Bilibili has finally made a profit. And then?

Text｜Wang Yuchan

Editor｜Qiao Qian

In the third quarter of this year, Bilibili finally achieved a single-quarter profit with an "adjusted net profit of 240 million yuan". In contrast, the adjusted net loss in the same period last year was 863 million yuan.

In this quarter, value-added services, advertising, games, IP derivatives and other businesses contributed 38%, 29%, 25% and 8% of the revenue respectively. It is particularly worth noting that the game business reversed the sluggishness of the previous few quarters, with revenue increasing by 84% year-on-year; and the advertising revenue increased by 27.8% year-on-year, maintaining a steady growth. These two businesses have made significant contributions to the "profitability battle".

Although Bilibili CEO Chen Rui set the goal of achieving breakeven this year early on, looking at it now, the profit in Q3 is somewhat of a "historical coincidence". For example, a large part of the high growth in game revenue is due to the income brought by the agency-distributed popular game "Three Kingdoms: Deciding the World". If the impact of this game is excluded, other old games are still declining.

Although the profit promise was fulfilled in the third quarter, after the financial report was released, Bilibili's stock price dropped by 12%. For investors, they are more concerned about whether Bilibili can continue the momentum of profitability next.

Character illustration of "Three Kingdoms: Deciding the World"

Advertising: There are still benefits in Q4, and there are no major problems in the short term

As the business that contributes the second largest to the total revenue and is the most growth-oriented, the performance of the advertising business in the next stage is very important.

In the third quarter, in addition to the favorable situation of the summer game industry's purchasing volume, it is actually not the peak season for the advertising industry, and even more adversely affected by the macro environment. However, Bilibili's advertising business still maintained a steady growth, demonstrating the resilience of this business. The financial report explains that the growth is mainly due to the optimization of advertising products and the improvement of advertising efficiency.

COO Li Ni explained at the conference call that the growth of Bilibili's advertising in this quarter is mainly due to three reasons: First, the development of "multi-screen and multi-scenario", which enables the information flow, search bar, PC and Pad ports to contribute more advertising revenue; second, the integration of "Huahuo + Qifei", optimizing the intelligent placement settings of the mobile terminal, resulting in a 7-fold increase in the number of customers year-on-year; third, relying on AIGC tools to reduce the advertising threshold and cost.

In addition, Li Ni disclosed several interesting data at the conference call, which can allow us to see the changes in Bilibili's advertising form - First, the growth rate of performance-based advertising is faster than other types, approaching 50% in Q3; second, after integrating the "Huahuo" and "Qifei" advertising systems, the proportion of commercial orders in "Huahuo" continues to increase, and it has approached 60% in the third quarter, "When doing commercial orders, performance advertising must be placed at the same time".

It can be seen that performance advertising is growing rapidly on Bilibili. This kind of advertising is different from the traditional brand advertising of "UP Masters' Endorsements". In the market environment where the advertisers' budgets have not yet recovered, paying attention to performance advertising is a common phenomenon, and Bilibili is also responding to this expectation. Moreover, performance advertising is often more willing to invest in traffic than brand advertising, and can bring Bilibili visible income in the short term, which also explains why Bilibili wants to integrate "Huahuo" + "Qifei".

A service provider with Bilibili investment experience told 36Kr that the industry generally abbreviates this strategy as "Huafei", that is, the budget is divided into three and seven, with 70% spent on UP Masters in "Huahuo" and 30% invested in Bilibili in "Qifei".

For a long time, "Huahuo" only takes a 5% commission, which can be said to be one of the "most conscientious" platforms in the industry, but it is obviously not enough for Bilibili's advertising revenue to rely only on this 5%. The emergence of "Qifei" can be said to be that the platform has solved this problem without a direct conflict of interest with UP Masters.

It is expected that in Q4 of this year, Bilibili's advertising revenue will still have a significant increase with the boost of "Double Eleven". Li Ni disclosed that during this year's Double Eleven, Bilibili's GMV of goods promotion increased by more than 150% year-on-year, and the number of UP Masters for goods promotion also increased by nearly 80% year-on-year, bringing a new customer rate of more than 50% to all industries, including 3C digital, home decoration, beauty, clothing, maternity and infant, etc. The advertising revenue of Bilibili during "Double Eleven" increased by nearly 50% year-on-year.

Games: A narrow victory in Q3, and the next hit has not yet appeared

Bilibili's game business did not hold back at this critical period, which is inseparable from the support of "Three Kingdoms: Deciding the World" to Bilibili's game business.

According to the calculation of the data from the third-party platform by Changqiao Dolphin Research, it is estimated that the revenue of "Three Kingdoms: Deciding the World" in Q3 is 1.5 billion yuan, and according to the consistent confirmation cycle, it is expected that 1 billion yuan of income will be confirmed in the current period. But if this 1 billion is excluded, other old games are still declining year-on-year.

Image source: Changqiao Dolphin Research

There are two key issues surrounding Bilibili's game business: How many quarters of income can "Three Kingdoms: Deciding the World" contribute? And when will the next hit game appear?

Regarding the first question, Chen Rui responded at the conference call: "In addition to the short-term performance, what I personally attach more importance to is the long-term operational structure of 'Three Kingdoms: Deciding the World'. I also told the team internally that the most important goal of 'Three Kingdoms: Deciding the World' is to achieve long-term operation. The long-term operation I mentioned refers to a stable operation with a life cycle of at least five years."

On November 16, the fourth season of "Three Kingdoms: Deciding the World" will start its operation, launching a new gameplay with a new map, new generals and new scripts.

Chen Rui said that operating "Three Kingdoms: Deciding the World" well is "one of the most important tasks of the game business next year". In the strategy game track, Bilibili will only make this one game for a long stage in the future, and this game will be truly done well, "because the ceiling of this game is high enough". At the same time, Bilibili is preparing to launch the Traditional Chinese version of "Three Kingdoms: Deciding the World" in the second half of next year for the game to go overseas.

Regarding the second question, Chen Rui responded that Bilibili plans to open up a new game track in addition to the two tracks of the second dimension and SLG next year. But he did not disclose what kind of game it is specifically.

In the SLG track, there is "Three Kingdoms: Deciding the World", and in the second dimension track, there is "Jujutsu Kaisen". "Jujutsu Kaisen" was released overseas on November 7. This is the first time that Bilibili has released a game in all countries except Japan overseas, and it has already ranked first in the download list in more than 70 countries and regions. "Jujutsu Kaisen" and "Three Kingdoms: Deciding the World" are currently the two games with the highest expectations for Bilibili next year.

For SLG games, which often have a "high opening and low closing" revenue trend, it is quite difficult to become an evergreen game. Judging from Bilibili's deferred income that is on the rise in Q3, it is basically not difficult for "Three Kingdoms: Deciding the World" to maintain the game revenue in Q4, but it is not certain whether it can continue to play a leading role next year. Judging from the current game pipeline of Bilibili, the next hit seems not to have appeared yet.