Bilibili (BILI/09626, hereinafter referred to as "Bilibili") finally made a profit, achieving its first quarterly profit in the least desirable way in the market. However, after the opening of the US stock market on that day, Bilibili's stock price plummeted by more than 13 percentage points, closing at $18.59, a decrease of 12.64%, with a market value of $7.76 billion and evaporating $1.1 billion.
First quarter profit
On the evening of November 14th, Bilibili's latest financial report showed that its revenue for the third quarter of 2024 increased by 26% year-on-year, reaching 7.31 billion yuan, with adjusted operating profit of 270 million yuan and adjusted net profit of 240 million yuan. This is the first time that Bilibili has achieved profitability since its listing.
(Bilibili. The same below)
In the third quarter, Bilibili's advertising revenue was 2.09 billion yuan, a year-on-year increase of 28%; The revenue from the gaming business was 1.82 billion yuan, a year-on-year increase of 84%, which led to a significant increase of 76% in the gross profit of Bilibili, reaching 2.55 billion yuan. The gross profit margin increased to 34.9% month on month for nine consecutive quarters.
Meanwhile, Bilibili achieved a positive operating cash flow of 2.23 billion yuan in the third quarter. As of September 30, 2024, the company holds a total of RMB 15.2 billion in cash and cash equivalents, term deposits, and short-term investments.
On the basis of sustained healthy cash flow, Bilibili announced a new share repurchase plan, which will repurchase stocks worth no more than $200 million over the next 24 months.
Chen Rui, Chairman and CEO of Bilibili, said, "Adhering to high-quality content is Bilibili's long-term value, as well as the core of community and commercial operations. In the third quarter, we maintained strong growth in community ecology and commercial revenue, and achieved a single quarter profit for the first time. In the future, we will not forget our original intention and continue to provide users with high-quality content. We believe that this is the unique value of Bilibili
Multi category and multi scenario content drives the continuous growth of Bilibili community. In the third quarter, the daily video playback volume of Bilibili exceeded 5.7 billion times, a significant increase of 23% year-on-year, and the monthly average interaction volume exceeded 19.3 billion times.
As of the end of the third quarter, 251 million users have passed the entrance exam and become "official members" of Bilibili, with a retention rate of 80% in the 12th month.
In the third quarter, the total revenue of Bilibili accelerated by 26% year-on-year, reaching 7.31 billion yuan. Among them, value-added services, advertising, gaming, IP derivatives, and other businesses contributed 38%, 29%, 25%, and 8% of the revenue, respectively.
For Bilibili, which has been losing money for a long time, making profits is not easy. From the financial report data, achieving this goal mainly relies on the synchronous growth of two major businesses.
As a content community, when explaining the reasons for this profit, Chen Rui, Chairman and CEO of Bilibili, first talked about the high quality of Bilibili's videos. However, the biggest contributor to the profit of Bilibili this time is actually a game.
This quarter, the gross profit of Bilibili increased by 76% year-on-year, reaching 2.55 billion yuan. The gross profit margin increased from 25.0% in the same period last year to 34.9% in this quarter. The management of Bilibili analyzed during the earnings call that this improvement is mainly due to the increase in the proportion of high profit margin gaming and advertising revenue, as well as effective control of fixed costs.
A game company disguised as a community
Bilibili was once seen as a gaming company disguised as a community.
In 2017, before its launch, Bilibili's gaming revenue accounted for over 80% of the total revenue, with more than half of the revenue coming from a mobile game called "FGO" - "Fate - Crown Position Designation". It can be said that Bilibili was sent to NASDAQ by FGO.
A single source of revenue means high risk. The early rejection of miHoYo's listing was related to its excessive reliance on a single popular game. Bilibili was naturally aware of this risk and subsequently constructed a diversified revenue structure. Behind this quarterly profit, Bilibili has increased its dependence on games.
Similar to relying on FGO earlier, the rise of Bilibili's gaming business this time mainly relies on one game.
From relying on games to relying on games again, Bilibili has walked a circle.
