The three logics of B station operation

Bilibili is indeed a controversial company.

After the release of Bilibili’s Q4 2021 financial report, various parties gave their own interpretations from different angles. There is no doubt that the interpretations are all interesting.

But there are always three core topics: Has the community changed? Is revenue down? Is turning losses into profits just a pipe dream?

In this article, I don’t want to list boring financial report data, but try to use the meaning of the data to talk about these three issues worth discussing about Bilibili.

1. Has the user stickiness of Bilibili decreased after it went viral?

Complaining that Bilibili has changed is an old topic, the community tone is disappearing, and user stickiness is declining. Such arguments are heard by everyone from users to investors.

But I noticed that these opinions are usually based on very emotional judgments based on one's own subjective feelings, and it is difficult to provide evidence.

The basic characteristic of this argument is that it is difficult to verify or disprove without careful examination.

Over time, it seems to have become politically correct in a sense for people inside and outside the circle to complain about the change of Bilibili.

However, there are actually some data that can verify whether user stickiness has decreased. Rather than relying on subjective conjecture, it is better to rely on real data.

Let’s take a closer look at a few indicators:

1. User access frequency

DAU/MAU, that is, the ratio of daily active users to monthly active users, this data can reflect the frequency of user visits in a certain sense.

The smaller the ratio, the less frequent the user visits; the larger the ratio, the stronger the user stickiness.

According to the financial report, Bilibili had 72.2 million daily active users in Q4, 27,200 monthly active users, and DAU/MAU=26.5%. In Q4 2020, Bilibili's DAU/MAU=26.7%.

It can be seen that this indicator has basically remained the same, with only a very slight decline.

2. Single user duration

This indicator is very simple and direct, that is, the average time each user spends on Bilibili. If the time spent by new users is not as long as that of old users, the time spent by a single user will definitely decrease.

According to the financial report, the single-user usage time of Bilibili in Q4 2021 was 82 minutes, while in Q4 2020, the single-user usage time was 75 minutes.

It can be seen that the time spent on Bilibili is increasing, that is, new users are spending more time on Bilibili.

3. Single user interaction

This indicator reflects the data of users' interactive behaviors on Bilibili, such as following, collecting, liking, coining, and posting barrages.

In my opinion, this indicator best represents the user stickiness and activity of Bilibili.

According to the financial report, the average monthly single-user interaction volume of Bilibili in Q4 2021 was 139 times (average monthly total interaction volume/DAU) , while the average monthly single-user interaction volume in Q4 2020 was 87 times.

It can be seen that Bilibili’s user interaction data has not decreased due to its expansion beyond the circle.

4. Revenue per User

This indicator reflects more the efficiency of commercial monetization, but I think it is also a side reflection of user stickiness. If this indicator increases, it means that the newly joined users are high-value users, not low-value users.

According to the financial report, Bilibili's revenue in Q4 2021 was 5.78 billion yuan, with 272 million monthly active users, and revenue per user was 21 yuan. In Q4 2020, revenue per user was 19 yuan.

It can be seen that the per-user value of Bilibili is increasing year-on-year, that is, the newly added users have not diluted the commercial value of Bilibili.

5. Payment ratio

This indicator represents the willingness to pay among the overall users, which in a sense also reflects the attractiveness of Bilibili to users.

According to the financial report, Bilibili's payment ratio in Q4 2021 was 9.02%, a slight increase from 8.86% in the same period of 2020.

This payment includes other payments such as B station membership and e-commerce.

Then let’s look at the penetration rate of premium members alone. It was 7.18% in Q4 2020 and 7.36% in Q4 2021, which also increased slightly.

Well, the result is very obvious.

We can see that in the above five sets of data, except for the first DAU/MAU which has a very slight decline, the other four indicators of Bilibili have all increased year-on-year.

Therefore, we can at least draw a basic conclusion from the data perspective - the argument that B station's user stickiness has declined after it went viral is not valid.

Considering that it still maintains a strong monthly active growth rate of 35% in the context of stock game at the peak of mobile Internet, the slight decline in DAU/MAU can be considered a necessary cost for breaking out of the circle, which is completely within an acceptable range.

2. Why can Bilibili’s advertising revenue grow against the trend during the cold winter of the advertising industry?

Indeed, in this Q4 financial report, Bilibili’s advertising revenue is a highlight that cannot be ignored, growing by 120% to 1.59 billion yuan, and the year-on-year growth rate is also higher than the 110% in Q3.

Some people say that it is because the advertising base of Bilibili is small.

