Shulou(Shulou.com)11/24 Report--

You may not have played Blue Moon, but you must be familiar with the name. "Hello, everyone. I'm a scum. If I'm a brother, come and cut me. "hong kong movie star cheung ka fai has appeared in computer pop-up windows or web pages many times. if you accidentally click on it, you will be brainwashed by the strong smell of earth.

Five years ago, this brainwashing ad became a phenomenal marketing event. Five years later, the company responsible for running Blue Moon went IPO. Recently, Zhongxu will formally submit a prospectus to the Hong Kong Stock Exchange in the future to be listed on the main board of Hong Kong.

Wu Xubo, the future founder of Zhongxu, made a lot of money by playing Blue Moon. In 2021, Wu Xubo became one of the four richest entrepreneurs in Shangrao, Jiangxi Province with a net worth of 5.56 billion yuan. Wu Xubo, who was born as a policeman, started the Internet game business early in the morning. In 2006, he founded 91wan web game platform and represented the game of "Hot Blood Three Kingdoms." In 2013, 91wan went public, and Wu Xubo harvested his first IPO.

In 2015, Wu Xubo founded Zhongxu Future, focusing on the distribution and operation of legendary games. According to the prospectus, Zhongxu Future has marketed and operated 259 interactive entertainment products, including 225 game products and 34 online literature products. Among them, 9 interactive entertainment products have been in deep operation for more than 5 years, and 27 interactive entertainment products have been in operation for more than 3 years.

Zhongxu Future's games and brands| Source: With the help of earthy legendary games such as "Play Blue Moon," Zhongxu has won a batch of middle-aged men aged between 30 and 45 in the fourth and fifth-tier cities in the future. It is also this batch of users who push Zhongxu Future to the secondary market.

Earth flavor, legendary game, how much charm and gold absorption ability does it have?

In the field of Internet games, making legendary games is an excellent business model. Low R & D cost, high willingness of users to pay krypton gold, a game can be operated for a long time, and the method can be copied and quantified. These advantages can be seen from Zhongxu's future business data.

According to the prospectus, from 2019 to the first half of 2022, Zhongxu's future revenues will be 3.008 billion yuan, 2.872 billion yuan, 5.736 billion yuan and 4.536 billion yuan respectively. In addition to the decline in 2020, the overall growth trend has been maintained, and a certain scale advantage has been formed. According to the data of Frost Sullivan, Zhongxu Future will be the fifth largest mobile game product marketing and operation platform in China in 2021 and the second largest non-self-developed mobile game product marketing and operation platform in China in terms of revenue.

Overall revenue scale, Zhongxu future even exceeds B station, Sohu and other listed companies game business revenue, enough to rank among the top 10 revenue list of Chinese game listed companies.

Let's look at the specific business of Zhongxu in the future.

The company's business is divided into two main businesses, interactive entertainment business and innovation business. Among them, the innovative business is dominated by the fast food brand "slag light" and the trendy brand Bro Kooli. Although revenue from this business increased by more than 120% in the first half of 2022, it accounted for only 1.5% of total revenue. The future flag of Zhongxu is still interactive entertainment business.

Zhongxu's future interactive entertainment business mainly has two modes, namely self-operated mode and intermodal mode. From 2019 to now, Zhongxu's future revenue under self-support mode is RMB 2.503 billion yuan, RMB 2.418 billion yuan, RMB 4.696 billion yuan and RMB 3.262 billion yuan respectively, accounting for 83.2%, 84.2%, 81.9% and 71.9% of total revenue respectively. The revenue of intermodal transportation mode was 505 million yuan, 453 million yuan, 977 million yuan and 1.186 billion yuan respectively, accounting for 16.8%, 15.8%, 17.0% and 26.1% of the total revenue of the current period respectively.

The main criterion for distinguishing these two modes is whether the end-user acquisition of its agent products utilizes the launch and intelligent analysis tools developed by Zhongxu Future-Hetu and Luoshu platforms.

Zhongxu Future Business Revenue| Source: Enterprise prospectus From this business model can also be seen, Zhongxu future does not make games, they are just game "porters," help agent game launch and buy volume, is their main business.

High marketing costs are evidence. From 2019 to the first half of 2022, Zhongxu's future sales expenses are 2.350 billion yuan, 1.643 billion yuan, 3.739 billion yuan and 2.922 billion yuan respectively, accounting for 78%, 57%, 65% and 64.4% of total revenue respectively. According to the prospectus, these expenses are mainly spent on online traffic acquisition fees, offline marketing expenses and celebrity endorsement fees paid to cooperative online media platforms.

For users, the most intuitive nature is Zhongxu future to the game please spokesperson. According to the prospectus, in recent years, the company's product spokesmen more than 30, Zhang Jiahui, Chen Xiaochun, Zhu Yin, Zhen Zidan, Guo Fucheng, Tse Tse and other Hong Kong and Taiwan stars have appeared in their game advertisements. However, Liu Yang, head of Zhongxu Future Brand Business Department, once mentioned at the Mass Creative Festival that the annual spokesperson expenses account for 0.4%-0.6% of his budget_that is to say, the purchase volume is the largest sum of money Zhongxu will spend in the future.