Since its listing, the growth of Bilibili's gaming revenue has gradually slowed down, putting pressure on Bilibili's profitability. In 2023, the year-on-year decline was 20%, while the year-on-year increase in the previous quarter was 13%. This quarter, Bilibili's gaming revenue increased significantly by 84% year-on-year, reaching 1.82 billion yuan, showing a leapfrog growth compared to the previous quarter and becoming the most outstanding business sector.
Bilibili revenue composition
Specifically, long-term operating games such as FGO and Blue Line have stable revenue. Especially on June 13th, "Three Kingdoms: Conquering the World" returned to second place on the iOS bestseller list on the day of its release on S3, driving stable growth in game revenue. According to Qimai's data statistics, as of June 24th, its iOS revenue exceeded 16.5 million US dollars. Prior to the release of this financial report, some securities firms predicted that "Three Kingdoms: Conquering the World" is expected to continue contributing substantial revenue to Bilibili. The financial report data also shows that the revenue contribution of gaming Bilibili reached 25% in the third quarter.
This is also the expectation of Bilibili. During the conference call after the release of the financial report, Chen Rui mentioned that the most important goal of "Three Kingdoms: Conquering the World" is to achieve long-term operation, that is, to achieve stable operation for at least 5 years of its lifecycle.
However, the gaming industry itself is fiercely competitive, rapidly changing, and unpredictable.
On November 14th, NetEase (NTES/09999) also released its third quarter results, with a 4% year-on-year decrease in net revenue from games and related value-added services. Looking at the entire market, the "2024 Q3 China Gaming Industry Quarterly Report" shows that the actual sales revenue of China's mobile gaming market was 65.658 billion yuan, with a year-on-year growth rate of only 1.2%.
Specifically speaking of the SLG category, the success of "Three Kingdoms: Conquering the World" has attracted attention from similar products, and the leading "Three Kingdoms: Strategic Edition" and "Leading the Land" have made corresponding optimization adjustments, even engaging in price wars. This adds variables to the future performance of 'The Three Kingdoms: Conquering the World'. On the current iOS bestseller list, 'Romance of the Three Kingdoms: Strategic Edition' ranks slightly higher.
To some extent, the extremely high growth of Bilibili games in the third quarter and the resulting first quarterly profit for Bilibili are actually in an "abnormal" state.
The growth rate of advertising business is high, but the growth rate of value-added services is slowing down
Looking at other business sectors, the advertising sector is still impressive.
The advertising business maintained a high growth rate, with revenue in the third quarter increasing by 28% year-on-year, reaching 2.09 billion yuan. Games, e-commerce, digital home appliances, online services, and automobiles have become the top five industries contributing to advertising revenue. Advertising revenue from emerging industries such as education, maternal and child care, and cultural tourism has grown rapidly, with a year-on-year increase of over 100%.
According to the 2024 China Advertiser Marketing Trends Survey Report, 75% of advertisers plan not to increase their advertising budget and invest in maintaining stability without blindly expanding. The counter trend growth of Bilibili advertising indicates the platform's attractiveness to advertisers and also reflects the effectiveness of Bilibili's optimization of advertising placement.
Bilibili COO Li Mei introduced that Bilibili's approach to releasing more advertising inventory is to adhere to the strategy of multiple screens and scenes. In the future, Bilibili will use more live streaming scenes, player scenes, hot searches, etc. to expand advertising revenue space. The optimization of the advertising chain by Bilibili has also driven advertising growth. By optimizing the intelligent advertising settings on mobile devices, the number of customers has increased sevenfold year-on-year.
Bilibili advertising products
In addition, AI has started to help Bilibili advertise. Li Mei mentioned that Bilibili has launched a creative center and AIGC functions, and will release more AIGC tools in the future to help advertisers automatically generate or modify advertising materials.
Unlike other content platforms that are conservative in promoting products, Bilibili has opened its doors in the past two years to attract traffic to e-commerce platforms. This year's Singles' Day, Bilibili reached cooperation with e-commerce platforms such as Alibaba, JD.com, Pinduoduo, and Vipshop, resulting in a rapid year-on-year growth of 154% in gross merchandise volume (GMV) and nearly 80% in the number of UP owners carrying goods. The number of advertisers is 6.6 times that of the same period last year. At the same time, Bilibili adheres to the "big open loop" strategy, bringing over 50% of new customers to all vertical industries, becoming an important source of new customer growth for major platforms.
