years is the platform in the hands of the fishing rod, only this time users will be willing to be good on the hook, which is essentially a disguised price increase.

Of course, the situation is also changing, Wang Si Cong have been debt collection, by the "marriage", and then rich horse dads will not be so indulgent rich second generation, co-ed price increases is undoubtedly a very attractive option, perhaps next year we will see this scene.

But will the same bed dream of Love Youteng continue to work together for a long time? I'm afraid it can only be plastic sister flowers.

02

B Standing "anxiety" what?

Looking back on B station, rich second generation "Love Youten" have to pull down the face just rice, why small broken station but continuously against the trend to spread money?

As a post-90s social position, what is "anxiety" about Station B, which is making great strides into the golden age? Users and revenue!

B station now tells the story to the capital market is the user growth, "small break station" may be one of the few users is still growing significantly platform-level products, B station itself set a goal of three years after the monthly active users reached 220 million, we are also optimistic that we can exceed this goal.

But now to let the market to buy, users are not enough, B station is widely criticized is the lack of revenue realization.

B station several major revenue modules: games, e-commerce, advertising, large members, live broadcast, looks complicated, combed, can be divided into two categories: 1. Kim's father pays, that is, advertising (agent games, sales of hand-held essentially equivalent to the advertising of a particular self-owned product); Users pay, including large memberships and live streaming services.

Objectively 7, Station B has been working very hard to advertise, do is also very characteristic. At present, the core game FGO and hand-held e-commerce business are around the secondary population demand customization, the two businesses together accounted for B station nearly 80% of the revenue.

But the problem is that the secondary population is small, older will go out of the pit business, there is a clear ceiling, and the ambitious small break station obviously can not stop there. Can the advertising business break through? Let's talk about this later.

Let's talk about the remaining two pieces of business, the big members obviously have obvious bottlenecks, "Ai Youten" are B station head of the mountain, they spent so much money to buy copyright but can only be the standard piracy, that B station ...

So there's one way left in front of Chen Rui: live.

Live broadcast is undoubtedly a revenue weapon, but also a large traffic. Station B began to dabble in live broadcasting very early, after all, the number of users in hand, the age is similar to the industry's live head platform. However, over the years, Station B's live streaming business, well, it's hard to say...

The title of "nod village" is not in vain...

I am Chen Rui I can not bear, it is said that Station B replaced the live broadcast team, it is said that Chen Rui personally responsible for the live broadcast business ..., so many are said to end up not as good as the iron fact: Station B began to cast money!

So the S10 cameSo Von Timo signed it.

We believe this is just the beginning.

LOL represents the game users, Feng Timo behind the entertainment users, Chen Rui this is to tiger teeth, YY business are snatched over. However, these live sites are in the thousands of broadcast war survived, regardless of combat effectiveness or experience are extremely rich, B station can win this battle? I pinched sweat for Chen Rui. And whether or not the small break station can do, his first enemy may be himself, the core of the secondary crowd.

When Von Timo's golden patrons and fans flocked to Station B, could the community culture that Station B was proud of be sustained?Leave an egg here, which we discussed in another episode.

03

Advertising, the largest cake on the Internet

Finally, let's talk about advertising.

It's not because he doesn't matter in the end, it's precisely because it's the biggest cake on the Internet.

If Station B does a good job of live streaming, it can be a $10 billion company; if it's qualified, it can be a company with tens of billions of dollars at its peak; and if it can do well in advertising, it's going to go straight to the billion-dollar giant.

Advertising is one of the core business models of today's Internet companies, familiar with Google, Facebook, Tencent, Alibaba and Baidu.

Roughly ing, Internet advertising can be divided into brand advertising and performance advertising two categories. As the name implies, the former pursues the exposure of the brand, the advertiser pursues the image of the brand, the effect is more difficult to measure. The latter pursues conversion effects, such as how many impressions are shown, how many clicks are converted, and the advertiser calculates how much sales/revenue is converted, in other words, the advertiser calculates how much revenue each ad fee translates into, that is, the legendary ROI.

When the economy is bad, advertisers naturally shrink brand ads that are difficult to measure, and turn to performance ads with clear ROI measures. And that's what's happening with this year's huge Chinese advertising.

The effects of advertising soared, with the traditional BAT giants taking 64 per cent of China's digital media spending, while the byte-beating of the past few years took a staggering 23 per cent, second only to Ali's 33 per cent share. In other words, the big four took up to 87% of the advertising market, while everyone else was split between the remaining 13%!

