On March 7th, Bilibili Co., Ltd. (referred to as Bilibili) released its unaudited financial results for the fourth quarter and full year ended December 31, 2023.
In Q4 2023 and throughout the year, the total net revenue of Bilibili was RMB 6.3 billion and RMB 22.5 billion, respectively, with a year-on-year increase of 3%; The gross profit was 1.7 billion yuan and 5.4 billion yuan respectively, with a year-on-year increase of 33% and 41%; The net losses were 1.3 billion yuan and 4.8 billion yuan, respectively, narrowing by 13% and 36% year-on-year.
According to the financial report, Bilibili's Q4 net operating cash inflow was 640 million yuan, achieving a positive operating cash flow for the first time throughout the year.
Looking at different businesses, Bilibili, which has seen daily active users exceed 100 million for two consecutive quarters, has maintained its basic position in advertising and value-added services, with growth of 28% and 22% in Q4, respectively. However, due to the significant decline in gaming and e-commerce businesses, the capital market is not buying into this. The gaming business represented by FGO once supported 80% of Bilibili's revenue, but now it is less than 20%.
After the financial report was released, the pre market stock price of Bilibili's US stock market fell by more than 7%.
"Telling a good commercial story becomes a major event for Bilibili."
In Q4 2023 and throughout the year, Bilibili's advertising revenue was 1.9 billion yuan and 6.4 billion yuan, respectively, an increase of 28% and 27% year-on-year; The revenue of value-added services was 2.9 billion yuan and 9.9 billion yuan respectively, an increase of 22% and 14% year-on-year. The combined proportion of the two accounts for 76.2% and 72.4% of the Q4 and full year revenue in 2023, which is the basic base of Bilibili's revenue, and the proportion is constantly increasing.
In addition, in Q4 2023 and throughout the year, the operating costs of Bilibili were 4.7 billion yuan and 17.1 billion yuan, respectively, a decrease of 4% and 5% year-on-year; The total operating expenses were 3 billion yuan and 10.5 billion yuan respectively, a year-on-year decrease of 17% and 14%.
Among them, general and administrative expenses in Q4 2023 and the whole year were RMB 512 million and RMB 2.1 billion, respectively, a year-on-year decrease of 37% and 16%, mainly due to a decrease in the number of general and administrative personnel; Sales and marketing expenses were 1.1 billion yuan and 3.9 billion yuan respectively, a year-on-year decrease of 11% and 20%, mainly due to a decrease in user acquisition related promotion expenses; R&D expenses were 1.3 billion yuan and 4.5 billion yuan respectively, a year-on-year decrease of 11% and 6%.
Overall, Bilibili's revenue structure in 2023 is more reliant on advertising and live streaming, while the efforts to cut down various costs are increasing.
At the performance meeting, Chen Rui stated that it is expected to achieve a positive adjustment in operating profit in the third quarter of 2024. Telling a good commercial story remains the top priority for Bilibili in the foreseeable future.
Live streaming and advertising are becoming increasingly important sources of income for Bilibili and platform creators. Prior to this, Bilibili was once embroiled in a wave of more popular UP content, partly due to a decline in the income of some UP creators, making it difficult to support their creations.
At the performance meeting, Chen Rui, Chairman and CEO of Bilibili, stated that in 2023, Bilibili created commercial revenue for over 3 million UP owners, with over 1.8 million UP owners earning revenue through live streaming and nearly 100% growth in the number of UP owners earning revenue through advertising. In addition, Chen Rui also emphasized that "the most promising and fastest-growing aspect in the future will be live streaming", because Bilibili's live streaming has the emotional precipitation of fans, the foundation of Bilibili's PUGC (professional user generated content) ecosystem, as well as the characteristics and advantages of virtual anchors.
But how much profit have these UP owners gained? Can profitability and cost coverage be achieved? The financial report and performance meeting have not yet been disclosed. In addition, similar to other platforms, Bilibili's commercial resources are also concentrated in a small number of top creators. Previously, Caixin reported in August that a core Bilibili agent revealed that for a 100 million yuan budget for a full marketing plan, Bilibili can allocate around 10 million yuan in advertising needs, accounting for about 10% of the total. Most of these resources will be consumed by super top UP owners, and there is a huge gap between the monetization ability of waist and tail UP owners and the top. The number of orders that UP hosts can accept is also linked to the number of followers.
Over the past year, Bilibili has indeed been continuously enriching the platform and even the monetization models of creators, advancing the commercialization process with great strides.