In addition, Chen Rui specifically pointed out during the conference call that the business of Bilibili does not strictly refer to advertising. In addition to the income brought by advertisers alone, the income of UP owners also includes user charging, paid courses, etc. In the future, Bilibili will also use more scenarios such as live streaming and hot searches to increase the space for advertising revenue.
However, the development trend of value-added services, which are the largest source of revenue for Bilibili, has slowed down. The revenue of this part was 2.82 billion yuan, with a year-on-year growth rate of only 9%, which was weaker than the previous quarter. The revenue from IP derivatives and other businesses reached 570 million yuan, a year-on-year decrease of 2%.
Value added services mainly correspond to live streaming, large membership, paid classrooms, and charging, which are closely related to UP owner income and reflect users' recognition of Bilibili content and participation in the community.
It is reported that since 2024, nearly 2.7 million UP owners have earned revenue on Bilibili, with a year-on-year increase of 24% in total revenue obtained through advertising and value-added services. By comparison, approximately 2.1 million UP owners earned revenue on Bilibili in the first half of the year, with a year-on-year increase of 30% in revenue from advertising and value-added services.
That is to say, there have been more UP owners making money on Bilibili, but the average personal income increase of UP owners has also slowed down.
The user base has reached a new high, but it is still far from the target
Beyond the gaming and advertising business sectors, Bilibili's worries outweigh its joys. From the perspective of users and content ecology, the user base of Bilibili has finally grown, but it is still far from its earlier set goals.
The potential of Bilibili depends on its user ecosystem, as its user growth has been struggling for a long time. Both daily and monthly active users have experienced a decrease instead of an increase.
This quarter, Bilibili finally slightly opened the ceiling of user growth: the daily active users reached 107 million, the monthly average active users reached 348 million, and the daily usage time increased to 106 minutes. Compared to the previous best records, they increased by about 4 million, 7 million, and 1 minute respectively. Compared to the explosion of gaming business, this may have more significant implications.
It is worth mentioning that Bilibili believes that the increase in user age has driven the prosperity of the platform's ecosystem, which in turn has also promoted profitability. Chen Rui disclosed that the average age of users on Bilibili platform has reached 25 years old, and the commercial value of users is increasing.
In fact, in addition to business growth, Bilibili has always emphasized the need to do a good job in community user growth. At the beginning of 2021, Chen Rui stated that Bilibili aims to expand its monthly active user base to 400 million by 2023. According to media reports, Chen Rui also proposed to double the daily active users on the mobile end of the main site.
But an pessimistic signal is that the number of Bilibili's major members has decreased. In the third quarter, the number of major members on Bilibili was approximately 21.97 million, a decrease of over 300000 compared to the previous quarter's 22.3 million. Although the absolute value of the change is not significant, it means that there are fewer users willing to directly spend money on Bilibili, and it also reflects the growth bottleneck of Bilibili's core user group.
Obviously, there is still a long way to go between the current performance of Bilibili and the goals proposed by Chen Rui.
Chen Rui revealed his confidence during the earnings conference call, "In China, as long as users mention high-quality videos, talented UP hosts, and medium length videos, the first brand they think of in their minds is definitely Bilibili, and there are no other brands, and they can't even remember what the second brand is." He believes that this mindset is as important as gold.
However, a signal with a sense of crisis is that at present, Tiktok, Xiaohongshu and other platforms have successively opened the right to ten minute video; In terms of vertical video, competitors of content platforms have also begun to specialize in young categories such as entertainment and gaming. Bilibili has made great efforts in the past to try short videos, but the current results are minimal. Many top Bilibili content creators, including "Film and Television Hurricane," choose to publish video content on Bilibili while also conducting live streaming sales on other platforms to generate revenue.
The above hidden concerns constitute the reason why Bilibili finally turned losses into profits, but the market did not buy it.