The decline of brand advertising is evident from Ai qiyi, because brand advertising accounted for 90%, Aiqiyi this year's advertising revenue hit hard, the second and third quarters of the year-on-year decline of more than 10%.

"Just rotten money", Ai Qiyi is also forced helpless.

B station advertising business has just started, with the main crowd into the mainstream of society (yes, after 90 has started to run four), small break station will become the major brands of the main battleground, B station brand advertising is only a matter of time.

But what determines the future height of Station B is how much effect advertising can do. This depends on the level of users of Station B, while on the other hand it depends on Station B itself, starting with Station B's U.S. --- Youtube.

Unlike its Disciples, Youtube sells only ads, and it sells them in a way that completely upends the U.S. video advertising industry.

Youtube was only 20 months old when Google bought it for $1.65 billion in 2006, with only 67 employees. The then controversial acquisition, more than a decade later, has been recognized as the most successful deal in Google's history. As a single app that now accounts for 20% of the world's total user time, Youtube has long been Google's ace business.

Google's financial statements are often spat on by Wall Street, and it doesn't list businesses such as YouTube. And YouTube's strong growth has led to new segments on Wall Street:It used to be not just YouTube, it was to hide his numbers, but now it's not just to hide that other numbers are too ugly.

Despite all the guesses, Wall Street widely expects Youtube to have $14-15bn in advertising revenue last year (compared with Station B's forecast of less than Rmb7bn this year). Youtube alone should be valued at more than $150bn, according to peer valuation systems such as Nye.

But it wasn't that good at first, and despite the prospects, when Google acquired it, Youtube was like this:

Grassroots users upload ---- like B stations

At that time, the post-80s-based --- similar to station B

The quality is uneven---- as station B

The copyright problem is --- the same between Station B and Station B

And what does Google have? The world's most powerful technology development capabilities, the most perfect user labeling system, the most experienced digital advertising sales team, a large number of users.

After joining Google, Youtube established a digital advertising system, Content ID, which splits accounts with copyright and content producers, to address copyright concerns and give content providers a huge incentive to continue to deliver high-quality content. For example, Mr. Li may earn more than $10 million a year in advertising revenue from Youtube.

Ads seem to be predators to users, who are naturally aversion to ads, especially for today's ever-longer video patch ads, but have to watch, which hurts the user experience, and advertisers' interests cannot be guaranteed if they can shut down ads at will. To balance the interests of advertisers, users and platforms perfectly, Youtube has explored a whole new approach: Trueview.

TrueView ads are available in two ways: skip-in-video ads (in-stream) and sponsored video ads (in-stream) next to search results and main videos.

In-video ads jump out before or midway through the main video, but there's a corner in the lower right corner that says ads can skip after 5 seconds. For the user, as long as 5 seconds, the experience damage is relatively limited. Sponsored video ads, on the other hand, allow users to choose to click.

But When Youtube charges advertisers, the definition of TrueView's "True" is more restrictive than not skipping in five seconds - only if the user watches the ad for 30 seconds or interacts with the content of the ad, such as clicking a link. If the ad is shorter than 30 seconds, it will not be billed until you finish reading it.

Youtube has detailed user browsing tags that combine Google's vast user data system to create accurate user portraits.

Youtube has developed programed ad delivery monitoring to help advertisers pinpoint users, identify prices, and measure performance, all to help advertisers improve ROI.

In addition, Google's powerful search advertising sales team can help YouTube achieve industry-wide advertiser reach and market education almost immediately.

At lastPerhaps most importantly, Google's strong profitability is enough to keep YouTube from making money for a decade, focusing on improving the experience of users and advertisers, instead of killing chickens for survival.

Youtube's technology and sales teams are built on a deep understanding of the needs of users and advertisers, which is the core competencies of the entire enterprise system.

If, at the advertising level, the Chinese version of Youtube is byte-beating, Ali, or probably more, they have the most user data, the most powerful sales and operations teams, and the highest paid algorithmic engineers on the market.

Station B has always refused to advertise, but also want to protect the user experience, but for the upcoming golden age of small break station, the future height is how high, is like doing anchovies or chicken head? It depends on today's strategy, which requires strong and sustained capital investment and tests the strategic vision and execution of the people at the helm. Zhang Yiming and Huang Wei are such people, Chen Rui, isn't he?

Choose live broadcast, perhaps helpless action, at least in terms of the current B station to show the ability to expect the future of giant-level advertising revenue, not unwilling, really can not also.

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