Chinese streaming service iQiyi last week filed a registration statement setting out plans to raise $1.5 billion from an IPO in the US. The company, funded by both advertising and subscription, was launched by main owner Baidu in 2010.
Quoting iResearch, the company says for the three months ended 31 December, it had 'approximately 421.3 million average mobile monthly active users (MAUs) and approximately 126.0 million average mobile daily active users (DAUs), while our average PC MAUs and average PC DAUs reached 424.1 million and 53.7 million, respectively'.
In December 2017, iQiyi users watched a total of 9.2 billion hours of videos on the platform, and spent an average of 1.7 hours per day per user watching video content on its mobile apps.
IQiyi will be the first online video company in China to go public as a separate entity from its parent company. The video streaming company has been unprofitable since launch, due to high content costs. iQiyi reported that it made a 3.7 billion yuan ($574 million) loss in 2017.
IQiyi’s advertising revenue growth slowed from 66.2% in 2016 to 44.4% in 2017. The share of advertising as part of total revenues dropped from 63.9% in 2015 to 46.9% in 2017. However, we believe online advertising will remain core to iQiyi’s monetisation model in the light of prospects for video advertising growth in China.
IQiyi’s membership revenue boomed in 2016 when it grew 277.5%, outpacing online advertising revenue growth. Membership revenue jumped from 18.7% as a share of total revenue in 2015 to 33.5% in 2016, and then 37.6% in 2017.
This rapid growth in subscription revenue has been driven by improvements in content quality, with more original production, more affordable monthly fees and better user experience with the paid-for version. The availability of improved online payment systems such as Alipay and WeChat pay has also reduced the friction involved in getting consumers to pay.
Content costs increased by 67.3% from 7,541.0 million yuan in 2016 to 12,616.9 million yuan in 2017. The company said the increase was primarily due to the increased purchase of third-party professionally-produced or partner-generated content, as well as a 429.4 million yuan increase in original production. Bandwidth costs were 2,190.2 million yuan in 2017, up 16.8% on the year before.