时间:2018年01月12日 15:00:40 中财网
We have concluded all of our meetings at our dbAccess China 2018 conferenceincluding a separate field trip involving various industry experts and companies.Separately, we have written on our takeaways for specific verticals (e.g. ecommerce,OTA); this note summarizes the various impression our team hasgathered through and between various company and non-company specificmeetings.
We plan to host a conference de-brief call this Friday at 10AM EST on Chinainternet. Conference ID: 4992549. Dial-in: 800-309-8606 (US); 020-3107-0289(UK); 800-8700-169 (China); 3011-4522 (Hong Kong); 6622-1010 (Singapore)。Please contact your DB representative for local dial in.
More finger in each other's pies
While not necessarily a new phenomenon, we may continue to see the linesbetween newsfeed, social media, short video, and live streaming blurred ascompanies borrow from each others' business models. The company meetingupdate for Meitu, summarized further below, is emblematic of the blurringbusiness model we heard throughout our conversations in various meetings.While the likes of Kuaishou, Toutiao venturing into live streaming could putsome concern around live streaming names and Tencent's emphasis on socialcommerce may give some pause on whether Weibo's social media presencecould be impacted. That said, we felt most of the incremental effort was placedon trying to create new value proposition, not eat each others' lunch, and createaccess points for lower-tier city consumers or niche demographics.
Our general impression was positive. We hosted several leading consumerlending operators as well as participants involved in the value chain. In general,the new regulations released towards the end of 2017 has disrupted the marketand could impact loan growth in 4Q17, but is paving the way to industryconsolidation and for larger compliant/licensed firms. If we paraphrase onespeaker's comment "now that we know what the government wants, industrycan work around it to do what it hasn't said it doesn't want".
Online video
An independent industry speaker felt that iQiyi offered differentiated valueproposition to content holders as they were incrementally using better big datato measure performance of each content and equitably sharing its revenue with content providers. On the other hand, Tencent (Buy, HKD440) had mentionedthe competition for non-entertainment content, particularly sports, had comedown more reasonably, thus helping make its overall content profitability betterthan before. Tied to overall improvement in content quality and investments, thespeaker noted that they were seeing improving retention on paying subscribers.In 3Q17, their assessment was that 45% of monthly subscribers were returning as3-6 month subscribers and 50% of half year subscribers would return as annualsubscribers and 50% of annual subscribers would return to subscribe for anotheryear. Membership ratio could temporarily dip in 4Q17 as there was no strongcontent but overall trend could continue its upward climb.
User acquisition cost
Broadly speaking, there was a strong desire to continue investing for new useracquisition in tier 3 and 4 cities and we felt user acquisition cost, and in turn overalldigital advertising spend, would go up. Not only was consumption rising in thoseregions but population migration from tier 1~2 cities to 3~4 cities meant therewas need to improve servicing of consumers across broader geographic region.
Meitu (Not covered)
Meitu has 80% female users, and mostly in tier 1-2 tier cities. The company has40-45% iOS users vs industry 20%. Future user base expansion will target at lowertier cities, according management. The company will focus on optimizing Androidapp experience to penetration into lower tier cities. The company views its femalecentric user base as unique value proposition with monetization potential. Thecompany tested 1P e-commerce business in 2017 with skin care and cosmeticsproducts sale. It leverages AI skin detection technology to recommend productsto users. Meitu expects the gross margin of this 1P e-commerce business to growfrom mid single digit in 2017 to 10% in 2018 and 20% in 2019. Reaching operatinglevel break even will require RMB200-300m GMV per month (current at RMB20mGMV per month)。

The company believes advertising should have a lot of room to grow becauseof the expanding scale of the sales team. As of mid of last year, the sales teamhad expanded to 80 (from virtually none a few years ago)。 Ad format would shiftfrom CPT type to in-feed in 2018 with the hiring of a new COO from Weibo.Meitu claimed to be dedicated to creating a more user engagement scenario andcontents to users, such as fashion news, cosmetic product reviews and photosharing. The company is open to collaborations with big internet players, butwon't spend aggressively on traffic.
Meitu also felt Meipai had no direct competition in live streaming and short videoas Meipai focuses on a niche female only audience while other platforms dependon male viewers. The company believes IVAS revenue (advertising, Meipai, ecommerceservice) will surpass smart device in gross profit level in 2018, and willsurpass in sales level in 2019. IVAS revenue contribution has been rising throughthe past year, to 15% for full year 2017.
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