Home » Interpretation of iQiyi (IQ.US) Q2 financial report: following sinking + overseas markets as the engine, stepping out of a new growth curve provider Zhitong Finance

Interpretation of iQiyi (IQ.US) Q2 financial report: following sinking + overseas markets as the engine, stepping out of a new growth curve provider Zhitong Finance

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© Reuters. Interpretation of iQiyi (IQ.US) Q2 financial report: following sinking + overseas markets as the engine, stepping out of a new growth curve

On the evening of August 12, online video leader IQiyi (IQ.US) disclosed its financial report for the second quarter of 2021.

According to the financial report, in the second quarter of 2021, the company achieved revenue of 7.6 billion yuan, a year-on-year increase of 3%, which is close to the upper limit of the previous company’s guidance. At the same time, thanks to effective cost control, its loss continued to narrow year-on-year, and its net loss was reduced to 1.4 billion yuan.

Among them, there is also a major growth performance worth mentioning-that is, the number of members can continue to grow in the “off season”. As of the end of the second quarter, iQiyi’s subscription membership reached 106.2 million.

As we all know, the second quarter is the traditional “low season” of long video, and the above-mentioned positive data also highlights the growth characteristics of iQiyi’s “not low season” to a certain extent. This point also coincides with the views expressed by Gong Yu, the founder, director and CEO of iQiyi, in the financial report:

“The performance in the second quarter was basically in line with the company’s expectations. Although the second quarter was a low season in the traditional sense, driven by the popular original dramas launched this quarter, the number of subscription members of the company increased to 106.2 million. In terms of indicators, it continues to lead the market.”

Next, let’s interpret from this financial report, what is the growth trend of iQiyi?

“Double Million” glows with new vitality for growth

In the financial report, there are two figures worth noting. First, as of the end of the quarter, the number of overseas members of iQiyi has exceeded 1 million. The second is that the iQiyi Express version for users in low-tier cities has rapidly spread, with a peak DAU of over 1.3 million.

Gong Yu pointed out, “Iqiyi Express Edition and overseas business for lower-tier cities have shown encouraging development momentum.”

In other words, this also means that the two growth paths that iQiyi valued-“sinking” and “going out to sea”, are currently showing growth vitality that cannot be ignored.

First, let’s look at the growth path of “sinking”. In 2019, the company launched an extremely fast version of the APP, which mainly advertises in first-tier cities and channels with high user penetration, and acquires new users through user sharing pages, and then through personalized recommendations, simple interaction methods, and Adaptation to low-performance, low-cost mobile phones, etc., to improve user retention.

In fact, this style of play has indeed seized new development opportunities. On the one hand, the domestic Internet demographic dividend is becoming saturated, and expanding to cities with low penetration rates and groups outside the age of 20 to 40 is a wise move to open up new markets. On the other hand, under the impact of live broadcasts, short videos, and medium videos, it has become an indisputable fact that the “growth space” of long videos has been squeezed, and it is logical to compete for new users through high-quality content.

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Judging from the data disclosed by iQIYI CTO Liu Wenfeng in the conference call, after the launch of the iQiyi Express app, the user growth has indeed been very rapid: as of the end of the second quarter, the peak DAU of the Express app exceeded 1.3 million. The number of daily active users in the last week of the quarter also reached 1 million.

Let’s look at the growth path of “going out to sea” again. “Going to sea”, as the name suggests, is to enter the overseas market. It is understood that iQiyi went to sea in the form of a platform in June 2019. At that time, iQiyi launched the international version of iQIYIApp, preparing to open up the market in Southeast Asia where the culture is similar and the streaming media field is in an explosive period. By the end of 2019, IQiyi has tried to expand into multiple markets outside Malaysia.

As of the end of the Q2 quarter, the number of overseas members of iQiyi has exceeded 1 million, which has promoted the total membership of iQiyi to 106.2 million. According to relevant public information, at present, the international version of iQIYI services has covered countries and regions such as Malaysia, Singapore, Thailand, Japan, South Korea, North America, Australia and New Zealand, and the Asia-Pacific market has become the main position of its overseas layout.

It needs to be pointed out that in last year’s Q3 earnings conference call, iQiyi CEO Gong Yu also said: “The number of overseas members is very small, so no specific figures were disclosed, which accounted for less than 1% of all members. “But only three quarters have passed, and iQiyi’s overseas market has ushered in a one-million-year growth. It is not difficult to see the growth vitality of the overseas market.

In addition to the “sinking” and “going to sea” two-wheel drive, iQiyi has also expanded a new market space for paid online video.

According to relevant information, iQiyi also launched the “Cloud Cinema” brand this quarter. The brand includes three categories: cinema movies launched under the PVOD model, S-rated online movies and original movies. The revenue sharing ratio of PVOD movies and content partners has increased to 42%, which is higher than that of theater distribution. By doing so, the company has greater hopes to explore a new growth area and establish a new film online distribution ecosystem.

