Baidu is another big traffic pool with Youzan outside of WeChat.
In the evening of May 27th, China Youzan (08083.HK, hereinafter referred to as “Youzan”) announced that on May 27, 2020 Baidu affiliates fully exercised Qima warrants of Youzan’s wholly-owned subsidiary at a cash consideration of US $ 29.998 million. After exercising the Qima warrants, the Baidu affiliate held approximately 1.20% of all issued shares of Qima.
The exercise of the above warrants can be traced back to August 2019 when Baidu (BIDU.US) has a strategic investment. After the relevant transaction is completed, Youzan holds approximately 50.76% of all issued shares of Qima, while Baidu holds a minority share of Qima. The announcement on May 27 means that the strategic cooperation between Youzan and Baidu has been completed.
At this point, Youzan and Baidu formally reached a strategic cooperation, and the focus of the business cooperation between the two focuses on the development of smart applets, applications and solution supply. At that time, it was more than a year since Baidu launched the smart applet business, and Youzan recently completed a new round of financing of HK $ 910 million led by Tencent. For Baidu, this strategic cooperation is conducive to improving the closed-loop e-commerce service of Baidu App; for Youzan, it means that it has a huge new traffic pool outside of WeChat. The financial report data shows that in March 2020, Baidu’s smart applet monthly activity reached 354 million, an increase of 96% year-on-year.
In the first quarter of this year, Youzan achieved a total revenue of 373 million yuan (RMB, the same below), an increase of 48.9% year-on-year; the net loss to the mother was 74.89 million yuan, which was 100 million yuan in the same period last year, which was narrowed year-on-year . In terms of operational data, as of March 31, there were 91,209 paid merchants in inventory, an increase of 48% year-on-year. The number of newly paid merchants in the first quarter was 13,987, an increase of 84% year-on-year.
However, despite revenue growth and net loss narrowing, Youzan, which has not yet achieved profitability, will still have a certain crisis in the future. As a comparison, one of its main competitors, Weimeng Group (02013.HK), has achieved profitability in 2017 and turned losses into profits in 2019, with a net profit of 331 million yuan.
With the popularity of live broadcast e-commerce, Youzan is also further betting on this field. On May 11, Youzan announced that it intends to subscribe for a 10% stake in the “Hangzhou Love Shopping Network” operator of the online shopping platform e-commerce. Youzan also repeatedly stated in the financial report that it attaches importance to the live broadcast e-commerce business, such as “will continue to cooperate with more platforms with live broadcast capabilities to expand the sales channels of merchants in live broadcast scenarios.”
As of press time, the Hong Kong Hang Seng Index fell more than 1%, and Youzan fell 2.50% to 0.78 Hong Kong dollars, with a total market value of 13.03 billion Hong Kong dollars.