From a platform of “sinking market” to a platform for all people

Editor’s note: This article is from the WeChat public account “Internet Strange Thieves Group” (ID: TMTphantom), author: Pei Pei, the head of the team.

Kaishou announced the first quarterly report for 2021 after the market on May 24. This is the second quarterly report after listing: operating income increased by 36.6% year-on-year, gross profit margin increased by 7 percentage points year-on-year, and Non-GAAP loss year-on-year Increased by 13.2% (loss rate has declined). The domestic DAU of Kuaishou APP reached 295 million, the full platform DAU reached 379 million, and the overseas MAU reached 100 million.

For this financial report, both optimists and pessimists can find ample arguments. Among them, optimists will point out:

Kaishou’s full platform DAU increased by 20% month-on-month, and the average daily user time increased by 14 minutes, which fully proves that Kuaishou can make “quality growth”. In particular, it is rare for any content platform to achieve an increase in user duration at the same time as the user growth.

The overseas MAU of Kuaishou reached 100 million at the end of the first quarter, and exceeded 150 million in April, that is, a net increase of 50 million a month, which is really impressive. Kuaishou can replicate the great success of Chinese video apps such as TikTok and BIGO overseas.

Kaishou e-commerce GMV is growing very fast, it is likely to be close to the magnitude of Taobao live broadcast; most of the GMV has come from the first-party platform “Kaishou Xiaodian”. Moreover, the monetization rate of this business is still very low, and a huge amount of ammunition is prepared for future revenue growth.

In contrast, pessimists will point out:

The domestic DAU of Kuaishou APP has grown to 300 million, which is almost the end, right? From the user’s point of view, perhaps Kuaishou has entered a stable period from the growth period?

The live broadcast revenue has declined, and even the total revenue has declined compared with the previous period. At the same time, the operating expenses have risen compared with the previous period. Isn’t it worth worrying about?

New businesses such as Kuaishou search, Kuaishou skits, games and game live broadcasts seem to be far from commercialization? Can they take the torch of growth in the next few quarters?

After reading the financial report carefully and referring to the operating data of similar platforms, I decided to stand on the side of the optimist this time. Optimists and pessimists see the same data, but they have different priorities. For a large Internet platform, everyone has their most concerned aspects; for me, I am more concerned about the following factors, which are of decisive significance in the longer term:

First of all, from the perspective of growth, Kuaishou is doing very well: The domestic DAU on all platforms reached 379 million, a year-on-year increase of 26% and a month-on-month increase of 20.%. I think that compared to the Kuaishou APP DAU, the full-platform DAU is a better indicator—because the former does not include the huge traffic from the WeChat applet, and the APP matrix such as Yitian Camera and Station A. If you have read Kuaishou’s prospectus, you will find that after the second quarter of 2020, Kuaishou’s full-platform DAU growth rate once dropped to single digits; however, this situation was broken this quarter. We can say that Kuaishou’s ecosystem has resumed strong growth.

Secondly, Kuaishou successfully maintained and improved user stickiness, which was reflected in the increasing ratio of DAU/MAU, increase in user duration, and increase in the proportion of content creators. For large content platforms, “rapid user growth” and “increasing user stickiness” are often not compatible-we can draw this conclusion from the financial reports of other listed video platforms. Today, when the ceiling of domestic mobile Internet users is approaching, the value of “quality growth” will be much higher than the “growth of flooding.”

Again, the growth of Kuaishou users overseas, especially in emerging markets such as Latin America and Southeast Asia, is impressive. Although the expansion of Chinese Internet companies in developed countries has been hampered, there is still a lot of room in third world countries. The development status of many third world countries is very similar to my country’s sinking markets. Kuaishou can quickly occupy these markets by relying on its experience in serving sinking markets in China.

Finally, the growth rate of fast hand e-commerce GMV is impressive. Although the growth rate of Douyin and WeChat video account e-commerce is not slow, Kuaishou can still maintain its dominant position in the content e-commerce field. The first-party platform “Kaishou Xiaodian” accounted for 85% of GMV, which means that Kuaishou has formed an internal closed loop of e-commerce. More importantly, the monetization rate of fast-hand e-commerce business in this quarter was only 1%, much lower than the level of mainstream e-commerce platforms-this greatly reduces the burden on merchants and also gives the future The revenue growth has left a lot of ammunition.

In addition, according to third-party data, this year’s “Honor of Kings” will be held on May 5th. The number of broadcasts, the number of broadcasts, the duration of live broadcasts, and the number of broadcasters’ increase in fans of Kuaishou are among the best among all live broadcast platforms. This shows that Kuaishou has become a leading game live broadcast platform.