Regardless of whether this conclusion is correct, at least this triple-digit growth is indeed very eye-catching given the overall downturn in the Internet advertising industry.

You should know that according to Questmobilede data, in the first three quarters of 2021, the overall Internet advertising growth rate was only a single-digit 9.5%.

Alibaba’s recent financial report shows that the marketing revenue of its core business Taobao e-commerce has decreased by 1%, Baidu’s Q4 advertising revenue only increased by 12%, iQiyi’s 3%, and Tencent’s advertising revenue in Q3 last year only increased by 5.4%.

Last year, the advertising industry experienced the rectification of splash screen ads, Apple’s IDFA privacy adjustment, the implementation of the Personal Information Protection Law, the rectification of education real estate, etc.

These factors have a direct impact on the growth of Internet advertising, while the sluggish macroeconomic situation, especially consumption data, has also limited brand spending.

So why can Bilibili’s advertising business grow rapidly against the trend?

Therefore, the claim that high growth is due to a small base is unfounded. Last year, Bilibili's advertising revenue reached 4.5 billion. Although there is indeed a big gap between it and ByteDance and Baidu, it is untenable to say that 4.5 billion is a small amount.

First of all, in my opinion, Bilibili’s unique user base and user value are an important factor in attracting advertisers, especially brand advertisers.

Bilibili has been established for 13 years.

Therefore, some of the young people that Bilibili continues to attract have actually already left the campus and become the backbone of the new generation of consumption.

Their spending power and willingness are continuously increasing, and in a sense, this group of active young people who love interaction also has the potential to leverage other people's consumption.

Therefore, when a brand wants to conduct in-depth marketing and advertising to young people, today's Bilibili has, in a sense, become an unavoidable existence.

Secondly, unlike other platforms, due to its unique demographic attributes, industries such as education and real estate that were rectified last year do not account for a large proportion of B Station’s advertising. Instead, B Station attracts more industries that represent more dynamic consumption upgrades.

According to the financial report, games, e-commerce, 3C products, food and beverages, and automobiles are the top five advertiser industries. These advertisers value the deep influence of Bilibili on their target audiences.

Finally, Bilibili itself is also optimizing its commercial products and working hard to improve monetization efficiency.

In the past, Bilibili did go through a stage of exploration in terms of commercialization, but today we can clearly see that the management attaches great importance to commercial monetization.

The chairman of Station B said it very directly in the earnings call:

"In the past, we allocated 70% of our energy to user growth and 30% to revenue growth. In this year's work plan, we will adjust the allocation ratio to 50% to 50%, that is, 50% of our energy will be spent on user growth and 50% on revenue growth."

These emphasis on monetization are reflected in many aspects of product operations. For example, the AD TALK 2021 marketing conference in December last year proposed the concept of "brand bank" for the business middle-office system.

The "Brand Bank" is composed of a commercial traffic management system, an advertising system, and the UP host business cooperation platform "Fireworks". Among them, the "Fireworks" system is the core of the UP host's commercialization, where brands and UP hosts can freely choose each other.

In the past year, more than 4,000 business order videos have become popular on the entire site, equivalent to an average of 10 videos on the list every day.

Bilibili has explored an advertising model that balances the interests of all parties. By deeply embedding advertisements by UP hosts, users, advertisers, UP hosts, and the site can all get what they want.

The comment under the video of UP host "奶糕成精档案社" eating rice, which received 23,000 likes, represents the users' acceptance of B's ​​advertisement.

As a frequent user of Bilibili and also as an advertising product manager, my intuitive feeling when browsing content is that Bilibili's Adsload (advertising loading rate) is still relatively small, and it is expected that there is room for further release.

3. Is it possible for Bilibili to achieve its goal of exceeding 400 million MAU in 2023?

To be honest, when Bilibili proposed the goal of breaking 400 million by 2023 more than a year ago, I didn’t quite believe it.

Today, however, things are changing.

According to the conference call for Bilibili's financial report, Chen Rui revealed that in January 2022, Bilibili's MAU had reached 300 million, while it was 202 million at the end of last year, which means that the MAU has increased by 100 million in the past year.

Therefore, based on the current growth rate, even if it slows down, the goal of 400 million by 2023 is not far away.

This was almost unimaginable five years ago, or even three years ago. You have to know that three years ago, the MAU of Bilibili was only over 90 million.

Let's sort out the logic behind this from other perspectives -

Let’s talk about the macro data level first.

According to CNNIC data, the number of users of pan-video (including long videos, medium videos and short videos) in China has exceeded 900 million, accounting for more than 80% of the total Internet users. Video content consumption has become a definite trend.