Zhongxu will rank fourth in advertising for domestic game products in 2021, the prospectus said.

The net interest rate is lower than that of peers who rely crazily on marketing to obtain traffic, and the result reflected in the financial data is "high gross profit, low net rate."

According to the prospectus, from 2019 to 2021, Zhongxu's future gross profit margin is 87.3%, 84.9% and 82.6% respectively. In the first half of this year, the company's gross profit margin declined to only 78.4%, which Zhongxu explained in the future, mainly due to the increase in revenue generated by game products operating in intermodal mode as a percentage of total revenue.

The overall high gross profit stems from the super gold absorption ability of legendary games. According to the prospectus, for the six months ended June 30,2022, Zhongxu Future had 274.2 million registered users, an average MAU of 9.4 million, and an average monthly revenue contribution of 397.4 yuan per paying user. By contrast, in the first half of this year, the celadon game ARPPU of the developer of the mobile game "The Strongest Snail" was 209 yuan, and the ARPPU of Flying Fish Technology, which also belongs to the field of leisure technology, was 42 yuan. The money-making ability of legendary games can be seen.

Zhongxu Future User Data| Source: The gross profit margin difference between the two businesses in the enterprise prospectus is also very large. In the past three years and the first half of this year, the gross profit margin of Zhongxu Future Self-operated Mode was 95.1%, 95.6%, 94.9% and 95.2% respectively, and the gross profit margin of game products operated under intermodal mode was 48.9%, 27.8%, 24.1% and 20.1% respectively. The reason for this difference, Zhongxu future explained: mainly because of the impact of cost, in the first half of this year, the sales cost of intermodal mode accounted for 82.5% of the total sales cost, under this mode Zhongxu future needs to pay large commissions to cooperative distribution channels.

In the legendary game operation, the user's krypton gold level mainly depends on the game settings, and the number of users mainly comes from the purchase volume. Zhongxu accumulated a large number of users by buying volume in the future, but this operation mode also led to its low net interest rate level.

According to the prospectus, Zhongxu's future net interest rates from 2019 to now are 2.8%,-45.3%, 10. 7% and 7.4% respectively, which are much lower than their peers. In the first half of this year, the net profit margin of Sanqi Entertainment was 20.94%, the gigabit was 27.40%, and the perfect world was as high as 30.43%.

The difference between gross profit rate and net profit rate of more than 10 times reflects the disadvantages of Zhongxu's future business model. Moreover, under the condition of continuous increase in purchase volume, the cost keeps rising, which also makes its gross profit rate decline continuously in recent three years.

Legendary games are not easy to make Although legendary games are a good business model from an ideal model, the current market is not optimistic.

According to the report released by Gamma Data in 2020, Legendary IP has been born for 20 years, with more than 600 million registered users, annual turnover of more than 10 billion yuan, accumulated creation value of more than 90 billion yuan, and potential value of 40 billion yuan in the next three years. Although the cake is big, there are many people who can't stand the cake.

In 2021, DataEye Research Institute released the Special Research Report on Legendary Games, which clearly stated that under the white-hot competition trend, legendary games have become a red sea. According to the data, the purchase volume of legendary games accounts for 15% of the total purchase volume in recent years, ranking first in medium and heavy mobile games. The massive purchases were fuelled by the influx of gaming companies. According to the statistics of DataEye Data Research Institute, nearly half of the TOP100 main list of game purchase companies in 2020 involve legendary products. 37 Mutual Entertainment, China Mobile Games and other big game manufacturers, are Zhongxu future competitors, a group of small companies are enough to give people a headache.

Moreover, the cost of legendary advertising is also constantly increasing, and the future marketing expense trend of Zhongxu also proves the current situation of the industry. DataEye Data Research Institute uses CPA (cost per action, CPA = total cost/conversion times) to judge the cost of advertising. The results show that from November 2021 to May 2022, the CPA value of legendary games continues to remain high, the CPA value of iOS side remains above 150 / A, and the peak value can exceed 200 / A. The increase of investment cost will further increase, mainly relying on the future pressure of Zhongxu who buys customers.

Industry market volume, Zhongxu future own situation also has pit. As of November 18,2022, the company still has five pending intellectual property-related lawsuits, among which "playing blue moon" has been involved in IP disputes before, and many games have not obtained complete legendary IP authorization. A series of issues such as defense and compensation will have an impact on Zhongxu's future business and financial situation.

In addition, the acquisition of game version number will further restrict Zhongxu's future prospects. Of the 384 game version numbers in six batches that have been issued this year, Zhongxu has only received one version number in the future.

In the prospectus risk factors, Zhongxu future to the above problems are well aware. Regarding the future, Zhongxu Future said it will launch 30-50 games by the end of 2023, including RPG and SLG. Expanding the business plate is one way to share risk, but to what extent it can be done remains to be tested.

Relying on magic, textbook version of brainwashing marketing, Zhongxu future into people's sight, and towards the capital market, listing is the past "miracle" recognition. But in the 500-page prospectus, the company's weaknesses are also clear. If you want to continue to move forward in the capital market, Zhongxu still has a very difficult way to go in the future.

This article comes from Weixin Official Accounts: AlphaSeeker (ID: deep_insights), by Li Jinglin

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