Today’s Internet companies are making great efforts to seize the use time of users. In the “squeezing” of users\’ fragmented time, short video and online audio are undoubtedly the two “killers” in the industry.
On January 17, 2020, litchi (Lizi. US) was officially listed on NASDAQ with an issue price of US $11. At that time, the market value of litchi was about US $500 million based on the issue price.
the listing of litchi is of great significance because it won the “crown” of the first share of China’s online audio.
Of course, the other two players of China’s online audio, Himalaya and dragonfly FM, have also been running on the road of capital. In September 2021, Himalaya submitted a prospectus to the Hong Kong Stock Exchange; In November 2021, dragonfly FM completed a new round of financing led by Col Digital Publishing Group Co.Ltd(300364) .
But looking back at litchi, which was listed first, it seems that the past two years are not easy. Red Star capital Bureau noted that after the listing of litchi, its share price began to plummet all the way. In February 2021, litchi took the opportunity to usher in its own short spring because musk “brought goods” to the overseas audio platform clubhouse. But after the heat, the performance of Litchi in the secondary market fell into a downturn again.
As of January 14, 2022, the closing price of litchi was US $1.57/share, and the total market value was only US $79.4498 million.
Now look at China’s online audio industry. The capital market has ruthlessly cast a “no vote” on litchi. After the publication of the Himalayan prospectus, it has also been questioned by many because of perennial losses. Is it really easy to tell the story of China’s online audio track? In this online audio “Three Kingdoms kill”, who can laugh the last in litchi, Himalaya and dragonfly FM
(I)
ear economy, what business do you do?
Red Star capital Bureau mentioned earlier that short video and online audio are the main killing tools for users’ fragmented time. Unlike short video, audio can completely liberate users’ eyes and hands. At the same time, it will have a stronger sense of companionship and more use scenes, such as driving, doing housework, going to bed, etc.
However, even in the same audio track, the business models of litchi, Himalaya and dragonfly FM players are actually different. The following specific analysis.
① litchi: UGC audio social platform
Litchi is China’s UGC audio community and interactive audio entertainment platform. Its revenue source is mainly composed of two parts: audio entertainment, podcasting, advertising and others. (Note: UGC is the production content of users, pugc is the production content of professional users, PGC is the production content of professional users)
Among them, audio entertainment refers to the virtual gift reward during audio live broadcast. Podcasting is the knowledge payment income. Naturally, it goes without saying that advertising. Litchi financial report shows that for a long time, more than 98% of litchi’s total revenue comes from audio entertainment.
According to the latest 2021q3 financial report, the total revenue of Litchi in the third quarter of 2021 was 505 million yuan, but the revenue from podcast advertising and other services was only 4.05 million yuan, and the revenue from audio entertainment accounted for 99.2% of the total revenue
source: company financial report, red star capital Bureau
In other words, the income of litchi basically comes from the show. In fact, we can also see its strong social attributes from the user structure of litchi.
According to the prospectus, 58% of litchi users were born between 1990 and 2000, and most of them were women.
In conclusion, litchi is more like an audio version of tiger teeth. Its essence is UGC community ecological operation. Community ecology is composed of content, users and anchor. In order to attract more users, podcasts on the platform are basically free and open. Through virtual gifts, more users are encouraged to create, so that the content and users are in a positive cycle.
In short, the content threshold of litchi’s UGC model is low, and the essence of the business model is the realization of “fan economy”.
② Himalaya: UGC + PGC + pugc integrated platform
Himalaya currently has the largest number of users and richer content forms among the three platforms.
From the perspective of revenue structure, the prospectus shows that Himalayan revenue is mainly composed of four parts, namely subscription business (member payment, on-demand service), advertising business, live broadcasting business and other innovative products and services; Subscription business and advertising business are the main revenue sources in Himalaya.
According to the prospectus, the total revenue of Himalaya in 2020 is RMB 4.076 billion, including subscription revenue of RMB 2.007 billion, accounting for 49.2%; The advertising business contributed 1.072 billion yuan, accounting for 26.3% of the total revenue; The live broadcasting business contributed 718 million yuan, accounting for 17.6% of the total revenue; The revenue from other innovative products and services was 280 million yuan
source: company financial report, red star capital Bureau
It can be seen that compared with litchi, Himalayan revenue is more diversified, with subscription revenue and advertising revenue brought by PGC content; There is also the reward income brought by UGC content, so Himalaya is a more comprehensive audio platform.
