Two hundred days after its initial public offering, Chinese entertainment platform Bilibili has endured a rollercoaster 2018, ultimately ending up as one of China's best-performing stocks. But does the company have enough to sustain long-term growth?
Opening on Nasdaq on March 28 at a valuation of more than three billion U.S. dollars, Bilibili (also known as “B-Zhan” to millions of Chinese fans) is currently more than 30 percent upon its opening price of 11.50 U.S. dollars.
Since the IPO, similar Chinese stocks have tumbled, with Tencent and Netease down 23.2 and 32.3 percent respectively in the past year.
So what's behind Bilibili's strong start on the markets?
Investors appear reassured by the company's focus on staying close to its core post-90s and post-00s generation audience while branching out into documentaries and international cooperation projects.
Bilibili mentioned the phrase “Generation Z” 41 times in its IPO prospectus, underlining how 81.7 percent of its user base was born between 1990 and 2009.
While many companies claim they are courting China's young and increasingly influential consumers, Bilibili says it has the numbers to prove it is the go-to platform for Generation Z.
The company's latest quarterly earnings report, published last week, showed that monthly active users increased by 19 million between 2017 Q3 and 2018 Q3, representing year-on-year growth of 25 percent.
Those 93 million Generation Z users are spending on average 85 minutes per day on Bilibili, and creating more of their own “professional user-generated” (PUG) content on the platform.
The number of monthly PUG content creators has increased 130 percent in the past year, with their videos representing 89 percent of all views according to data for September.
Looking ahead to 2019 and beyond, Bilibili has also established ties with the BBC, NHK, Discovery and National Geographic, reflecting the growing popularity of documentaries among China's Generation Z.
Shows like Masters in the Forbidden City and BBC nature documentaries have found particular success in recent years, leading to Bilibili's cooperation deals with international broadcasters which will see both sides co-producing new content for users.
However, despite 107 percent year-on-year growth in advertising revenue and a huge 292 percent jump in revenue from live broadcasting and other value-added services, Bilibili's financials could be a cause for concern.
While the company boosted its net revenue by 48 percent to 1.079 billion yuan (157.1 million U.S. dollars) in the third quarter, Bilibili's net losses grew by a worrying 1,587 percent to 246 million yuan (35.8 million U.S. dollars), as a result of investments in research and development, and revenue-sharing costs with content publishers.
For long-term growth, Bilibili needs to stay popular with China's post-90s and post-00s generations, a group with huge spending power and potential, but also a reputation for being fickle, unpredictable and quick to change jobs, tastes and trends.
Despite the huge potential, it's almost impossible to say how relevant Bilibili will be to Generation Z (or even the “post-10s” generation) five or 10 years from now.
Bilibili also faces growing competition from established content platforms like Tencent, while iQiyi – a company that also listed in March this year – has had an equally impressive year, with its stock price growing 27.8 percent since its IPO.
One other sticking point is how the bulk of Bilibili's revenue still comes from mobile games (744 million yuan, or 107.2 million U.S. dollars in Q3).