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Video-streaming platform turned mobile-gaming operator Bilibili sets sights on $400million IPO

March 06, 2018

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Bilibili sets sights on $400 million IPO

According to a prospectus filed on 2 March, Bilibili, the online entertainment platform covering video, live broadcasting and mobile games, plans to list on the New York Stock Exchange. Bilibili business was initially centered on the Anime, Comic and Games (ACG) industry and has developed into a comprehensive content platform. ACG content has become very popular in China and is influenced by Japanese anime and video games. 

Our analysis

Bilibili started out as a video-streaming platform that went on to establish a large userbase interested in ACG content, and then moved into aggressive monetization through a variety of approaches: film production, membership subscription as well as involvement in sponsorship of sports championships, i.e. the Chinese Basketball Association. However, only its game operation has brought a scalable revenue stream and contributed to its IPO progress. In 2017, revenue from mobile games accounted for 83.4% of its total revenue compared to the rest from live broadcasting and advertising. The prospectus indicates that the platform has average MAUs of 67 million and generated revenue of $379.3 million in 2017.

Mobile games are key to Bilibili's recent performance but sustaining this performance will be a challenge

Among the eight exclusively distributed mobile games and 63 games under joint operation, Fate/Grand Order was the driver for revenue growth in 2017. The game is a turn-based fantasy strategy game with PVP or PVE battles adapted from the original Fate PC game. Its adapted anime series has achieved great popularity in China. As such, the game’s potential players are in line with Bilibili’s existing user base resulting in a cheap and effective network marketing effect through its platform. Also the game implements loot boxes to encourage in-game spending.

However, relying simply on mobile games operation might pose a challenge for the portal, in terms of maintaining stable revenue growth. While mobile games are the high growth sector of the China games market, IHS Markit expects competition from established publishers to become increasingly fierce. Major players such as Tencent and NetEase are well positioned to acquire well-known anime IP for games development, as well as utilize their very dominant positions for distribution of content.

Realizing the potential growth of the ACG industry in China, a large number of companies have rushed into the market including big publishers such as Tencent, Kalends and NetEase, and mid-tier distributors such as eWan, 7659, and JPAPP Game. ACG video sharing site AcFun, which is partially owned by Alibaba’s Youku, announced the closing of its operations recently suggesting the difficulties of maintaining a position in this fast moving market. We predict that this competitive climate will result in Bilibili finding user retention to be a challenge.

Advertising remains an important revenue stream and is growing strongly

As Bilibili has concentrated its business on mobile games, advertising share of the company’s total revenues has dropped. Share of advertising of total revenues dropped from 14.4% in 2015 to 11.6% in 2016 and then 6.4% in 2017, however Bilibili reported rapid advertising growth of 220.9% in 2016 and 162.1% in 2017. In the long run, IHS Markit expects Bilibili to gear up its advertising capability in order to contribute more to growth. Bilibili generates advertising revenue from targeted displays and in-programme advertising.

Besides the well-defined young user base, the demographic data it collects from its users is attractive to advertisers. By utilizing the growing user traffic and data generated on the platform, Bilibili is expected to further its ad monetisation potential by increasing the frequency of targeted in-programme ads.


Research by Market
Media & Advertising
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