The short-term growth is fast and the long-term weakness.
Editor’s note: This article is from WeChat public account “Alpha Works” (ID: alpworks) , Author Lin Xiaochen, reproduced with permission.
Online electronic tour provider Donkey Technology will be listed in Hong Kong on January 17. It is planned to issue 353 million shares with an offer price range of HK $ 1.5-1.12. The estimated post-listing valuation is between 2.116 billion and 2.99 billion Between Hong Kong dollars.
After the closing of the subscription on January 10, the subscription amount of donkey trail technology new shares reached 4.21 billion Hong Kong dollars, 56 times oversubscribed. According to the donation information of Donkeyprint Technology, the sponsor of the company’s listing this time is CCB International, which has helped the Bank of Guizhou (HK: 06199) and China Feihe (HK: 06186) to complete the listing of Hong Kong shares in the past two months.
The main business of Donkey Technology is the research and development of online electronic guide content, and it is the largest online electronic guide provider in China. According to Frost & Sullivan’s data, in terms of transaction volume in 2018, Donkeyprint Technology’s share in the entire online electronic navigation market reached 86.2%.
Specifically, Donkeyprint’s products include hand-drawn maps of scenic spots, text descriptions of scenic spots, and audio explanations. In addition, the company will also provide content customization services at the request of scenic spots and government offices.
It is known as China’s largest online electronic tour guide provider, and has 86% of the entire industry’s market share. It seems that a new star is rising, and investors are justified.
But when we look beyond the layers of donkey trail technology, its business model is still a “shop-in-shop” model that is highly dependent on the channel side. Due to its inferior position in the ecological chain, we believe that the “shop-in-shop” model is not a good business model.
Essentially a content and marketing company
The industry track where Donkey Technology is located is called an online electronic tour guide, which provides tourist guide services through maps, text and audio explanations.
The track of the online electronic tour guide is not wide. According to the prospectus data, the total market size of the entire online electronic tour guide industry in 2018 was 340 million yuan, which is comparable to the online tourism (OTA) market with a scale close to one trillion. The ratio is even more negligible.
Due to the marketToo small, although Donkeyprint Technology has a market share of 86.2% in the segmented industry, it is still a drop in the entire OTA market. Of course, the online electronic guide market is constantly developing, and the market share is bound to increase with each passing day. However, the threshold for this industry is not high. The market is doomed to increase the number of players and the competition is naturally fiercer.
The so-called electronic tour business is not so much a technology business as a content provider of travel products. The prospectus shows that from 2016 to the first half of 2019, the highest proportion of all employees of Donkey Technology has been the content production team, mainly because the company has been expanding the coverage of national scenic spots in recent years. The number increased from 527 in 2016 to 8,304 in the first half of 2019.
Except for the content team, the higher number is the operation and sales team. Even before 2018, Donkeyprint Technology did not have a research and development team. Just a concept, content and marketing are still the company’s main development drivers.
Platform-based “shop-in-shop” model
In the past two years, the performance of Donkey Technology has grown rapidly. In 2016, the company’s total revenue was only 13 million yuan, but its 2018 revenue has increased to 302 million yuan, and the revenue has soared 22 times. In the first half of 2019, Donkeyprint Technology still maintained the previous high growth, and its total revenue increased from 64 million yuan in the same period in 2018 to 183 million yuan, an increase of 186% year-on-year.
However, behind the rapid growth of revenue, the weakness of over-reliance on the support of key platforms is also exposed. According to the prospectus, donkey trail technology’s revenue from the OTA platform always accounts for more than 90%, and its own APP’s revenue accounts for less than 1%.
The “store-in-shop” model parasitic on the OTA platform is the foundation of Donkey Technology. Therefore Donkey Technology attaches great importance to marketing. After all, this directly determines the company’s short-term performance.
In the past two years, the performance of Donkey Technology has grown rapidly. In 2016, the company’s total revenue was only 13 million yuan, but its 2018 revenue has increased to 302 million yuan, and the revenue has soared 22 times. In the first half of 2019, Donkeyprint Technology still maintained the previous high growth, and its total revenue increased from 64 million yuan in the same period in 2018 to 183 million yuan, an increase of 186% year-on-year.
However, behind the rapid growth of revenue, the weakness of over-reliance on the support of key platforms is also exposed. According to the prospectus, donkey trail technology’s revenue from the OTA platform always accounts for more than 90%, and its own APP’s revenue accounts for less than 1%.
The “store-in-shop” model parasitic on the OTA platform is the foundation of Donkey Technology. Therefore Donkey Technology attaches great importance to marketing. After all, this directly determines the company’s short-term performance.