Will Bilibili Grow into the Chinese Youtube?
COVID-19 and China
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As a star online video platform in China, bilibili (BILI:NASDAQ) has many tags attached to it, including Animation, Comic, Game (ACG), generation Z and user-generated content (UGC). These tags make bilibili different from other video platforms in the industry. The company's stock price rose from USD 11 in 2018, the year of its listing on the stock exchange, to USD 28.78  per share. The market value is about USD 7.8 trillion. On April 9, this ACG platform announced a strategic investment of USD 400 million from Sony, marking one more step towards its target of USD 10 trillion market value.

In 2019, the keyword for bilibili was 'breaking the circle.' On bilibili a 'circle' is a group defined by a shared interest among users. The company's content managers have been working to try to blend a greater mix of material into the content feed experienced by each user, hence 'breaking the circle.'

This initially game-based company took several actions to expand into more extensive areas. A milestone of the initial success they achieved in 2019 was the 'New Year's Eve' party for the start of the year; the party hit 95.58 million plays and 3.04 million live viewers. It not only attracted generation Z, people of the 1960s and 1970s also tuned in, and bilibili prepared shows aimed at this age group. That is one more step towards its monthly active users (MAU) goal of 180 million, which is the key traffic milestone of 2020.

It's evident that the existing base of users and businesses cannot satisfy bilibili's ambition, and competitors have been paying much attention to its expansion. Will bilibili grow into China's Youtube?

Breaking the circle achieves initial success

The success concerns two aspects. The first is the more balanced business income sources; the second is the more diversified video content sector.

As the game is the B station's initial import business, the income percentage of this part from 2017 to 2019 fourth quarter kept decreasing, from 83.4% to 43.2%, accodring to 2019 annual and fourth quarter finanical report. At the same time, other business sectors' income shares were increasing. For the live streaming and value added-service part, bilibili spent a vast sum of CNY 800 million to earn exclusive broadcast rights for the 'League of Legends' Global Finals in the next three years. The value-added service mainly focused on paying accounts; the average monthly paying users doubled to 8.8 million in 2019 fourth quarter. As a result, this part's income increased from 14.4% in 2018 total revenues to 28.4% in 2019 fourth-quarter revenues. For the e-commerce part, bilibili cooperated with Alibaba, in  2018 December. This video player also launched a store platform function. During the 'Double 12' period in 2018, Taobao's market growth rate for ACG peripheral products reached 90%. The e-commerce income occupancy grew from 3.5% in 2018 to 13.9% in 2019's fourth quarter.

The second part is the high-quality video content generated by bilibili's UPers (similar to YouTubers on YouTube). As the base of bilibili's content ecosystem, the videos posted by UPers obtained 91% of total play volume. At the beginning of the establishment of this ACGplayer, there were only six sections. After further diversifying its business, it has now expanded to 20 sectors, 7000 division circles, and 8 million content tags. On bilibili's official website, lifestyle has become the hottest topic, with the same number of channels as games. Other new hot areas include technology and online study. In co-productions with National Geographic in 2019, the media company posted nature documentaries and raised an outstanding reputation in China. Moreover, targeting students who study at home, bilibili has joined Tsinghua and other famous universities to produce live-streamed courses.

According to data disclosed (in Chinese) by bilibili, in the past two months, the total broadcast volume of the technology board and digital board has increased by 184% year-on-year; the total submission volume increased by 202% year-on-year, and the viewing time increased by 186% year-on-year. The 'breaking the circle' actions have achieved initial success, and bilibili is continuing its way to expand its business and contents outside the ACG circle.

Users are the priority

Except for the feature of high-quality content, high user stickiness is a unique and competitive aspect of bilibili. The average daily watching time of users is 77 minutes, and the monthly interaction times between users and UPers number 2.4 billion. One interesting thing is that this station is the only video platform that requires a user to pass a test to become a formal member.

As well, the user retention rate in the twelfth month after passing the exams was 80% in the fourth quarter of 2019. To compare with other online video industry players, after 14 days of paying fees, the user retention rates for iQiYi, Tencent Video, and Youku are (in Chinese) 58.3%, 57.5%, and 42.9%, respectively. Bilibili's high user retention rate is generated by high-quality content, active interactions with UPers, while other factors also contribute. For the advertisement part, most videos on bilibili don't have them. Users hate them and have accepted the long-existing situation of no advertisement for videos. That's why the advertisement income of bilibili is not the primary income, making it different from other video platforms. But these actions bring a good user experience (UX) since even unpaid users can watch videos without advertisements. Together with the good community environment, these two are the central competitive advantages in the UX, and also the reason for the high retention rate and high user stickiness.

Dilemma appears

Breaking the circle has expanded the diversity of the community environment and already raised dissatisfaction among original users; these people want their content feeds to remain 'clean,' with no unexpected material creeping in. Breaking the circle is, however, a clear goal of bilibili, and introducing high-quality content from more areas has proven to bring significant traffic. Just like on other platforms, traffic is essential, and each station is eager for it now. And here is the dilemma. If bilibili wants to stand out among online video players, high-quality content and high user retention are vital to keeping a lead. The situation is similar to that of Netflix, which plans to invest USD 17.3 trillion into original content to keep the advantage of high-quality video for customers.

Editor: Luke Sheehan
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