Bilibili has started live streaming to sell goods. Is profitability far away in the future?

Netizens are joking that the end of traffic is to sell goods. Now that Bilibili has also started live streaming to sell goods, how will Bilibili make money? Let's take a look at the analysis in this article.

In recent years, Chen Rui’s profit “forecast” seemed to be always in the future, but recently it seems to be possible.

Before Bilibili planned to go public in 2017, Chen Rui, chairman of Bilibili, said, "No video platform in China is profitable. We strive to be profitable after iQiyi." Chen Rui was very cautious. He could not guarantee profitability. He took other audio-visual websites as an example. If they were profitable, I would be profitable. At that time, iQiyi, which had a mature business model, was still a long way from making a profit. What's more, users of Bilibili did not accept the common sense of monetization rules.

In 2021, iQiyi's losses narrowed visibly. At the annual report conference call, Fan Xin, chief financial officer of Bilibili, mentioned for the first time that it is expected to achieve non-GAAP break-even in 2024. In 2022, after a long wait of 12 years, iQiyi finally made a profit. Although the way is not the high-speed progress we ideally want, but through cost-saving and saving money. Chen Rui finally proposed in the release of the second quarter report in 2023 that the goal of breaking even next year can be achieved.

If profit is a test question, from the beginning, we can feel that the questions at Bilibili seem to be beyond the scope. With the sincere attitude of learning while doing the test paper, Bilibili's solution ideas are gradually becoming clearer.

1. The entire industry is waiting for Bilibili to become profitable

Although Bilibili itself has not made a statement on this statement, both inside and outside the domestic industry have always compared Bilibili to YouTube. In terms of user creativity and community atmosphere, there are similarities. However, YouTube is backed by Google, with a strong traffic entrance; the user categories are mature and rich, and have long adapted to the advertising and content payment system of Google and its products. Bilibili has more than 300 million monthly active users, and they are reluctant to accept video ads.

This is a real headache: In 2014, Chen Rui hastily promised on Weibo that he would "never add video interstitial ads", which brought considerable user traffic, but also put himself in a situation of "setting the bar too high". Later in 2016, Bilibili had to urgently withdraw the promise because the copyright holder required it to add ads, but was also complained by angry users. Chen Rui had to respond personally: Because we are not capable enough and cannot fully implement our promise, I apologize to all users on behalf of Bilibili."

For a long time, Bilibili was a video website supported by games: in March 2018, Bilibili successfully went public in the United States and released its first financial report in May of the same year. The financial report shows that mobile game business is the largest source of revenue for Bilibili, with revenue of 688.5 million yuan in the first quarter of 2018, accounting for 79.32% of the total revenue. The premium membership value-added service launched in 2016 only brought in less than 100 million yuan in revenue.

The persistence of using love to generate electricity will lead to the exhaustion of love - in 2023, Bilibili should fulfill its promise to make profits after iQiyi. Capital sentiment is becoming increasingly pessimistic. Bilibili finally realized that it has people and content, and if it continues to struggle, it may really go bankrupt. Capital cannot understand your love and feelings, and it is even more impossible to use money to generate electricity for Bilibili's 300 million users, fill the deep pit of content sharing, and selflessly support UP masters. All they want is "money makes money".

Bilibili has gone through a period of rapid growth and steady development of live streaming; short video platforms such as Douyin and Kuaishou have emerged to divide user time and squeeze Bilibili’s living space; e-commerce live streaming has grown from zero to a trillion-dollar market, creating countless wealth. The more lively the outside world is, the more anxious the investors in Bilibili are. In fact, Bilibili is still “burning money” five years after its listing, and the pressure of profitability has put Chen Rui under pressure.

With iQiyi as a sample, we should start with cost-saving: In 2022, Bilibili allocated 9.1 billion to UP hosts, and adjusted the reward mechanism in 2023. One UP host said that for a video with similar data to last year, this year it can only give 1/3 to 1/2 of the income last year. Therefore, many UP hosts have the intention to quit, saying that Bilibili’s incentive plan is not yet ready for full-time work. This may have an impact on the activity of UP hosts, the core asset of Bilibili, in recent years.

But Bilibili can no longer take care of so many things. It can no longer spend the next ten years waiting for the growth of UP hosts and users.

2. Small broken station puts aside mental cleanliness and makes a living

Only Bilibili can last for ten years. If it switches to another platform, it will go bankrupt.

Fortunately, users have been nurtured and "grown up" and have begun to accept that small broken stations also need to make money. From time to time, small broken stations are "low-key" and add some advertisements in obvious positions, even patch ads, and no one goes to Chen Rui's Weibo to make a fuss. At most, they privately complain about the embarrassment of the advertisement content and the inconsistency of accepting any advertisement for the sake of making money. More users have made a beautiful wish that "it would be great if Bilibili could use this part of the advertising revenue to purchase animation copyrights."

Figure: Pinduoduo seizes B station’s advertising dividend

The advertising business model is naturally suitable for video websites! The advertising entry model that can be used as a reference at home and abroad is easy to copy and use, and there is no threshold for B Station. Moreover, the users of B Station have always been coveted by all parties and regarded as a piece of fat meat. The user portrait is clear and accurate, and the delivery efficiency is extremely good. If B Station blocks this road for itself because of Chen Rui's words and insists on looking for other ways, it will undoubtedly die of thirst in front of the water source.

