Sales associates at one of Alibaba-owned InTime’s store display products for sale during a livestream.
InTime | Alibaba
BEIJING – The fickle Chinese consumer has latched onto a set of new preferences for watching videos, a trend investors and media giants are tapping into.
Late on Thursday, short-video and livestreaming app Kuaishou filed for an initial public offering on the Hong Kong Stock Exchange. The offering is reportedly expected to raise $5 billion.
Morgan Stanley, Bank of America Securities and China Renaissance are the underwriters, according to the filing.
Kuaishou claims 302 million average daily active users in the first six months of this year. The company said revenues during that time were 25.3 billion yuan ($3.8 billion), up from 17.1 billion yuan a year ago.
Video game streaming aside, analysts say the video apps at the forefront of popularity among Chinese consumers are: ByteDance’s Douyin, the Chinese version of the popular short-video sharing app TikTok, as well as Kuaishou and Bilibili — both backed by Tencent.
Stay-home policies and acceleration of the digital economy in the wake of the coronavirus pandemic have helped the trend. In particular, livestreaming has taken off in China as a way to entertain – and sell products.
“We believe short video plays Douyin and Kuaishou, since they entered the Live field, have reshaped China’s Live landscape causing mounting pressure on the existing plays,” Jialong Shi, head of China internet and new media research at Nomura, said in an email last week, referring to the livestreaming sector.
Average daily active users for Bilibili soared 55% over the 12 months through October, the fastest among 11 major app and social media platforms, according to CNBC analysis of data from app developer services company Aurora Mobile.
Douyin saw growth of 38%, while Kuaishou contracted 6.7%, the analysis found. But for the former three leaders of video apps: Tencent Video, iQiyi and Youku, the average number of users dropped by roughly 30%, 22% and 23%, respectively.
In a sign of the times, BBC Studios announced on Oct. 19 a multi-year strategic cooperation with Bilibili for distribution of shows and films from the British media company, as well as co-production of future content.
“Everyone knows that Bilibili is a major video and gaming platform in China. In recent years, they have developed into a very primary documentary platform in China,” Ding Ke, greater China general manager, BBC Studios, said in a phone interview two days after the announcement.
She noted the app’s users are primarily “generation z,” or those born roughly in the mid-to-late 1990s to early 2000s. “We do see this group as one of the driving forces for content consumption in China,” she said.
BBC Studios also has partnerships with other video platforms in China, including one this year extending licensing for the “Sherlock” TV series on Alibaba-backed Youku.
Consumers today are already used to short videos, said Tony Zhao, co-founder and CEO of business-focused video communications platform Agora.io and former chief technology officer of livestreaming platform YY.
Among long-form players, Bilibili was able to make the most significant shift to shorter videos and other popular content, a change which may not be replicable, he said. Zhao added that the major long-form video platforms Youku, iQiyi and Tencent may not necessarily be able to transform themselves in the same way.
Nasdaq-listed Bilibili shares are up more than 140% so far this year; Baidu-owned iQiyi is up about 20%. While iQiyi has maintained a strong line of content production and launched a new mini-series drama format, the company has struggled to monetize at a faster pace – total subscribers rose 4% as of June 30 from a year ago. Both companies are still operating at a loss.
Jerry Liu, head of China Internet at UBS Investment Research, described the Chinese video app landscape as cyclical.
“Sometimes new platforms come out. They’re very successful, they gain a huge following, a lot of momentum, and then for a while the industry becomes very concentrated, dominated by two, three platforms. … Then you have a cycle of disruption,” Liu said in a phone interview last week.
But he expects the current set of disruptors to maintain their hold on the industry, with few rivals in the near future.
Politics are another risk video platforms face in China.
Iqiyi’s hit drama of summer 2018 “Story of Yanxi Palace” was reportedly criticized by state media in the months that followed. Most recently in late September, the drama was reportedly removed from streaming sites with no explanation. Iqiyi declined to comment on the disappearance of the show from its platform.
BBC’s Ding said the company is still working with regulators to distribute “Doctor Who” on Bilibili in China.
To be fair, Bilibili’s growth comes off a far smaller base than many of its larger competitors. The company reported 50.5 million average daily active users in the second quarter, 171.6 million monthly active users, and 12.9 million monthly paying users.
IQiyi reported 104.9 million subscribing members as of June 30, the vast majority of which were paying customers.
Analysts also said many people in China are gradually getting used to paying for content, and subscription-based video content will retain a share in China.
The greater competitor for consumers’ attention in China is ByteDance’s Douyin, which has surged in popularity in just a few years to claim more than 600 million daily active users across its platforms in September. The short-video and livestreaming app is not only an entertainment and information portal, but also an e-commerce channel.
“Douyin has basically become TV,” said Edith Yeung, partner at early stage investor 500 Startups. “(Anecdotally, people are using the app) 8, 9 hours a day because they literally fall asleep with Douyin.”