Shulou(Shulou.com)06/01 Report--

Douyu successfully listed on NASDAQ on July 17, 2019, with an offering price of US $11.50 and a market capitalization of US $3.7 billion, surpassing Luckin Coffee to become the largest US-listed IPO of Chinese stocks so far this year.

As the largest live game platform in China, Douyu was jokingly said to have missed the best time to go public, but was listed first by Huya TV, the second in the industry. However, Dawei is not afraid of late maturity. If you have laid a solid foundation and then go to the capital market to fight, you will have more stamina.

The eve of listing: double growth of revenue and net profit

According to the prospectus released by Douyu, Douyu's revenue reached 1.4891 billion yuan as of March 31, 2019, up 123.4 percent from 666.5 million yuan in the same period in 2018, while the net profit was 18.2 million yuan, an increase of 183.5 million over the 155.7 million yuan net loss in the same period last year.

From the content revealed in the prospectus, it can be seen more intuitively that Douyu not only has rapid revenue growth, but also succeeded in turning losses into profits. In fact, Douyu's doubling of revenue and turning losses into profits are all planned. We understand that Douyu is to first accumulate users, and then develop the development of paid users. This is the same as building a house and building a foundation, that is, if the foundation of the platform is not laid well, it is difficult to exert its effectiveness even if there is a better realization strategy.

Douyu has been in a "foundation-building" Xu Li state in the past few years, paying more attention to traffic acquisition and quickly occupying the user market, so the revenue growth rate of the platform may not be at the top of the industry, and it has not been profitable.

But starting in 2018, the time is ripe for Douyu to cultivate the market. Douyu has a high MAU (monthly active users), most of the head anchors, good content ecology and event cooperation, and the traffic has been growing at a high speed, with an average MAU growth rate of more than 25%, the highest in the industry. Douyu began to pay equal attention to commercial cash, formulated a cash-out strategy with remarkable results, and constantly explored the profit model of e-sports Live, which made Douyu grow very fast in terms of live broadcast reward and advertising. revenue growth of 140% and 80% respectively (compared with 2018 and 2019), firmly ranked first in the industry, and Douyu achieved a turnaround in a relatively short period of time.

Douyu can double revenue in a year and turn negative net profit into positive, which is inseparable from the foundation of huge users of the platform.

The scale of users continues to take the lead, and the position of the number one in the industry is further stable.

Judging from the data revealed in Douyu's prospectus, Douyu has performed very well in terms of users. Data show that as of March 31, 2019, the number of registered users of Douyu has reached 280.9 million; and Douyu's quarterly average number of monthly active users (MAU) reached 159.2 million in the first quarter of 2019, an increase of 25.7% over the same period last year; the number of paying users increased to 6 million.

Douyu's current performance in users can be summarized in nine words: large base, high stickiness, and high payment.

"large base" means that Douyu has a large number of users. According to the prospectus: as of March 31, 2019, the number of registered users of Douyu reached 280.9 million, an increase of 54.26% over the same period in 2018, and continued to be number one in the industry.

"High stickiness" means that betta users have higher activity, duration and retention rate. Relevant data show that the MAU of Douyu's Q1 in 2016, 2017, 2018 and 2019 is 85.6 million, 112.6 million, 136.4 million and 159.2 million respectively. Not only the MAU continues to grow at a high speed, but its MAU is much higher than the 123.8 million announced in the Tiger Q1 financial report.

Douyu's total number of active users in the first quarter of 2019 exceeded 2.3 billion hours, up 43.75% from 1.6 billion hours in 2018, and the average daily viewing time for active users was about 26 million hours, up 50.3% from 17.3 million hours in the same period last year.

Douyu also showed no carelessness in the user retention rate. Relevant data show that as of December 31, 2018, Douyu's average monthly active user retention rate was 74.9%, and the average 3-month registered user retention rate was 68.6%. Judging from the public data (Huya's annual financial report for 2018 only revealed the next month's retention rate), Douyu's next-month active user retention rate is nearly 5 percentage points higher than Huya's average monthly active user retention rate of 70%. The higher retention rate once again proves the high stickiness of Douyu users.

