Douyu's high valuation was questioned, and it once faced the problem of a broken capital chain

In March, a report titled "2017 China Unicorn Development Report" swept the Internet. The report showed that the live broadcast platform Douyu has joined the ranks of unicorns, with a valuation of US$1.5 billion at the end of 2017. However, at the end of March, a media report titled "2017 China Unicorn Enterprise List: Douyu Live Leads the Live Broadcast Industry" mentioned that "Douyu Live has completed its E round of financing, and according to industry insiders, its market valuation has exceeded US$3 billion."

Obviously, Douyu's valuation has skyrocketed. In just two or three months, or just one quarter, Douyu's valuation has doubled. This is really admirable. However, many people outside have questioned Douyu's rapidly rising valuation.

External doubt 1: The opacity of financing data

The most well-known round of financing for Douyu came from Tencent's strategic investment in March, which was not small, at $630 million, setting a record for the highest financing in the live broadcast industry. Douyu CEO Chen Shaojie also expressed his gratitude to Tencent in his WeChat Moments at the time, saying that "Douyu fully cooperates with Tencent to deepen its presence in the game live broadcast field and to achieve strategic coordination between the game and live broadcast industries."

Although the financing amount is known, Douyu has not disclosed Tencent's shareholding ratio, which has caused many people to wonder whether Tencent has already controlled Douyu? What is Douyu's valuation? How many valuations does Douyu rank in the industry? Since there is no official data, the lack of Tencent's shareholding ratio makes Douyu's valuation an unsolved mystery.

Since Tencent’s shareholding ratio is not transparent, where does Douyu’s valuation of US$1.5 billion and US$3 billion come from? Of course, from another perspective, Douyu’s intention of not disclosing Tencent’s shareholding ratio may be well understood. On the one hand, Douyu has been frequently rumored to be going public, and corporate valuation is naturally the data that companies care about most. If specific financing-related data is released, it may be adversely affected in the capital market, such as being undervalued;

On the other hand, the competition in the live broadcast industry is extremely fierce, and the arbitrary disclosure of financing data may also have a negative impact on future development. In this regard, it seems reasonable that Douyu did not disclose the proportion of Tencent shares, but the mystery of Douyu's valuation will always exist, which will also make Douyu's current valuation untenable.

External suspicion 2: Douyu once faced a funding chain rupture problem

In April last year, news broke out online that Douyu owed wages to third-party brokerage companies, which immediately set off an uproar in the live broadcast industry, and many anchors also took the opportunity to denounce Douyu. Judging from the environment Douyu was in at the time, on the one hand, it had to face strict supervision and high competition in the live broadcast industry, and being reshuffled was a constant anxiety. On the other hand, Douyu's firm strategy made it develop the habit of attacking everywhere, and the war for talent was imminent.

In essence, Douyu's pan-entertainment live broadcast platform route, especially its rapid expansion strategy, is the root cause of its funding problems. During the peak period of competition in the live broadcast industry, Douyu had limited money, and the cost of signing anchors was rising. Coupled with the high maintenance and operation costs, Douyu was unable to make ends meet.

Before the current funding crisis, Douyu CEO Zhang Wenming also said in 2016 that Douyu was once facing the risk of a funding crisis. It can be said that the rapid expansion strategy has brought glory to Douyu, but also brought harm. On the one hand, in the live broadcast industry, only by running fast can you see the farther scenery. Douyu's all-round development strategy is to take in big fish and small fish, which also makes it closer to its goal of becoming a comprehensive live broadcast platform; on the other hand, the all-round development model means that it will get involved in unfamiliar fields. The trial and error costs plus the threshold of the live broadcast industry have also cost Douyu a lot.

The problem of broken capital chain also sounded the alarm for Douyu. What is the reasonable degree of expansion strategy? More importantly, in the valuation standard, the broken capital chain actually reflects many financial defects, such as cash flow, turnover speed, etc. Looking at the entire live broadcast industry, in the tense development situation, the control of capital chain represents the stability of the platform to a certain extent. The problems that Douyu had in the past are established facts, so will the conclusion of overvaluation still hold true now?

