Aiming for New Growth, iQIYI Doesn't Choose Only One Option.

Perhaps the true breakthrough in the video industry is never a single-choice matter between long and short videos, but to construct an ecological network that enables all content forms to coexist and cooperate.

On February 18, iQIYI released its unaudited fourth-quarter and full-year financial results as of December 31, 2024: In the entire year of 2024, iQIYI achieved an income of 29.23 billion yuan; among them, in the fourth quarter, iQIYI achieved an income of 6.61 billion yuan.

It is worthy of mention that iQIYI's full-year Non-GAAP (Non-US Generally Accepted Accounting Principles) operating profit was 2.36 billion yuan, with a Non-GAAP operating profit margin of 8%, achieving operating profitability for the third consecutive year. Among them, the Non-GAAP operating profit in the fourth quarter was 410 million yuan, and the Non-GAAP operating profit margin reached 6%.

After the financial report was released, Citigroup and Bank of America Securities both maintained a "Buy" rating for iQIYI, with target prices of $3.1 and $3.5 respectively. On February 20, the latest rating information released by CFRA shows that it maintains a "Hold" rating for iQIYI and raises the target price from $2.3 to $2.5. In terms of domestic brokerages, GF Securities maintains a "Buy" rating and releases a research report "iQIYI (IQ): Blockbuster Drives the Recovery of Long Dramas, and Micro-Dramas Expand Categories", stating that "The stage that led to the profit decline has begun to bottom out. With the enhanced scheduling of long drama content and the combination of the layout of micro-drama content to form a stronger product matrix, the income is expected to continue the momentum of Q1 and recover quarter by quarter throughout the year."

Now, while maintaining the advantages of long videos, the "emergence" of micro-dramas has become one of the most important variables in iQIYI's "new story" in 2025.

Micro-Dramas on the "Main Table"

"The current situation is that, sorted by duration, in the main station App, the duration of micro-dramas is comparable to that of anime, children's content, and variety shows. In the speed version, the duration of micro-dramas ranks second only to the TV drama channel." Gong Yu, the founder and CEO of iQIYI, said at the earnings call. This is also the first time that iQIYI has disclosed the key data of its business since it announced its entry into the micro-drama market in September 2024.

In 2024, the micro-drama industry achieved a leap in market status at a speed that exceeded market expectations.

Goldman Sachs believes that based on the continuous improvement of user penetration and the growth of usage duration, the TAM (Total Addressable Market) of the short drama market will achieve a compound annual growth rate of 25% in the next two years, and the market size is expected to reach 91 billion yuan in 2027.

The explosive growth of the industry has led to the collective entry of leading platforms, and many long-video platforms have taken micro-dramas as a new fulcrum for their development strategies.

In September last year, iQIYI launched the "Short Drama Theater" and "Micro Drama Theater", officially entering the micro-drama market. At that time, Gong Yu publicly stated that iQIYI's short dramas are not equivalent to low-cost online dramas that are simply cut short, and micro-dramas are not equivalent to low-quality paid micro-dramas.

iQIYI defines micro-dramas as those with a duration of 1 to 5 minutes and mainly in a vertical screen format, and short dramas as those with a duration of 5 to 20 minutes and mainly in a horizontal screen format, and focuses on micro-dramas with a duration of 1 to 5 minutes.

When it comes to the reasons, Gong Yu pointed out that the business model of horizontal screen short dramas is relatively close to that of existing TV dramas, but the business model and user viewing behavior habits of vertical screen dramas have changed significantly.

In the past year, the micro-drama industry has not only continued to expand in scale, but also achieved a key transformation in both content form and business model.

In terms of content, the micro-drama industry is gradually getting rid of the path dependence of the early extensive development, shifting from the simple copy of traffic routines to the high-quality creation with quality as the core. This shift is directly reflected in the improvement of the production standards of the dramas: the script structure is more complete, the audio-visual language has a more cinematic texture, and the actor's performance is more professional. High-quality content has gradually become the key bargaining chip for platform traffic competition.

During the Spring Festival, iQIYI launched more than 28 high-quality micro-dramas in a concentrated manner. Among them, "Emperor Phoenix Industry", "Phoenix Lord", and "Ascending to the Phoenix Platform" continued to lead in popularity. Many topics related to the new dramas topped the hot lists on Douyin and Weibo, forming a cross-platform communication effect, confirming the market value of the high-quality strategy.

In terms of the business model, although the traditional paid recharge model still occupies an important position, the free model with natural traffic and advertising monetization as the core is gradually emerging. This model reconstructs the interaction logic between content and the audience. User dwell time and advertising conversion rate replace simple click-through rate as the new yardstick for measuring business value, forcing producers to continuously improve content quality.

Gong Yu revealed that iQIYI has optimized the advertising delivery system to more efficiently utilize the growth of micro-drama traffic to enhance monetization capabilities. Data shows that people aged 35 and below are the main force of iQIYI's micro-drama Spring Festival season, accounting for 73%. This younger trend not only brings an incremental user group to the industry, but also creates a high-quality delivery scene for advertisers.

