Lychee is struggling with profit and loss, online audio is embarrassing |

Original title: Lychee struggling to make a profit and loss line network audio is embarrassing

Source: Beijing Commercial Daily

As the first domestic audio company, it clearly won at the starting line, but Litchi failed to tell the story of the “ear economy” well enough. On November 30, Online Audio Lychee Group released its financial report for the third quarter of 2021, with total revenue of 505 million yuan, exceeding the full-year revenue of 2020, but a net loss of 27.2 million yuan under non-international generally accepted accounting standards, a year-on-year turnaround. Since its listing in early 2020, Litchi has issued a total of eight quarterly financial reports. Only in the third and fourth quarters of 2020 will it be profitable, and the other six quarters are all at a loss.

Located on the mobile Internet sound track where online music, online K songs, and audio storytelling products gather, the awkward network audio continues to brush its presence through the form of content output to smart hardware, launching derivative apps, and doing voice live broadcasts. On the issue of profitability, they use the forward look as an excuse. Refined operation can be profitable, but the expansion of investment will again lose money, and online audio seems to be in an endless loop.

　　Earned more but turned a loss

Like the previous quarterly financial report, Litchi’s revenue in the third quarter of 2021 maintained a growth trend, with a year-on-year increase of 40% to 505 million yuan. In the first three quarters of 2021, litchi received 1.559 billion yuan, 56 million yuan more than the 1.503 billion yuan in 2020.

However, from the perspective of income structure, the phenomenon of lychee relying on audio entertainment still exists. The financial report for the fourth quarter of 2019, which is the first financial report released by Litchi, shows that audio entertainment business revenue accounted for 98.6% of total revenue. By the third quarter of 2021, Lychee audio entertainment business revenue accounted for 99%, and podcasting, advertising and other revenues accounted for only 1% of total revenue.

Litchi mentioned in the financial report that “the year-on-year increase in revenue was mainly due to the growth of paying users and the enhancement of our audio entertainment product commercialization capabilities”. When interpreting the third-quarter financial report, Lai Yilong, the founder and CEO of Litchi, also focused on the audio entertainment business: “The average monthly active users of the audio entertainment business in the third quarter increased by 21% year-on-year to 9.17 million. In terms of commercialization, we will release the audio entertainment business. Commercialization potential as the goal.”

The commercialization goal was clear, and revenue continued to grow, but the first online audio company to go public in the United States failed to maintain profitability. In the third quarter of 2021, litchi had a net loss of RMB 27.2 million under non-international accounting standards, and a year-on-year net profit of RMB 600,000.

Losses are not unfamiliar to Litchi. Among the eight financial reports released after the listing, only two were profitable, and the highest net profit was only 5.4 million yuan.

“Online audio is the same as online music and online video. Profitability is a difficult problem. Both iQiyi, which is independently listed now, and NetEase Cloud Music, which will be listed soon, have this problem. The ceiling for relying on members to pay is too low.” Li Jinqing, an analyst at Bida Consulting, bluntly told a reporter from Beijing Business Daily.

Specific to lychee, the revenue bulk audio entertainment business includes virtual gift rewards, etc. Zhiwen Group (formerly Momo), which released its financial report on the same day, puts gift rewards revenue mainly on live broadcast revenue, and this business also contributes to Zhiwen The most income. In terms of business model, one is audio and the other is live broadcast, but the two business models are similar. In terms of volume, Zhiwen Group’s live broadcast revenue is 2.167 billion yuan, which is significantly higher than that of Litchi.

　　The inevitable problem

In addition to the relatively simple revenue structure, it is basically the same expanding loss, which has obviously become a shadow over the entire online audio industry. Compared to Litchi FM, Himalaya, which has an annual revenue of more than 4 billion yuan, 250 million monthly active users, and a 13.3% payment rate, undoubtedly has a performance that matches the industry’s leading position. According to its previously announced prospectus, revenues from 2018 to 2020 were 1.48 billion yuan, 2.68 billion yuan and 4.05 billion yuan, but net losses were 773.7 million yuan, 773.3 million yuan, and 605.1 million yuan respectively. .

According to QuestMobile’s classification, the network audio where Litchi is located is on the mobile Internet sound track along with online music, online K songs, and audio books. Data shows that in October 2021, the number of voice populations is 728 million, of which monthly active users of online music, online audio, online K songs, and audio books are 663 million, 120 million, 114 million, and 38 million, respectively.

Looking at the performance of typical apps in the segmented industry, according to QuestMobile data, in October 2021, Litchi MAU (monthly active) 4.81 million, ranked behind Himalaya, Qingting FM, and Maoer FM, and only higher than Kuaiyin. Judging from the year-on-year changes in MAU, litchi decreased by 32.8% year-on-year, ranking bottom among the above-mentioned apps.

In the financial report for the third quarter of 2021, Litchi disclosed that the overall mobile terminal monthly active users in the third quarter was 58.9 million, and the average monthly total paying users was 485,000. The data for October 2021 was not disclosed.

Regardless of user scale, look at investment. The operating expenses of litchi in the third quarter of 2021 were 191 million yuan, a year-on-year increase of 91%. When explaining the loss in the third quarter, a related person in Litchi told a reporter from Beijing Business Daily, “The first is the increase in G&A expenses: management team and employee salaries, and international expenditures are part of the company’s normal investment in business expansion. The second is the increase in R&D expenses. The reserve of technical talents for long-term development and the construction of core technologies (including the construction of underlying technology, enhancement of audio capabilities, and coverage of global business) are mainly based on long-term sustainable growth considerations. In addition, in this quarter, Litchi has adjusted the content category And optimization, focusing on content categories with strong commercialization potential. With this optimization and adjustment, Litchi’s investment in recording and broadcasting content has been reduced accordingly.”

　　Internal and external competition

“The boundaries between online audio, online music, and audio books are becoming more and more blurred. If online audio does not expand, you will watch your share be eaten away. If you expand, you must invest. Companies that have just reached the profit line are very It’s easy to lose money again,” said Li Jinqing.

Although the leading platform of the online audio industry is still in a vortex of losses, this has not prevented it from becoming a market that the outside world believes has great potential. According to relevant data released by CZ Consulting, the online audio penetration rate in the Chinese market is only 16.1% in 2020, but the penetration rates of online music, short videos and long videos have reached 56.7%, 73.8% and 74.2% respectively in the same period. So this also means that the online audio industry may still have broad room for development in the future.

But from another perspective, the current low market penetration rate of the online audio industry also shows that it has not attracted the favor of mass consumers. Therefore, in the current situation of a relatively niche market, a limited user group has also become the target of competition for participants on this track.

In addition, in addition to their respective market competition, the three leading platforms in the industry, Himalaya, Litchi FM, and Dragonfly FM, also need to face the “invasion” of external forces. In June last year, the “Tomato Listening” launched by ByteDance and the “WeChat Listening Book” launched in October of the same year may also mean the entry of the giants. Not only that, in the face of short videos and social platforms that continue to grab user time, it will undoubtedly make the competition more intense.

Beijing Commercial Daily reporter Wei Wei

Editor in charge: Qi Qiqi