Bilibili Inc.
Q4 2020 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Good day, and welcome to the Bilibili 2020 Fourth Quarter and Full-Year Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Juliet Yang, Senior Director of Investor Relations. Please go ahead.

[Juliet Yang:]

Thank you, operator. Please note the discussion today will contain forward-looking statements relating to the Company's future performance and are intended to qualify the safe harbor from liability, as established by the U.S. Private Security Litigation Reform Act. Such statements are not guarantees of the future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the Company's control and could cause actual results to differ materially from those mentioned in today's press release and in this discussion.

[Xin Fan:]

Thank you, Juliet, and thank you, everyone for participating in our 2020 fourth quarter and fiscal year end conference call. I am pleased to deliver today's opening remarks on behalf of Mr. Chen. We had an exceptional year in 2020. Through a challenging macro environment, we remained focused on our growth strategies and achieved record results. In the fourth quarter, our MAUs reached 202 million, up 55% year-over-year, marking a new starting point for our growth journey. In addition, mobile MAUs were up 61% year-over-year to 187 million. On the user engagement front, we had 54 million DAUs, up 42% year-over-year. Our users remained highly engaged and spent an average 75 minutes on our platform daily in the fourth quarter, reflecting the strong appeal of Bilibili's content offerings and the stickiness of our growing community. The high quality and rapid growth of our user base laid a solid foundation for our commercialization efforts. In the fourth quarter, our premium content and services continued to drive paying user conversion. MPUs reached 18 million, up 103% year-over-year. Our overall paying ratio increased to 8.9%, compared with 6.8% in the same period last year. At the same time, more business partners are turning to Bilibili to reach and engage our massive audience base of young generations. Our advertising business grew by 149% in the fourth quarter year-over-year, marking the seventh consecutive quarter of accelerated growth on a year-over-year basis.

[Operator:]

Thank you so much. Ladies and gentlemen, we will now begin the question-and-answer session. And our first question comes from the line of Alex Poon from Morgan Stanley. Alex, your line is now open.

[Alex Poon:]

My first question is related to the user growth in coming years and the strategy and in terms of the product strategy, et cetera. At the same time, how can we maintain the user quality? For example, in fourth quarter, we noticed there is a small decline in terms of DAU-MAU ratio and also the user time spent on a year-over-year basis. Thank you very much.

[Rui Chen:]

So user growth has always remained our top priority. And I personally take a great priority in looking after the user growth strategy. So under the rapid trend of videolization, we believe every Internet user could potentially become a video user, and this is creating a massive market opportunity for us. So I believe the user growth for all the content platform really depends on the quality of the content. Whichever platform has the highest quality content, the user will tend to – that will turn to that platform. And for Bilibili, we have always practiced the philosophy that to leverage high-quality content to attract our users. And we are really focused on expanding our content offerings and content categories. So the reason why that Bilibili can continuously produce high-quality content is because we have built ever-growing sustainable content ecosystem, which naturally give birth to many high-quality content. So as we attract our users through our ever-growing high-quality content, at the same time, our highly engaged, sticky community help us to retain those users and providing them unique community experience. And our commercial efforts is also organically combined and merged with our content ecosystem as well as our community. So in many ways, it does not affect our user experience. On the contrary, we think it's becoming part of our content offerings and community experience. So looking at the past two years, we have experienced a very high-quality and rapid user growth. And you may even notice that our reach for broader audiences is beyond the Generation Z. And according to the latest third-party report, about 86% of our users in 2020 are aged below 35. So Bilibili is becoming the primary choice for not only the Gen Z, but also become a lot of users' choice that age below 35. On top of our user numbers expanding, we think that we are expanding our influential power-up multiple content verticals. In the past, people might have the perception that Bilibili has all the content young generations like, such as anime, games, music and entertainment. And in 2020, you would notice that there are many verticals that emerging that have the mass market appeal to all the age groups, for example, knowledge sector was one of the fast-growing sector in last year and knowledge as itself is the high quality content for all age groups that's out there. On top of our further ever-growing PUGV content ecosystem we've noticed in our OGV department, there has been a great synergy, for example, our traditional strong verticals, anime and documentary, continues to thrive and on the other hand, we have seen new emerging content categories such as our New Year's Gala, our films and TV productions is also welcoming more and more audiences. So all the above, we can summarize our user growth can at least meet three criteria’s; one, as we will continue to penetrate the young generations, in the past it might be the Gen Z demographic, people born in between 1990 to 2009, we believe we can further enrich, expand to the age group that's born after 1985 or even 1980. So the second point is on the quality of the content. We believe we can become a leading player in more and more content verticals and gaining more mindshare of those verticals in the market. So for example, in the past people may have the perception the best anime and the best game content is on Bilibili. Going forward, we hope to establish more mindshare and a high ground on more and more verticals, for example, in knowledge and in many more. And we believe there will be more high quality content and various content verticals will be in margin on Bilibili, gaining more market share. So by achieving the first two points, we are confident we can continue to take a leading role in terms of the pace of the content and leading the young generation's preferences over content and over our artistic preferences. We'll continue to maintain a highly engaged and friendly community environment at the same time increase our commercialization capability. So in the past, we had done a lot of work setting up our user growth and we have done a lot of groundwork and we are very prudent when it comes to setting up plans and strategies. And in the past, we have set two user growth, ones is back in 2018. Back then, we set a user target of 150 – to achieve 150 million in 2020. Then we updated that user goal back in 2019, which is to refresh the user target to achieving 220 million by 2021. So in the past, the goal that we announced, we believe we have very good track record in delivering those goals. As for the 220 million by 2021, we are quite confident to achieve that goal in advance. And standing where we are today in early 2021, we are setting up a new three-year user target, which we believe we can achieve 400 million MAUs by end of 2023. As we move forward, we believe that the Internet companies' competition over user is only getting more and more fierce. Despite challenging environment, we remain confident about our goals. We will further enhance our advantage in our content ecosystem as well as our engaging community. We are quite confident to achieve that user guidance. So as for the DAU to MAU ratio, I would like to emphasize that in the fourth quarter our main mobile app, the DAU to MAU ratio actually slightly improved quarter-over-quarter. And we have made the judgment back in the third quarter that as our user has experienced fast growth, the DAU to MAU ratio might fluctuate. Over the long-term, it shouldn't have large differences. As for the time spent, for this quarter, our time spent per DAU was 75 minutes and compared to the same period last year only a slight decrease, which we believe it's a normal case. So when we look at the time spend per DAU in January this year, it actually improved to above 18 minutes. So, this is also in check with our overall judgment on the time spent and DAU to MAU.