"fast growth" means that Douyu's paying users are growing fast. At present, Douyu has become the platform with the largest number of paying users in the game live streaming industry. Data show that in 2016, 2017 and 2018, Douyu had an average of 900000, 2.4 million and 3.8 million paying users per quarter, respectively. In the first quarter of 2019, Douyu's paying users increased to 6 million, an increase of 66.66% compared with the first quarter of 2018, compared with 3.6 million in the first quarter of 2018, and its growth rate was higher than the 57.4% growth rate of Ye Huya in the same period.

Through the previous analysis, we can see that Douyu has experienced the precipitation of efforts over the years, not only in the revenue growth rate is getting faster and faster, the net profit has successfully turned negative to positive, but also the user base is getting larger and larger, the stickiness is constantly improving, and the growth rate of paying users is further enhanced. Douyu's position as the number one brother in the industry is also more stable.

Behind the late blooming, Douyu's "internal skill" is practicing hard.

Douyu did not blindly pursue cash, but first continue to accumulate users, and enhance the stickiness and activity of users, paying users will naturally follow more and more, profitability will naturally become stronger and stronger. Behind Douyu's late blooming, Douyu did not get it overnight or by speculation, but through hard practice of "internal skills."

First, make great efforts to create the anchor "Legion"

Anchors are one of the core competencies of live streaming platforms.

From the perspective of the history of live broadcasting, anchors have always been an indispensable element of live broadcasting. Whether it is live television, or live network, can not be separated from the anchor (called host in live television) as a condiment. For example, when you watch a football match on TV, will it last for 90 minutes without a commentator? Think again, when you watch LOL games on live platforms such as Douyu, there is no anchor around to explain whether your enthusiasm for watching the game is still there. Because of this, it is a required course for live broadcast platforms to build a strong anchoring team.

Douyu naturally made great efforts in the construction of the anchorman team. There has always been a story: when Douyu got 20 million yuan in investment in Ofei Animation at the beginning of its establishment, he spent 15 million yuan in the first month, which was mainly spent on bandwidth and signed anchors, but the effect was also remarkable. In just a few months, he sucked away popular anchors from mature live broadcast platforms such as YY, and harvested a large number of users, so Douyu fired the first shot in the live broadcasting industry.

It is Douyu who is willing to work hard on the anchor team, which makes it possible that eight of today's TOP10 anchors are Douyu anchors. As of March 31, 2019, the number of registered anchors on Douyu's platform was 6.5 million, an increase of 41.3% over the same period last year. Among them, the number of head anchors such as PDD and Xuxu Baby who signed exclusive agreements reached 5200, up 160% from 2000 in the same period last year. Douyu has become the main influx of excellent anchors in the game live broadcasting industry. And a stable anchor camp cannot be subverted and surpassed by the underachievers overnight.

Second, deep ploughing "e-sports"

In the early days of China's live broadcast industry, most of the live broadcast platforms took the "live show" route, and the platforms crowded in this track were YY, Ku6 and Momo. But at this time, the game live broadcast industry is still a blue sea, not only the industry competition is small, but also at that time in the awakening period of Chinese "e-sports", it seems feasible to do game live broadcast.

So Chen Shaojie decided to do the game live broadcast, but also to cultivate e-sports. On the one hand, Douyu actively sponsors professional teams to expand his influence in e-sports 's industry. Relevant data show that by the end of 2018, Douyu had sponsored 26 top e-sports teams.

On the other hand, Douyu actively creates the "e-sports race circle". Since hosting the e-sports season, Douyu has hosted 85 e-sports events as of December 31, 2018, of which the most popular "PUBG" Golden Grand Prix has attracted more than 18.7 million spectators. At the same time, Douyu continues to sign up for broadcasting rights to top international competitions. Since 2016, Douyu has won 29 exclusive broadcasting rights for e-sports events nationally and globally, including "League of Legends", "PUBG" and "DOTA2".

It is Douyu's continuous ploughing in "e-sports" that has helped Douyu win more loyal users. Data from iResearch Consulting show that in the first quarter of 2018 and the first quarter of 2019, the average monthly visitors to Douyu e-sports are about 78.3 million and 125.3 million respectively, and the market volume is expanding rapidly. In this context, Douyu's exploration of "e-sports" has also created more profit possibilities for Douyu.