In terms of age structure, the total population of China's Z+ generation (i.e. those born after 2000, 1990, and 1985) has reached 490 million.

According to data from Questmobile, people born between 1985 and 2009 account for 86% of Bilibili's user structure. Therefore, even if Bilibili does not significantly penetrate into older age groups in the future, the existing Z+ generation will be able to provide a sufficient ceiling for Bilibili's user growth.

Looking at the regional structure, a considerable number of Bilibili's users currently come from high-tier cities (first-tier, new first-tier, and second-tier cities) , and the top 10 cities in Bilibili's MAU are mostly developed provinces.

The management of Bilibili has also stated that the user growth of Bilibili in third- and fourth-tier cities has long exceeded that of first- and second-tier cities, and Bilibili has the potential to continue to penetrate into lower-tier markets.

The above are just macro data in theoretical sense. Let’s take a look at the possible path to achieve 400 million MUAs at Station B:

First of all, content production determines content consumption. If you want to cover more people, you must produce more diverse content. In the past two years, Bilibili has continued to make efforts on the two fronts of PUGC and OGC.

At the PUGC level, Bilibili is constantly expanding the content categories of the community, continuously increasing general knowledge content and content for women, so as to attract audiences of different genders, occupations, and age groups.

In 2021, more than 1.3 million UP hosts earned income through creation on Bilibili, of which more than 557,000 UP hosts have joined Bilibili's creation incentive program.

At the OGC level, in November last year, Bilibili announced 51 new domestic animation contents at one go, and put forward the slogan "Made for Global" for the overseas expansion of domestic animation.

Since 2020, 24 works from Bilibili have been launched in various regions around the world, including some domestically created works purchased by NETFLIX.

Bilibili has also produced a number of popular shows in the fields of documentaries and variety shows, including "Little Boys", "A String of Life" Season 3, and "Do You Listen to My Music?"

These more diverse contents are targeted at a wider range of people.

The statement of "aiming to become the Disney of China" is a bit exaggerated, but it is undeniable that IP is also a content competitiveness that Bilibili cannot ignore.

Only when the content layer breaks through the circle first can the user layer break through the circle. Bilibili has thought about this very clearly.

Secondly, at the product level, Bilibili is also constantly exploring. For example, the "Story Mode" is a focus for Bilibili to meet the fragmented consumption of a wider range of users.

The Story mode mainly consists of vertical short videos of 1 to 3 minutes, which is actually an expansion of the content format.

Because Bilibili wants to meet the video consumption needs of a wider range of people.

According to Chen Rui's disclosure in the earnings call, the current penetration rate of the Story mode has reached 20% of DAU, and the change in form has not affected Bilibili's unique interactive atmosphere, and the like ratio has exceeded 30%.

Through these product-side actions, Bilibili hopes to grab more user pie in the fierce competition and game.

Let’s take a look at a comparable product – Weibo.

Weibo achieved an MAU of 400 million in Q1 2018, and today its MAU has reached 570 million. Although there are differences between the two in product and content forms, the threshold for content consumption of Bilibili is not much higher than that of Weibo.

Therefore, in this sense, it is possible for Bilibili to achieve a MAU of 400 million in 2023.

In addition to the 400 million DAU in 2023, B Station CFO Fan Xin also proposed another goal during the earnings call - to achieve break-even in 2024.

This is also a very realistic and arduous task for Bilibili, which is still suffering increasing losses this year.

So the question is - will there be a conflict between the 400 million DAU target and the break-even target?

The ideal logic of Bilibili is to create good content, keep users in the community, explore and meet user needs, and encourage continuous payment, rather than spending money in exchange for user growth.

This requires a significant improvement in the current spending efficiency. Can Chen Rui's team, which is determined to split user growth and commercialization 30% and 70%, accomplish this arduous task?

We will know the result in three years.

OK, that’s the end of today’s article.

To summarize briefly - this article discusses three topics about Bilibili based on the Q4 financial report data, namely community stickiness, advertising growth rate and user growth.

Overall, the small and broken website of the past is neither small nor broken today, either from the user side or the business side.

As a high-frequency user of Bilibili, I am cautiously optimistic about its future.

The logic behind this is that, looking at the big picture, in the context of China's Internet entering a stock game, there are actually not as many companies like Bilibili that have growth potential with a high probability of certainty as imagined.

I hope Ruidi, who uses real money to buy back stocks, will not disappoint his fans.

Author: Wei Xi Zhi Bei

Source: Weixizhibei