[Ni Li:]

So Carly would like to supplement one point. One is that, as Mr. Chen mentioned, our growth model is driven by our content ecosystem as well as our community. And you would also say that we made all the right moves in expanding Bilibili brand name in 2020. As we look forward to 2021, we'll continue to build on our – further expand our branding perception and branding awareness through multiple marketing events. So we've done our user perception study on our brand awareness back in 2019, 2020, and the number was – they're over 30% in 2019, and the brand awareness perception rate was improved to over 60% in 2020. We hope with number of our branding initiatives and marketing event, we hope to increase that perception rate above 90% in 2021. Okay. And one more thing is that on the branding initiatives, we are going to launch several campaigns in cooperation with company events and a big content launch to increase our brand perception and brand awareness. At the same time, we'll also work with other leading Internet players to increase our perceptions along with active user acquisition and channel acquisitions. Okay.

[Operator:]

Thank you so much. And your next question comes from the line of Alex Yao of JPMorgan. Alex, your line is now open.

[Alex Yao:]

So my first question is about the advertising business, which has been accelerating almost four quarters in a row in the past several quarters. Can you guys elaborate a bit more on the growth driver behind this rapid-growing advertising business? Also, can you talk about the advertising revenue growth outlook for 2021? A follow-up question on this advertising monetization is that we noticed you guys have recently launched a number of KOL economy monetization models, such as the Huahuo. Can you talk through your latest thinking on the KOL economy monetization on Bilibili. And also, can you talk about the feedback from both advertiser as well as content creators on the introduction of Huahuo? Thank you.

[Ni Li:]

So first of all, we have over – near half of active users that's our – that is China's young generation, and Bilibili is the platform that has the most concentrated young generation users. As we believe as the Gen Z become the mainstream of the society, they have more saying and more spending power across various industry verticals. And the next decade will be the new consumer upgrade, new consumer branding upgrade for the China's overall consumption industry. As Bilibili's user has the most influence and most spending power within this vertical, Bilibili is becoming the must-invest advertising platform. So in 2020, as we experience fast and high-quality user growth, our influence over brand advertising is also increasing. Over the years, we have continuously improved our commercial middle platform capabilities, and our advertising revenue has experienced accelerated growth for seven consecutive quarters. In the fourth quarter, our advertising revenue reached RMB120 million and up 149% year-over-year. And for the full year, our advertising revenue also grew by 126% year-over-year. So for 2021, we do not intend to increase our ad load, and we're going to maintain the ad load around 5%. From our perspective, we are still at the Phase II, building our infrastructure. And our advertising business still have a huge potential to grow. So first of all, we will continue to enhance our middle platform capability serving the commercialization progress. As our product – as our advertising product improve and our algorithm improve, our overall advertising efficiency will also improve. And the efficiency is not only reflect on the increase of our advertising revenue, it also reflects on other business. For example, our game – jointly operated games improvement also depends on the improvement of our advertising efficiency. So that goes with our live broadcasting membership and e-commerce. So on top of our news feeds, we tend to enhance our commercialization capability across multiple business lines and across multiple platforms. For example, the business line includes live broadcasting, comic and our audio drama platform. And as for the multi screen, that goes to our mobile device on iPad, on PC and our smart televisions to help our – the brands to connect even further in multiple ways with the young generations. So the third point would be to increase our integrated marketing efficiency and standardize more of the procedures among this overall integrated marketing campaign. In 2020, we have significantly improved the ad efficiencies on single users. And in 2021, we are going to elevate that to a single industry – on a single industry basis to better serve our industry verticals. And last but not least, I'll add some point on our Sparkle advertising platforms. This platform was launched in Q3 last year. It is a matchmaking platform between content creator and various advertising platform – advertisers. So this – the born of the platform is a natural development of our advertisers' needs and our content creators' needs as more content creator need commercialization empowerment. And our content – our advertisers also need efficient ways to influence users' decision-making. So the born of the platform is to connect both parties' needs at the same time to ensure a smooth, efficient transaction between two parties. And in 2021, we'll spend more efforts in improving this platform, bringing more opportunity for both parties. So in summary, we are quite confident of our advertising revenue growth. We believe we can still maintain a high-growth rate that's above the overall growth rate of the company.

[Operator:]

Thank you so much. And that concludes the question-and-answer session. I would like to turn the conference back over to the management for any additional or closing comments.

[Juliet Yang:]

Well, thank you once again for joining us today. If you have further questions, please contact myself, Juliet Yang, Bilibili's Senior IR Director, or TPG Investor Relations. Our contact information for IR in both China and the U.S. can be found on today's press release. Have a great day. Thank you.

[Operator:]

And that does conclude our conference for today. Thank you for participating. You may all now disconnect.