In addition, Douyu not only cooperates deeply with major game manufacturers, but also deeply participates in the upstream and downstream industrial chain of e-sports, promoting his voice in e-sports 's industrial chain. With the improvement of its voice in e-sports 's industrial chain, Douyu's e-sports content will be more colorful in the future.

Third, enrich the content of the platform

Generally speaking, the diversified content audience will be wider, and the platform may have a larger number of potential users.

Because of this, Douyu is constantly promoting the "diversification" of the content of the platform. Chen Shaojie once said: "at present (Douyu) is half-half, half games and half non-games". "many people get traffic from games at first because they watch games, and then go to watch some other live broadcasts. Games are a rigid demand in our live broadcast field, and we attract him with the content he cares about. It may be two-dimensional, animation, food, outdoor, singing, music."

On the one hand, Douyu still seeks cooperation in high-quality game content resources, winning large and medium-sized anchors, signing top events, professional teams, and official commentary, so as to provide platform users with more high-quality game live content. In order to meet the needs of original users for games and e-sports, and maintain and enhance their stickiness to the platform.

On the other hand, Douyu is also making continuous efforts in pan-entertainment to attract more new users. For example, Douyu invited several stars such as Jiang Yingrong, Chen Zitong, Zhu Tingting and Li Changchao to Douyu in May 2018, promoting Douyu's pan-entertainment live broadcast layout to a new stage.

At present, the content of Douyu platform has formed a diversified pattern dominated by games, live broadcast by e-sports, supplemented by two-dimensional, entertainment world, science and technology education and other pan-entertainment live broadcast. This not only helps to enrich the life of "e-sports circle" users and increase its stickiness. And the development of new users is also of great help, after all, the platform also has in line with the "rice circle", "two-dimensional circle" and other group taste of the content.

Fourth, constantly optimize the business structure

According to the current general situation of the game live broadcast industry, a single business structure is a "common fault". For example, Huya's first financial report in 2019 shows that its live broadcast business accounts for 95.16% of revenue, while advertising and other businesses account for only 4.84%, less than 5%. From the perspective of content realization, the large proportion of live broadcast business in total revenue is a sign of the healthy development of live broadcast business. However, from an objective point of view, a single business structure may also hinder the further commercialization of the platform.

For this problem, Douyu has been gradually expanding the revenue radius and exploring diversified commercial realization channels. The relevant data of the prospectus show that as of the first quarter of 2019, Douyu TV's business, advertising and other businesses accounted for 90.9% and 9.1% respectively, and the business structure was better than that of other peers. This is due to Douyu's continuous optimization and adjustment of the business structure. In 2017, Douyu launched the "fish purchase" platform to initially explore the business model of live broadcast + e-commerce. Subsequently, Douyu launched new businesses such as value-added telecommunications services, Internet information services, music and entertainment products, and game products. By the first quarter of 2019, advertising and other businesses have been able to contribute 135.1 million of revenue.

V. strict control over content censorship

In the era when content is king, whether the content of the platform is healthy or not has an important impact on the development of the platform.

Judging from the history of the live broadcast industry, the non-compliance of the platform content may face the risk of being removed from the shelves and stops. For example, the "PR" club, which was seized by the police for playing "edge ball", and so on.

From a policy point of view, the country's stricter regulation of platform content also forces live streaming platforms to strictly control content, which is also the social responsibility of enterprises.

In April 2018, the government convened 18 live broadcast platforms across the country and held a meeting of webcast and short video companies to strengthen content security management to strictly enforce regulatory requirements. Subsequently, relevant departments across the country issued corresponding laws and regulations to strengthen the supervision of the live broadcast industry.

Douyu has always been proactive in content censorship. Zhang Ming, co-founder and co-CEO of Douyu, said in an interview with reporters: we very much hope that government supervision can make the industry develop healthily. We can see that in some other industries, the whole industry changes because enterprises do not have the consciousness of self-discipline. Douyu, as the leading company in the industry, will set an example.

In terms of content censorship, Douyu has higher requirements for anchors and audit teams. With regard to the review of anchors, Douyu starts with the registration of the real-name system of anchors. In 2017, the examination of Douyu's real-name system has been upgraded from photo verification with ID cards to face recognition technology verification. After the implementation of the real-name system, Douyu customized a 12-point deduction system for anchors to ensure the harmonious and healthy content of the platform with strict rules and regulations.

