Core view
The stronger the instrumentality or practicability of the platform, the longer the service life of the platform and the stronger the user stickiness. We believe that, as the same UGC platform, the instrumental and practical important difference between Bili and Tiktok / Kwai in product logic is also an important weapon for Bili in the competition. The premise of being instrumental is to have high-quality content. The reduction of the creation threshold of short video platform will dilute the content quality of the platform. We believe that a mature economic and cultural system must have a mature ugc&pugc platform to carry users' requirements for the quality and practicality of video content. Bili and Tiktok / Kwai are actually misplaced competition. Quantitatively, daily and monthly live users of Bili have steadily increased in the overall market of video platform; The number and duration of Bili users are growing steadily, and there is no phenomenon of being squeezed by Tiktok / Kwai.
In the community, the interpersonal relationship is weak, and the connection between people depends more on the content. The network structure lies in the super nodes (for example, theme, KOL, etc.), so the community nature of Bili comes from the content and up master in essence. The growth in the number of active up masters and the expansion of OGV / PCG content are the underlying driving forces for users to expand their circle. We believe that Bili's idea of circle expansion is correct and the rhythm of circle expansion is in line with expectations.
Bili's revenue growth engine has switched from games to advertising. The driving factors for the growth of advertising business include: 1) the increase of the number of users and duration; 2) Increase of advertising loading rate: 3) increase of advertising price. Bili's advertising business includes: 1) brand hard wide; 2) Effect advertising; 3) Business order and fireworks platform; 4) Investment promotion. We believe that with the addition of story vertical screen advertising, the medium-term advertising increment of Bili comes from effect advertising. It is expected that the advertising business of the company will account for 33% of the total advertising revenue in 2024, of which effect advertising accounts for 34% of the total advertising revenue; In the long run, if we can achieve the success of commercial order and fireworks platform, it will open the ceiling of advertising business.
Compared with Kwai and iqiyi, Bili has advantages in user cost and customer acquisition cost. Based on the target of 400 million Mau in 23 years, the growth rate of Mau from 2022 to 2023 is 31% and 18%. With the decrease of Mau growth rate, the growth rate of sales expenses is expected to decline. We believe that while the company realizes the rapid growth of users and revenue, the profit model is expected to achieve marginal improvement. We predict that the gross profit margin of the company in 2024 will be 29.4%, the sales expense rate will be 18%, and the corresponding non GAAP net profit margin will be - 1.8%, which can basically achieve profit and loss balance.
In the short term, the online video industry will moderately benefit from the home dividend brought by the local epidemic, but the budget investment and settlement of advertisers in various industries may have a negative impact on the performance of relevant companies. It is suggested to pay attention to the recovery of advertising demand and the impact of game version number distribution on advertising demand of subdivided industries.
Risk tip: policy supervision risk, user growth is less than expected, and commercialization is less than expected.