On March 2nd, Bilibili's top UP owner "- LKs -", who has 3.711 million followers, updated a video titled "How much money can the highest earning channel on Bilibili earn in a year?" According to information disclosed by UP (data source is third-party), the top 100 UP owners in comprehensive income earned over 60 million yuan in 2023, and the top 100 UP owners earned over 4 million yuan, with an average income of 9 million yuan. Among them, the highest revenue ceilings were achieved for fireworks sales orders, reward sales, and live streaming, reaching levels of over 20 million, 60 million, and 6 million respectively. The Dan Bounty with Goods has a certain uniqueness - the first place is unparalleled. In addition, classrooms, workshops, and charging ceilings have all reached the level of millions of dollars in revenue. At the end of the video, "- LKs -" summarizes that UP's monetization channels have been enriched significantly. Live streaming and advertising remain the most important sources of income for UP owners.
In addition, in the gaming industry, Tencent Games' "Yuanmeng Star" and NetEase Games' "Egg Party" have been in a heated relationship. According to the latter's recently disclosed Q4 2023 financial report, in order to cope with competition, its Q4 sales and market expenses surged to 4.226 billion yuan, with Q1 to Q3 expenses of 2.905 billion yuan, 3.271 billion yuan, and 3.567 billion yuan, respectively. Tencent on the other hand has not yet released its financial report, but the corresponding figures will not be less. So, the overwhelming wealth and prestige fell on the head of the online advertising industry, and Bilibili also took a share of the pie.
At the performance meeting, Li Ni, COO of Bilibili, stated that one of the reasons why the company's Q4 advertising revenue exceeded expectations was to seize and amplify the advantages of major vertical industry nodes, as well as the potential of customers when launching new products. A representative example is in the gaming industry, where multiple games broke through the industry's historical consumption peak during the public beta stage, such as Tencent's "Yuanmeng Star".
Seeking a new growth curve failed
However, Bilibili's mobile gaming, IP derivatives, and other (formerly known as e-commerce and other) businesses have performed poorly, and Bilibili's investment in these two major business sectors is also decreasing. Specifically, in Q4 2023 and throughout the year, Bilibili's mobile gaming revenue was 1 billion yuan and 4 billion yuan, a year-on-year decrease of 12% and 20%; The revenue of IP derivatives and others was 556 million yuan and 2.2 billion yuan, a year-on-year decrease of 51% and 29%.
The explanation given in the financial report for the decrease in mobile game revenue is due to a decrease in the number of new game launches and a decrease in revenue for several games, while the revenue of the best performing old games in 2023, such as Blue Line and FGO, remained relatively stable.
It is worth noting that there was almost no mention of game related content in this performance meeting, and the proportion of game related content in the financial report has also decreased. Years after FGO and Blue Line, Bilibili has not been able to produce a "leader" in terms of both self-developed and agency. During this period, the anime mobile game national service Shining! Youjun Girl, which was the exclusive agent of Station B and was expected by players, also suffered Waterloo. First, it was delayed to go online on August 30 due to the localization progress, and then on the ninth day of online, the game client download portal was closed due to "technology upgrade", which has not been recovered so far. At the Q3 2023 performance meeting, Chen Rui once stated that Bilibili values this game and also values player experience, and will resolve technical issues as soon as possible to relist it.
At present, there are three proxy games in Bilibili's game reserve that have obtained licenses, including strategy games "Three Kingdoms: Strategizing the World", card games "Blazing Sky" and "Wuhua Mixin", and they are planned to be launched and operated in the next few quarters. Although Chen Rui has stated that he will focus his resources on competitive gaming projects, perhaps Bilibili will no longer invest more in games in the future - after all, Bilibili, which has clearly promised a profit schedule, does not have much time left.
As for the e-commerce sector, since Bilibili adopted its "big open loop" strategy in the third quarter of 2022, it has been practicing opening up its content ecosystem to top e-commerce platforms such as Pinduoduo, Taobao, and JD.com for diversion over the past year, rather than adopting a closed-loop e-commerce path of on-site grass planting and on-site transactions.
At the performance meeting, Li Ni stated that the GMV of e-commerce based on the overall ecosystem of Bilibili has exceeded 10 billion in 2023. But at least at this stage and in the short to medium term, Bilibili's e-commerce business is still far from making much contribution to financial reports. From the first quarter to the fourth quarter of 2023, Bilibili's e-commerce and other (now known as IP derivatives and others) revenue were 510 million, 539 million, 580 million, and 556 million yuan, respectively; A year-on-year decrease of 15%, 10%, 23%, and 12% respectively; The proportion of total income is only about 10%.