In the self-examination of the audit team, there are not only strict requirements for the dress, behavior and behavior of the auditors, but also an examination for the auditors every two months.

VI. Technical training

Maintaining a good user experience is the best way for the platform to maintain user growth and improve profitability.

From the point of view of the structure of the game live broadcast, reward, advertising and value-added services (paid) are the main ways to realize the platform. However, as the payment consciousness of Chinese users has not been fully awakened, the main means of cash realization of live broadcast platforms still rely on reward. Therefore, the key to the realization of live broadcast platforms is how to make more users willing to pay for their interests.

Among them, the user experience directly affects the users' willingness to appreciate the anchors, and Douyu is constantly improving the users' experience of watching movies. On the one hand, Douyu further strengthens the broadband construction, and further improves the picture quality of the live broadcast through relevant technologies, so as to enhance the user experience; on the other hand, Douyu invests a lot of energy and makes use of patented technology and big data analysis to make the live broadcast content "understand" users better.

Through technical training, Douyu has also created a unique user viewing perspective, which has greatly improved the user experience, thus making users more willing to "pay" for their interests, as evidenced by the current more than 6 million paying users.

Deep ploughing in the community

Keeping users active enough is an important guarantee for the sustainable development of the platform.

Douyu increases user stickiness and activity through community operation. Douyu's predecessor is the live broadcast below the A station, which is basically the place where two-dimensional enthusiasts accumulate. It can be said that Douyu has had a social attribute since the beginning of his birth. It was not until 2014 that it officially changed its name to the well-known Douyu TV, although its social attributes remain intact.

Subsequently, Douyu transferred his community position to the fish bar. At present, users can discuss common topics of interest with other water lovers in the fish bar, such as outdoor live discussions, game live gossip, anchors really know how to play, memoirs of old drivers, and so on. Fish bar has become an important position for fans to interact with anchors.

In addition to the official community of Fish Bar, Douyu also actively enhances the interaction between fans and anchors and platforms through community operations such as Weibo, fan groups and offline carnivals, so as to enhance user activity and stickiness. At the same time, Douyu Sheng Community has also enhanced the diversification of its fee-paying channels.

Listing is only the starting point, and Douyu's late blooming is more manifested in her accumulated strength after listing.

With the largest number of active users and paying users in the industry, the strongest anchor team in the industry, and the fastest profit growth, Douyu's late blooming will be more reflected in the accumulated strength after the listing.

First, the ceiling of the game live broadcast market is still very high. According to the 2019 China Game Live Industry Research report released by iRui.com, the game live broadcast market in 2018 reached 13.19 billion yuan, an increase of more than 60 percent over 2017, and is expected to reach 25 billion yuan by 2020. China's game live broadcast platform has 260 million users and is expected to reach 310 million and 340 million in 2019 and 2020, and the game live broadcast industry still has a large user growth dividend. Because of this, it has attracted short video platforms such as Douyin and Kuaishou to enter the field of game live broadcast one after another.

Douyu, as the "number one" in the game live broadcast industry, currently has 159.2 million monthly active users. At the same time, it has the top anchor team of the whole network, the most colorful games and e-sports content. Douyu is more attractive to users than other platforms, and will also become the main destination for new users in the game live broadcast industry.

Second, with the continuous development of Douyu's pan-entertainment layout, Douyu's user stickiness and user payment conversion rate will also be further improved. At present, Douyu's diversified ecological prototype has basically taken shape, and the "Deep ploughing e-sports value chain" plan is also being carried out in an orderly manner. With Douyu's ecological layout in live broadcast, e-commerce, games, film and television becoming more and more perfect, Douyu will also have more room for imagination.

Third, according to the prospectus, 35 per cent of the funds raised by Douyu will be used to invest in e-sports content and expand content types; 30 per cent will be spent on technology and big data research and development to improve operational efficiency; and 15 per cent will be spent on investment and marketing activities, including potential strategic acquisitions, investments and alliances. Douyu put more resources and funds into the platform construction, under the siphon effect, its competitive moat will be wider and wider.

From this point of view, the current market value of Douyu is in a depression. With the continuous improvement of Douyu's internal skills, Douyu will really usher in a late bloomer after listing, and the long-term value of Douyu will continue to be released.

(official account of Liu Kuang / tr. by Phil Newell) ID:liukuang110

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