On the 14th of this month, the live streaming platform Douyu released its second-quarter financial report. Faced with "the data that looks pretty good", it emphasized to the outside world that "it has achieved profitability for two consecutive quarters", and said that "the income structure of Douyu continues to grow." Optimization", "Betta's profitability has improved", "Betta's steady growth is expected", "Supervision has improved its content review capabilities".
Earnings are reported, which is a good thing. At the same time, this is another embarrassing thing. You must know that Douyu was founded in 2013, and it has been ten years since then.
Internet companies have an obvious development law: in the early stage, they trade losses for scale, complete market harvest, and then trade scale for profits. The early stage of Douyu obviously conformed to this rule, but in the later stage, it has not been transferred to the market harvesting stage, and profitability has become a problem.
From the beginning of its establishment to the present, including Station B, Douyin, Huya, etc., Douyu has more and more competitors, occupying its original space and track. If Douyu wants to dig deep into its moat, it must find another way.
With the entry of regulation, the market is generally pessimistic about Douyu, but time has proved that market expectations are not always accurate. Obviously, regulation has little effect on Douyu’s provocative dancing and side-stepping, which has largely contributed to Douyu’s continuous profitability in the past two quarters.
01｜Double worries
A few days ago, Douyu (NASDAQ:DOYU) released a mixed financial report for the second quarter of 2023.
Fortunately, this is Douyu’s consecutive quarterly profit. The financial report shows that in the second quarter of 2023, Douyu’s adjusted net profit will be 61.4 million yuan (about 8.5 million US dollars). In the last quarter, Douyu had an adjusted net profit of 25.8 million yuan, compared with a net loss of 52.5 million yuan in the same period in 2022.
But this profit is also hidden, the fundamental reason is to reduce costs.
Chen Shaojie, founder and CEO of Douyu, explained, “In the second quarter, Douyu strengthened its in-depth and mutually beneficial cooperation with game manufacturers on the one hand, and on the other hand reduced the marketing investment in promotion and customer acquisition. The upgrade of activities and revenue products has maintained the stability of the core high-quality users of the platform.”
The data shows that in 2023Q2 Douyu’s revenue share and content cost dropped from 1.3147 billion yuan in the same period last year to 981.3 million yuan, a year-on-year decrease of 25.4%; 167.5 million yuan fell to 87 million yuan, a year-on-year decrease of 48%; management expenses decreased by 48.2% year-on-year, and the two were almost cut in half. Research and development expenses decreased by 30.2% year-on-year.
However, while saving these expenses brings profit margins, it also brings difficulties in revenue and user growth. These are also the two major concerns hidden in Douyu’s financial report for the second quarter of 2023.
Worry 1: Douyu’s revenue is still on the decline. In the past three years, Douyu's quarterly revenue has shown a downward trend, and it has shown an obvious step-wise decline. Among them, Douyu’s quarterly revenue will remain at 2.3 and 2.4 billion yuan in 2021, and will remain at 1.7 and 1.8 billion yuan in 2022. By 2023, the quarterly revenue will be 1.483 billion yuan and 1.392 billion yuan respectively.
Worry 2, the number of Douyu users is also on the decline. Data show that in the past three years, Douyu’s average mobile monthly active users have dropped from 60.7 million in 2021Q2 to 50.3 million in 2023Q2, and the average number of quarterly paying users has dropped from 7.2 million in 2021Q2 to 4 million in 2023Q2.
For an Internet company, it goes without saying how fatal the decline in revenue and user numbers is. In the Internet industry, which is extremely focused on economies of scale, the profit margin depends on the revenue and the number of users. When the revenue and the number of users decline, even the profit is small and unsustainable.
02｜Weak content
Game live broadcasting is still hot. Statistics show that from 2019 to 2022, the scale of China’s game live broadcasting market will increase year by year. In 2021, the market size will be 94.8 billion yuan, a year-on-year increase of 11.8%. In 2022, it is expected to be 110.8 billion yuan. But Douyu is weakening, and Tencent alone has competitors such as Huya, Bilibili, and Kuaishou.
Such weakness is not only in terms of performance, but also in terms of content. In other words, the root cause of Douyu’s weak performance lies in the weak content.
One, Douyu's good content is disappearing.
With the rise of platforms such as Douyin, Kuaishou, and Bilibili, the anchors of Douyu have been lost. Feng Timo, the former "first sister of Douyu", Xu Xubaobao, a popular anchor of Douyu, announced the first broadcast on Douyin one after another; performance The decline in users and users has made Douyu more cautious in the copyright competition. It did not appear in the copyright competition of the head e-sports event for a year.
Second, the content of Douyu is facing a dilemma of compliance.
In recent years, the state has strengthened the supervision of live broadcasting. Since the release of the "Guiding Opinions on Strengthening the Standardized Management of Online Live Broadcasting" in 2022, game live broadcasting has entered an era of strong supervision, and stricter requirements have been put forward in terms of minors, rewards, and content compliance.
But Douyu is still walking on the edge. At the beginning of this year, the dance area opened by Douyu was repeatedly reported by the media as "related to pornography" and "soft pornography". On May 8, the State Internet Information Office instructed the Internet Information Office of Hubei Province to send a working group to the Douyu platform to carry out a one-month centralized rectification supervision.
In the financial report meeting for the second quarter of 2023, Douyu introduced the follow-up of the rectification supervision. Douyu said that in the second quarter, it completed the optimization of the platform’s content management and review mechanism, added and refined more than 30 review standards, and improved its technical capabilities such as content monitoring and filtering.
This is not the first time Douyu has received attention for content compliance. Tianyancha information shows that from 2019 to 2022, Wuhan Municipal Bureau of Culture and Tourism and other relevant departments imposed administrative penalties on Douyu four times for violations such as vulgar performances, with a total fine of 85,000 yuan.
Rectification, punishment, and then rectification and punishment seem to have become the norm for Douyu. It has only been a quarter since the last rectification inspection, and Douyu seems to be going back to its old ways. In the late nights of the past few days after the release of Douyu's second-quarter financial report, the live broadcast of its dance area is still exposed, and the dance scale is extremely large.
Screenshots of Douyu’s live dance room on August 16th and 17th
Facing the front and rear attacks of competitors, and the continuous decline in performance and user numbers, Douyu seems to be in a hurry. However, in the live broadcast industry, there is a bottom line that cannot be touched no matter how urgent it is, that is content compliance and supervision. Previously, Douyu was removed from the shelves by the regulatory authorities twice due to compliance issues, so it should understand the importance of compliance management.
Short-term profit or long-term development, for Douyu, this is not a multiple-choice question, but a "life-and-death issue" related to the survival of the enterprise. There were Huya and Bilibili, which are also from Tencent, and Douyin and Kuaishou later. There is not much time left for Douyu to make the right choice in the market.