External doubt 3: Unfriendly future financing prospects under the internal friction development environment

Internal friction is a taboo for business development. The recent chaos among departments of Meizu is a typical example. Of course, for Douyu, its internal friction problem originated from inappropriate operation and management strategies, and the most direct manifestation of this internal friction is the continuous burning of money.

On the one hand, Douyu's operating culture prefers the ranking system. Last year, Douyu held a limited-time ranking event for each live broadcast zone. This also led to a problem. It is not uncommon for anchors to compete for the first place. When Douyu faces big anchors, it can only take a laissez-faire attitude, so the choice of related anchors' traffic tilt is ambiguous. From the final result, this kind of pleasing both sides did not play a good role in promoting Douyu's development, but instead aggravated the "standing in line" culture.

On the other hand, Douyu’s internal friction is also reflected in the signing of anchors. I believe everyone is familiar with the previous battle for talent among the top platforms, but Douyu’s attitude towards signing seems to be quite tough, and it has also adopted the most effective and direct method - continuously increasing the signing fee. It is not uncommon for anchor signing fees to exceed tens of millions or even hundreds of millions.

Under Douyu's training system, anchors are all treasures. But it is precisely this principle that makes Douyu burn the money it raises very quickly, and this internal consumption inertia may continue for a long time until the human flow in the live broadcast industry reaches a relatively stable stage.

To a certain extent, the serious internal friction has been deeply embedded in Douyu's genes, and such a development environment will obviously be unfavorable to Douyu's future financing. First of all, capital expects every penny to be spent in the right place, that is, to be spent efficiently, and if internal friction cannot be avoided, it will eventually have a continuous negative impact on this efficiency; secondly, internal friction is an unhealthy development signal, and for live broadcast platforms running towards stable profits, this will cause certain obstacles to their profits.

Therefore, if Douyu cannot solve the internal friction problem as soon as possible, it will not only increase the damage to its own operating environment, but will also be questioned by capital under the premise of constantly accumulating internal friction factors (low-quality anchors, unhealthy operating culture, etc.). Simply put, Douyu's future financing path may not be as easy as before before its listing.

To break the doubts, Douyu still needs to improve its internal strength

The latest data from Cheetah Big Data shows that among live streaming apps, Douyu's weekly active penetration rate ranks third in the industry, second only to YY and Huya Live. This is enough to show that Douyu has become a leading platform in the industry after several years of hard work, but it also means that Douyu still has a lot of room for growth. Judging from the fact that the valuation has been questioned by the outside world, if Douyu further improves its internal strength, I believe that the return from capital and the market will come soon.

Since Douyu's rapid expansion strategy once affected its capital chain, Douyu must also self-examine its platform shortcomings. Rapidly expanding platforms are often blinded by the blue ocean of the market and forget the importance of steady progress. Therefore, for Douyu, under the premise of current financial guarantees, all-round strategic expansion requires a comprehensive monitoring mechanism to ensure efficiency and avoid loopholes.

Not to mention the continued regulatory pressure on live streaming platforms, if Douyu establishes a good traffic and quality output plan based on previous experience when entering a new live streaming vertical field, it will be even more powerful. The diversified content will also help it gain additional traffic and increase the stickiness of original users.

Therefore, rapid expansion is not impossible, but Douyu needs to grasp the degree of any node. Now that it has made a commitment to industrial layout, the stability of the future ecology needs to be guaranteed by every "screw" tightened now.

In terms of internal friction, Douyu should continue to optimize its current management and operation system. Top anchors are important, but the essence of live broadcasting is still content service, so we need to compete on quality. There can be many standards, such as fan popularity, content influence, revenue generation, etc. After establishing a series of transparent and reliable standards, we can have our own "live broadcast system" by strictly implementing them, and at the same time, we are expected to create a differentiated advantage in the innovative live broadcasting industry.

However, the ultimate goal of live streaming platforms is to seek a bright future, such as becoming a reliable and profitable leading platform. The capital environment and competition environment of the Internet industry are very complex, and there are still many variables in the future of the live streaming industry. If Douyu wants to truly dispel the outside world's doubts about its valuation, it must be able to walk easily in the live streaming industry and cultivate its internal strength to have an indestructible golden body, which may be the best way to break the deadlock.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.