Based on the above point of view, by virtue of the “sinking” and “going to sea” play styles, iQiyi has opened up a lot of growth curves, and as it continues to enter the paid online video market, it may be expected to open more Room for growth. And combined with the ever-increasing financial data-revenue continues to grow, losses are gradually narrowing, the company’s “multiple growth curve” has appeared.

Content power and technical power empower “growth poles”

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As the saying goes, Rome was built in a day. The reason why iQiyi is able to quickly realize the rapid development of new markets and the continuous improvement of operating data is essentially that it has played a role in the continuous deep cultivation of content and technical capabilities.

1. Launch a series of popular dramas and variety shows in line with user needs, further demonstrating the long-tail value of high-quality content.

It is understood that iQiyi launched a series of classic content this quarter: In terms of drama series, the exclusive content “Rebel” has been welcomed by the majority of users. “Fall in Love with Special Forces” is also well received on the platform. At the same time, the success of “Moonlight Variations” and “The Day That Became You” has further verified the success of this new model of the Fog Theater. In terms of variety shows, this quarter’s original content “Meng Tan Tan Tan An”, “Housework Man 3” and “Go to Work! Mom” ​​have also become particularly popular variety shows this season.

In addition, in terms of movies, the exclusive online movie “Blood in the Nameless River” in April was very popular with audiences, and the box office is about to exceed 30 million yuan; the original movie “Sweeping Darkness” launched this quarter has also exceeded 400 million yuan in box office so far. In animation, some breakthroughs have been made. For example, the self-made animation “Pocahontas” has maintained its popularity throughout the quarter.

Under the influence of the above-mentioned popular dramas and variety shows, iQiyi once again demonstrated a strong market share in the second quarter: according to third-party data, the platform’s drama and variety show video views accounted for the overall market respectively Nearly 40% and more than 30% of the viewing volume, animations (including children’s cartoons) have more than 40% of the market share.

What needs to be pointed out is that in the second half of the year, iQiyi has better reserves in terms of content quantity, quality and type than in the first half of this year or the second half of last year. For example, the key dramas in the second half of the year covered many traditional dramas starring popular celebrities, such as “Ideal City” starring Sun Li and “Wind Up Luoyang” starring Wang Yibo. The Fog Theater includes many popular vertical theater brands such as “Who is the Murderer” and “Gold Rush”. As for variety shows, innovative content on multiple themes has been developed, such as the already-launched “Strange Script Shark” and the upgraded version of “China’s New Rap”-“Youth Rap Project”, as well as “Our Name” and “Dance” pregnancy”.

Based on the above, it can be seen that as iQiyi continues to enrich its content reserves, the platform’s enduring vitality in high-quality content may show a strong long tail effect.

2. Through technological empowerment, not only has made certain progress in the industrialization of film and television, but also promoted a significant improvement in content production efficiency.

It is reported that during the quarter, iQiyi continued to adhere to the development strategy of promoting the industrialization of film and television with technology empowerment, which specifically includes the following points:

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One is, through continuous efforts to improve the recommendation engine technology of the platform, in order to match users with the most suitable content from a huge content library, and there is reason to believe that nearly 30% of DAUs in the second quarter are driven by content libraries. The second is that the iQiyi Express Edition for low-tier user cities has achieved rapid popularity, personalized recommendations and simple interaction methods have greatly captured the needs of groups outside the age of 20 to 40.

In addition, the company has also made progress in the industrialization of video production using the intelligent production tool set. For example, it has launched the production business intelligence system (PBIS) internally, which is the professional data system of the iQIYI content production team. In the near future, it will be widely promoted internally and will cover all internal studios within one year to promote the industrialization of video production within iQiyi and in the partner ecosystem.

With the empowerment of the above technologies, iQIYI’s content cost rate continued to be optimized this quarter, and R&D expenditures also increased year-on-year: In Q2 of 2021, the company’s overall content cost remained the same as the previous period, but the content cost rate continued to increase from the previous period. Down, the trend for the better has not changed. At the same time, sales and management expenses fell 1% year-on-year to 1.185 billion yuan, and R&D expenses increased by 2% to 677 million yuan. Although research and development expenses have increased, it is likely to increase investment in the field of intelligent film and television production. To.

From the above performance, it is not difficult to see that with the empowerment of technology, iQiyi’s content production efficiency has indeed improved, and with its further advancement in the film and television industry, the company’s growth trend may appear in the future. Great progress. This view also coincides with the statement made by iQiyi CFO Wang Xiaodong in the conference call:

“The main goal of the industrialization of content production is to increase content supply and content quality. In the past few years, the main driving force of content costs has come from the further diversification of content quality and content strategies, such as the Fog Theater. However, the next three Within five years, you will see a significant improvement in content production efficiency in view of the anticipated progress made by iQiyi in the industrialization of film and television content production.”

In summary, it is not difficult to see that iQiyi’s positive trend in the traditional off-season of long videos is not accidental. As iQiyi continues to produce and output high-quality content to make its core competitiveness stronger, and to gain the advantages of large-scale and efficient content production through technology empowerment, the company’s future growth path may become clearer and clearer.

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