A paying user pointed out on Zhihu that now, except for the ads before watching videos, Bilibili is full of ads everywhere: they appear in the opening banner, below short videos, and in many other places; every four or five times when watching a video, there will be an information flow ad video disguised as video content; UP hosts are also allowed to insert patch ads into videos. Correspondingly, in the second quarter of 2023 financial report, Bilibili's advertising revenue increased by 36% year-on-year to 1.6 billion yuan, higher than the company's performance guidance of 25%.

On the other hand, the paid PGC/UGC video function was opened to UP hosts. Considering the fans' acceptance, most of the UP hosts who were invited to open the exclusive charging video only chose the lowest tier of 30 yuan per month, 360 yuan per year.

UP host Graham Lin said in the video response, "I'm not in a hurry, it's Bilibili that is anxious", "I feel that the price is a bit expensive, I have tried my best and there is no lower price", "Hot videos have high playback volume, likes and coins are all good, they will still be free, and learning videos with low playback volume will become exclusive charging videos, so that everyone can make reasonable consumption choices based on their own interests."

Figure: Bilibili offers paid video knowledge

These words reflect that in the ecosystem of Bilibili, UP hosts are very humble about "wanting to ask fans for money to make a living". Indeed, Bilibili cannot continue to pay for all the content, and needs to pass on part of the cost to users. "Subsidized things can't last long", this UP has a clear understanding. Previously, his account created 500 videos and only earned more than 1,000 yuan. After opening the exclusive charging video, he quickly had more than 300 monthly subscriptions, and his annual income could reach 10,000 yuan.

The UP hosts' reluctance to let go means that this source of income is unlikely to become a revenue growth engine for Bilibili in the short term. Something is better than nothing, so let's continue to bet on the future.

3. “Supernova Project” starts to bring goods

In fact, it is understandable that capital has changed its attitude towards Bilibili: the most valuable users are also the bottleneck that restricts Bilibili's income. With the emergence of live streaming trends one after another, Bilibili has always been half a beat behind others, and it has not been able to play well in the highlight period of shows and games. Now the wheel of fate has turned to e-commerce live streaming. In the first half of this year, the transaction scale of live streaming e-commerce was about 1991.6 billion yuan, and the annual transaction scale is expected to reach 4565.7 billion yuan, maintaining a high growth rate of 30.44% year-on-year.

Even netizens are joking that the end of traffic is to bring goods. While others are preparing for the "Double Eleven" event, Bilibili has also announced the launch of a new UP main product incubation plan - the "Supernova Plan".

The program is open to UP hosts who have no record of selling goods through live broadcasts on Bilibili in the past three months, or whose cumulative GMV of live broadcasts is ≤ 1 million and whose broadcasts are ≤ 10 in the past three months. UP hosts who participate in the program are allowed to bring their own inventory. If the UP host lacks product resources and investment attraction capabilities, Bilibili will provide the UP host with resources for selecting suitable products from the sources that have been invested in. The specific preferential strength of the selected products and after-sales service issues need to be negotiated between the UP host and its team and the merchant.

This can be regarded as a "nanny-level" plan, probably taking into account that the UP hosts on the site are good at creating content, but when it comes to online sales, many things have to be learned again.

In June, UP hosts Bao Jiansao and Yu Ge fired the first shot: the cumulative number of live broadcast viewers reached 2.2 million, the total number of transactions exceeded 250,000, and the transaction amount reached 28 million yuan. Like the UP hosts who opened the charging video, Bao Jiansao and Yu Ge also did their homework in advance and gave their fans "enough vaccinations" -

In April, the series of videos "Find a live streaming teacher to teach you" and "Sell things to UP masters" were released as early hints;

On June 3, a video was released to officially announce the live streaming sales, confirming the hint, announcing the process of setting up the live streaming room, and the psychological journey of deciding to do live streaming sales;

On June 8, other UP hosts released a blessing video, making the live streaming of goods a natural way to make a living.

Live streaming sales officially started on June 10th.

The process is complicated but effective. Even if the products in the live broadcast room are not priced the lowest on the entire network, fans are not overly resistant and instead donate generously.

Two months after Bao Jiansao, fashion UP host Yingwuli started to sell goods. The first live broadcast had a total of more than 136,000 transactions and a GMV of more than 30 million. With the enthusiastic support of fans, 84 clothing items were sold out, including 14 high-priced items with a unit price of more than 1,000 yuan. Most of the products in her live broadcast room have appeared in her previous works, which means that fans have finally achieved a closed loop from planting grass to pulling grass with Yingwuli.

Figure: Bilibili displays recommended products on the UP host’s homepage

The products selected by other UP hosts are similar to those of Parrot Pear, which are precisely adapted to the fan base. Or it would be more vivid to describe it this way: visiting the live broadcast rooms of big live broadcasters such as Li Jiaqi, Simba, and even Wei Ya before is like visiting a comprehensive market, while shopping in the live broadcast room of a UP host on Bilibili is more like entering a boutique store. The market needs a comprehensive market, and it also needs boutique stores. And it just so happens that boutique stores are what are missing in the current e-commerce live broadcast sector.

With this combination of measures, Bilibili is indeed doing its best to increase revenue and cut costs. The entire industry, from top to bottom, is waiting for Bilibili to make a profit. Is it possible that it will be just one step away next year?

Author: Liushuang, public account: Audio-visual Observation (ID: shitinggc)