As for the issues that pessimists are concerned about, most of them can be reasonably explained, or simply a matter of perspective. For example, should Kuaishou’s user growth be measured by “Kaishou APP DAU” or “full platform DAU”? This quarter, the first data increased by 16.7% year-on-year, and the latter data increased by 26.3% year-on-year-both are remarkable. In my opinion, the “full platform DAU” is the most important, because it includes the WeChat applet, Yitian camera, A station and other complete products.Product matrix. You know, the WeChat ecosystem has always been an important source of traffic for Kuaishou.

For another example, the decline of Kuaishou live broadcast revenue is largely due to the fact that the platform has shifted the development focus of the live broadcast business from show live broadcast (mainly rewarding) to e-commerce live broadcast (mainly service fee), and the platform extracts The proportion of e-commerce service fees is still very low. If Kuaishou substantially increases the monetization rate of e-commerce live broadcasts, it can make a very beautiful revenue growth, but in the long run, the advantages outweigh the disadvantages. At present, the most important thing is to establish the closed loop of the e-commerce business and consolidate the foundation, rather than eager to pursue realization.

Among operating expenses, the growth rate of Kuaishou’s marketing expenses was significantly slower than R&D expenses (the former increased by 44% year-on-year and the latter increased by 199% year-on-year). This is what we want to see: marketing is important, but the Internet The long-term competitiveness of the platform still depends on research and development. I estimate that Kuaishou’s R&D focus includes not only technology and algorithms, but also self-developed games and other content categories. These self-developed content can exert great value in the long-term.

For long-term investors, the best news is that the user growth momentum of Kuaishou has rebounded significantly: For the whole of 2020, the DAU of Kuaishou’s full platform was only 308 million, while in the first quarter of 2021 it has risen to 379 million. The rebound in user growth is determined by the following factors:

During the Spring Festival, Kuaishou’s marketing activities were very successful. Kuaishou APP and Kuaishou Speedy Edition have repeatedly topped the download charts of major app stores. Our grassroots research shows that Kuaishou’s user retention rate during the Spring Festival in 2021 is significantly better than during the Spring Festival in 2020 (although it sponsored the Spring Festival Gala last year). This is “smart marketing”.

The product continues to iterate, especially after the release of Kuaishou 8.0, seamless switching between single and double columns is realized, which is suitable for user groups with different habits and different demands. This greatly improves the user coverage of Kuaishou, and also improves user immersion in the single-column interface.

Regional operation activities are carried out for different regions. For example, a series of activities with the theme of “In Kuaishou, See the New Sichuan” will be launched in Sichuan from January 2021, and it is proposed to support 1 million in Sichuan within 6 months. “Millions of Fans”, supporting 100 local brands. This kind of localized customized operation is far better than the extensive operation of “overwhelming flooding”.

Relying on the refined content operation of various vertical content, including the super broadcast of the Spring Festival lasting 26 days, the fast broadcast of more than 200 million DAUHand skits, etc. During the Spring Festival, Kuaishou won the title and broadcast rights of ten local satellite TVs in one go. Among them, Henan Satellite TV’s Spring Festival Gala triggered a “out-of-circle” effect that was hotly discussed throughout the network. Not long ago, Kuaishou won the video-on-demand and short video broadcast rights for the Tokyo Olympics and the Beijing Winter Olympics, making it another success on the road of vertical content operation.

Some people may think that 295 million Kuaishou APP DAU and 379 million DAUs on all platforms are already the “ceiling” for the growth of Kuaishou users; I don’t think so. The growth momentum of Kuaishou is far from exhausted: there are fast versions, single and double row switching in product form, and a variety of vertical content including games, sports, and skits in content operations. Regional operations have only just started. Took a head. Almost three years ago, everyone was discussing whether the user growth of WeChat and Taoist e-commerce companies had reached the end, but their MAUs are still increasing at a rate of tens of millions every quarter; now, people are discussing Kuaishou users again. Has the growth come to an end? This is how history repeats itself.

At one time, Kuaishou was considered a platform only suitable for “sinking the market”, but it has stubbornly become a platform for the whole people; Kuaishou is also considered only suitable for live broadcasts and not suitable for advertising, but it has opened up tenaciously Space for advertising business; So far, there are still people who doubt the feasibility of Kuaishou to enter overseas, but it has already obtained 150 million MAU overseas. You can’t use any rules to restrict Kuaishou-in the past year, it has withstood tremendous pressure from competitors and successfully achieved breakthroughs at both the user and revenue levels. The significance of this breakthrough will not only be reflected in the next few quarters, but will also be reflected in the next few years and beyond.

When will the growth of Kuaishou hit the “ceiling”? I do not know. All I know is: it’s still far away!