According to the profile of Himalayan users, as disclosed in the prospectus, as of June 30, 2021, about 24% of Himalayan users are post-80s, 28% are post-90s and 25% are post-00s. 53% of users come from the first and second tier cities in China, and 37% from the third and fourth tier cities.
It can also be seen from the user portrait that Himalayan content attracts a wider range of user groups.
③ Dragonfly FM: PGC + pugc, emphasizing content first
Dragonfly FM started earlier and was established in September 2011. In terms of content production, dragonfly FM started with PGC content. Since 2015, dragonfly has started pugc mode and signed contracts with celebrities, TV and radio hosts to produce professional content. Perhaps it is to prevent the barbaric growth of UGC content, resulting in the decline of platform content quality. Dragonfly has never focused on creating UGC content.
As dragonfly FM has not released financial data, it is unable to view specific revenue data. However, in June 2018, Xiao Yi, former COO (chief operating officer) of dragonfly FM, said in an interview with the media: in terms of revenue, in addition to advertising revenue, at present, half of dragonfly FM’s monthly revenue comes from the revenue contributed by paid content.
From the current user portrait of dragonfly FM, according to the data of iResearch in 2018, the user group of dragonfly FM under the age of 24 accounts for 21%; The proportion of users aged 25 ~ 45 is 59%; Users over 36 accounted for 21%. At the same time, male users were slightly higher than women, accounting for 58.4% and 41.6% respectively.
Unlike litchi and Himalaya, dragonfly FM emphasizes more professional content. While users are diverse, a single user is more perpendicular to the partition content they are interested in.
(II)
The model is different, and each has its own difficulties
At present, litchi and Himalaya, which publish financial report data, are difficult to make profits without exception. Xiao Yi, the former COO of dragonfly FM, also said in 2018: at present, dragonfly FM has not made a profit, and the company is basically in a “slight loss” state.
Why are the three enterprises facing the dilemma of difficult profitability? Or, why is it difficult to make money on online audio tracks?
In fact, from the perspective of revenue structure, the current realization sources of the platform are nothing more than reward income, subscription income and advertising income. The reason why it is difficult to make profits is that the business models behind these realization methods are facing their own difficulties.
① behind the reward business: “local tyrants” are a minority, and the share is hard injury
As mentioned earlier, the realization logic of litchi is to obtain user reward income. The reason why litchi is difficult to be valued in the capital market is mainly due to the low industry threshold and the user’s willingness to reward.
According to the litchi financial report data, there were 46.61 million active users in Q3, the proportion of paying users was 0.82%, and the average arppu (average revenue per paying user) was 848 yuan; There are 56.2 million active users in 2020q3, paying users account for 0.8%, and arppu is 793 yuan; The number of active users in 2021q3 is 58.9 million, paying users account for 0.82%, and arppu is 1030 yuan.
although the reward amount of single paying users increased year-on-year in 2021q3, paying users accounted for less than 1% of the total users, indicating that the vast majority of users were just watching and only a small number of users were willing to pay.
In addition, every reward income obtained by the platform needs to be shared by the anchor or guild. According to the litchi prospectus, in 2019, the share of litchi to the anchor accounted for 72.8% of the total revenue, that is, for each reward of 100 yuan, 72.8 yuan was distributed to the anchor and the association.
However, even if litchi draws more Chengdu to the anchor, the anchors are more willing to choose the video live broadcasting platform, because the video has a stronger impact on users, the amount of gifts is greater, and the monthly flow is generally higher than the audio anchor.
Of course, in the audio business, the platform will also face many risks, such as the departure of the anchor or the impact of the anchor’s low-quality content on the platform’s reputation.
Therefore, the reward business of litchi seems to achieve “win-win” between litchi and the anchor. In fact, the platform is difficult to grasp the core dominance and the income is relatively limited.
