IQiyi's operating profit has reached a new high, and advertisers have started using AI to generate materials
六月清晨搅
发表于 2024-5-17 09:28:37
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On May 16th, iQiyi released its unaudited first quarter financial report as of March 31, 2024. Its total revenue was 7.9 billion yuan, with Non GAAP operating profit of 1.1 billion yuan and an operating profit margin of 14%, reaching a historic high. By comparison, the operating profit for the same period last year was 1 billion yuan, with an operating profit margin of 12%.
The double increase in revenue and operating profit is mainly due to the continuous decrease in costs and the improvement in operating efficiency. The financial report shows that iQiyi's total cost was 5.6 billion yuan, a year-on-year decrease of 5%. As the main component of the cost, the content cost was 4 billion yuan, a year-on-year decrease of 5%.
According to Interface News, iQiyi has achieved positive operating cash flow for 8 consecutive quarters. As of the end of the first quarter, the company's operating cash flow was RMB 938 million, free cash flow was RMB 915 million, and cash balance (including cash, cash equivalents, short-term investments, and long-term restricted funds in prepaid and other assets) amounted to RMB 7.3 billion.
As the core business of iQiyi, membership business contributes more than half of its revenue. The revenue from membership services was 4.8 billion yuan, with a record high monthly average single member revenue (ARM), and a continuous six quarter on quarter growth.
At the financial report conference call, iQiyi CEO Gong Yu stated that there is still room for improvement in ARM value in the long term. In the future, we will continue to provide users with high-quality content, optimize member rights, and strengthen member loyalty construction, incentivizing users to subscribe to long-term and advanced membership services.
At present, iQiyi is strengthening its member operations through value-added services such as change gifts to enhance their willingness to pay. Among them, in the TV series "Three Teams", the paid income from the change ceremony broke historical records.
Another major source of revenue for iQiyi is advertising. In the first quarter, its online advertising service revenue was 1.5 billion yuan, a year-on-year increase of 6%.
After the popularity of short videos, a lot of advertising has shifted from long video platforms to short video platforms such as Tiktok and Kwai, and iQIYI is also facing some pressure on advertising revenue. In order to seek differentiated competition, it has adopted a strategy of relying on high-quality TV series to sell customized advertisements for content. These customized advertisements are inserted into the series and can connect with the characters and plot of the series.
The financial report shows that over half of the brand's advertising revenue for the quarter came from content targeted advertising. IQiyi's original drama series "Going North and South" has performed well in attracting investment, with advertising revenue for "Planting 2" increasing by about 80% compared to the first season.
Against the backdrop of cost reduction and efficiency improvement, this company has extensively used generative AI tools in its advertising business. Advertisers can use these AI tools to automatically generate high-quality advertising materials, and also make advertising placement more precise and personalized, helping advertisers improve traffic monetization efficiency.
According to Interface News, AI production of advertising materials has driven the return on investment of advertisers in industries such as games and short dramas to increase by over 50%, and iQiyi's revenue from effect advertising has grown in double-digit year-on-year growth.
At the same time, iQiyi has also begun to try using generative AI technology for episode content extraction and marketing promotion. By utilizing the story outline, character biographies, and character relationship diagrams provided by generative AI, the reading efficiency of producers can be increased by 9 times.
From the overall financial data, iQiyi's company has gone through a difficult period of operation. At the 2019 iQiyi World Conference, CEO Gong Yu stated that the rapid increase in copyright procurement costs was a serious directional mistake in the industry over the past seven or eight years.
It was from then on that the company shifted from investing heavily in content to reducing costs and increasing efficiency, ultimately turning losses into profits in the first quarter of 2022.
In the past three years, iQiyi's cost reduction has mainly been reflected in reducing the overall content cost of the series. The content cost ratio of iQiyi TV series in 2023 decreased by 12 percentage points compared to 2022, which directly drove its profit growth. According to the financial report, iQiyi's Non GAAP net profit in 2023 was 2.8 billion yuan, a year-on-year increase of 121%.
Not only iQiyi, Tencent Video and Youku are also reducing costs and increasing efficiency. At present, Tencent Video has achieved profitability, while Youku is continuing to turn losses into profits. The common problem faced by several parent video platforms is how to continuously produce popular content while compressing content costs. Long video platforms not only face competition from competitors, but also the challenge of short videos competing for long video user duration.
Previously, Wang Xiaohui, the Chief Content Officer of iQiyi, stated that we should create works with high public recognition and high market returns, create innovative high-quality content, and continue to focus on the efficiency of content launch, the quantity of top content, and social insight.
In fact, in the fiercely competitive domestic environment, iQiyi has also begun to seek new growth directions - going abroad. Gong Yu stated during the financial report conference call that in the next three to five years, iQiyi will not only improve the quality of its domestic market business, but also expand its overseas market growth space with appropriate investment efforts.
According to Interface News, iQiyi is currently operating in overseas markets such as Hong Kong, Malaysia, and the UK in China. Although overseas revenue accounts for a relatively small proportion of iQiyi's overall revenue, its member revenue increased by nearly 80% year-on-year in the UK and Hong Kong, indicating significant growth potential in the first quarter.
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声明:该文观点仅代表作者本人,本文不代表CandyLake.com立场,且不构成建议,请谨慎对待。
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