It is worthy of mention that iQIYI's micro-drama content library has exceeded the 10,000-level magnitude, reaching a scale comparable to that of the leading micro-drama platforms in the industry.

In the latest earnings conference, Gong Yu positioned the current development of iQIYI's micro-drama business as "achieving a phased breakthrough", and emphasized the huge potential shown by short dramas in increasing advertising inventory and improving advertising revenue.

With the improvement of production standards and the polishing of the business model, the micro-drama track that iQIYI is betting on is forming a virtuous cycle of "content quality improvement - traffic growth - monetization efficiency improvement", opening up a new growth pole for the streaming media industry.

"Long + Short" Becomes the Solution to Break the Deadlock

iQIYI's bet on micro-dramas cannot simply be explained by "following the trend and chasing hotspots". Its "Long + Short" strategy sends a strong strategic signal to the market: By leveraging the complementarity of content forms and the superposition of commercial values, long-video platforms can break through the growth ceiling.

In the past, the market generally believed that there was a "zero-sum game" between members and advertisements in the long-video industry. If the platform strengthens member services such as skipping advertisements, it will inevitably suppress the growth of advertising revenue; if it increases the advertising inventory to improve commercialization, it may cause user loss.

At the same time, long-video platforms are also facing the current situation of users' increasingly fragmented attention. Short-video platforms erode users' time with "short, flat, and fast" content, which further aggravates the traffic anxiety of long videos.

In this context, iQIYI's "Long + Short" strategy, from a certain perspective, is to explore a systematic solution of a "two-way rush".

In fact, long videos and micro-dramas are not substitutional relationships. As pointed out in the research report of CICC, the layout of micro-dramas by long-video platforms forms a content supplement, meets the viewing needs of the original users, improves stickiness, and contributes a certain amount of effect advertising increment.

As a good supplement to long videos, micro-dramas can not only meet users' fragmented viewing needs, but also improve the content structure, expand the influence of iQIYI's content matrix, and create a "global ecology". According to Gong Yu, iQIYI's main App is mainly positioned as a long-video platform, with member income as the main source, and micro-dramas are just a supplement. iQIYI's speed version is transformed into a platform mainly featuring free micro-dramas, with the main income model being advertising.

The majority of the income of traditional long videos comes from member subscriptions and interstitial advertisements, while the free model of micro-dramas opens up a new scene of "content as advertising". Through a series of innovative forms such as brand-customized dramas, plot implants, and interactive advertisements, user viewing behavior is transformed into consumption clues.

It is also a positive for the micro-drama industry: The entry of professional teams from long-video platforms and the support of resources have accelerated the transformation of micro-dramas from "tacky and thrilling dramas" to high-quality good dramas.

On November 6, the China Netcasting Services Association released the "White Paper on the Development of the Micro-Drama Industry in China (2024)". It is predicted that the market size of micro-dramas in China will reach 50.44 billion yuan in 2024, with a year-on-year growth of 34.90%. It is expected that by 2027, the market size of micro-dramas in China will exceed 100 billion yuan.

Obviously, the construction of the "Long + Short" content ecology not only meets the differentiated preferences of multiple user groups, but also means market increment for long-video platforms like iQIYI.

It is learned that iQIYI's measures to continuously deepen the construction of the "Long + Short" content ecology in 2025 include: improving the quality and proportion of super-head content in the long-video field, increasing the construction of the original ecology in the micro-drama track, and increasing the supply of free micro-dramas to cultivate iQIYI's original micro-drama ecosystem.

For members, the newly added micro-dramas mean an additional option for the video library to choose from, which is "more quantity without additional price"; for the advertiser business, the number of exposure scenarios to consider has increased. Behind the construction of the "Long + Short" content library is actually a new breakthrough in the traditional "Member + Advertising" business model.

When heavyweight IP dramas and micro-dramas form a resonance, iQIYI may be creating a new growth paradigm for the streaming media industry.

Since the fourth quarter of 2024, iQIYI's high-quality long-video content has made a strong comeback. The content popularity values of the two dramas "I Am a Criminal Police" and "Bleaching" have consecutively exceeded 10,000, and various types of content such as "Flame in the Wind", "Criminal Profiling 2", "Great Dream Returns", "Winter Solstice", and "White Moon and Brahma Star" have also received a warm response from users. According to Yunhe Data, in the fourth quarter, iQIYI's total market share of dramas ranked first.

While consolidating the advantages in the long-drama track, the micro-drama reserves are also expanding rapidly. According to Gong Yu, iQIYI has covered 95% of the top micro-drama partners and produced the first micro-drama project with a monthly revenue share of over one million yuan in December 2024, showing initial commercial potential.

Perhaps the true breakthrough in the video industry is never a single-choice matter between long and short videos, but to construct an ecological network that enables all content forms to coexist and cooperate.