② behind content payment: the game between users’ willingness to pay and copyright cost
The reason why Himalaya has become the first in the industry is that the content is rich enough and high-quality, and users are willing to pay for high-quality content.
According to the prospectus, Himalaya has signed contracts with more than 140 publishers, and also has in-depth cooperation with content production teams such as Deyun society, Wu Xiaobo and Yu Qiuyu. In 2020, the cost of copyright purchased by the company was 255 million yuan, accounting for 6.3% of the total revenue.
In terms of the number of paying users, the payment rate in Himalaya is indeed growing. The payment rate is only 6.2% in 2019, 9.9% in 2020 and 12.8% in the first half of 2021.
the rapidly growing payment rate in the Himalayas also contains some “water”. for example, in 2020, Himalaya launched the “buy 1 get 13” membership discount. Android users only need 218 yuan to pack and obtain 13 annual membership cards such as Himalaya, Netease cloud music, Tencent video, iqiyi and JD.
At that time, media reported that more than 100000 copies were sold within one hour of the event. Himalaya has made great efforts to promote sales activities to boost its performance, which has indeed had a significant effect in promoting paid members.
But even so, the late Himalayan member penetration may still be limited. Due to the late formation of Chinese users\’ payment habits, at present, even for long video streaming platforms, the payment rate of users is less than 25%, and it is difficult to break through. Take iqiyi as an example. Since 2020, iqiyi’s payment rate has not increased but decreased. For online audio with less “impact”, its user payment ceiling is or lower
source: company financial report, red star capital Bureau
In the later stage, Himalaya still needs to constantly update content to attract new users and retain old users, which is inseparable from copyright investment and marketing investment, and also tests how the platform can find the optimal solution.
③ behind the advertisement: subject to many restrictions such as industry characteristics
Advertising, to put it bluntly, is the realization of flow economy. Taking the Himalayas as an example, it is mainly in the form of display advertising, audio advertising and brand promotion activities.
However, audio platform advertising is relatively special. For example, audio advertising has a single form and poor advertising effect. Therefore, the bargaining power of advertising is also low, which belongs to the natural short board of the industry.
In addition, the experience of audio advertising to users is also relatively poor, and many users say it is difficult to accept audio advertising. Netizens said that when they are listening to the content, the emergence of advertising will disturb their thoughts.
In fact, QQ music has also launched audio advertisements before, but once the advertisements came out, more netizens were dissatisfied. Later, the platform also announced the suspension of such advertisements. it can be predicted that Himalayan and other audio platforms want to broaden the road by advertising in the later stage, which is unrealistic under many restrictions.
(III)
who will eventually get the market cake?
Looking back, litchi, Himalaya and dragonfly FM are known as the three giants of online audio in the market, but their business paths are different.
Litchi emphasizes social networking, dragonfly emphasizes high-quality content, and Himalaya, as the boss of the three, seems to integrate all businesses.
Will the Himalayas be the final winner? The market is changing rapidly, and the final success or failure is still unknown. Moreover, now the “giants” are also eyeing the online audio market cake.
The first is Tencent. In 2020, Tencent music launched the product “Kui Chang listening” with a high degree of overlap with the Himalayas; In the same year, Tencent music acquired lazy listening and packaged it as a new long audio brand “lazy listening”; Wechat also launched the “wechat listening” function.
In addition, bytes, Kwai Fu and NetEase are also coming in. In June 2020, the company launched “tomato listening”, “tomato novel” app and other products; In September 2020, Kwai launched the podcasting APP kayak. In the same month, Netease cloud music launched the “sound theater”.
In the face of new players with their own traffic and abundant funds, the outcome is naturally unpredictable.
In addition, according to the report released by iResearch consulting, the growth rate of China’s online audio industry has declined from 36.9% in 2016 to 15.1% in 2019, and it is predicted that it will continue to decline to 10.8% in 2020. It is an indisputable fact that the growth rate of users in the online audio industry has decreased, which has also exacerbated the intensity of this competition
summary
In fact, whether UGC, PGC or pugc, the mode of online audio is limited there. At present, the real breaker of the industry has not yet appeared.
