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Because of iQiyi, how much is Baidu worth?

via:博客园     time:2019/3/18 13:03:18     readed:168


Text / Eastland

On March 15, 2019, Baidu and iQiyi released the 2018 financial report.

iQiyi, Tencent Video, Youku Tudou are the three giants of China's online video, and only iQiyi is listed independently.

Tencent's financial report reveals a scale and a half of the claws. Even the income of Tencent's video is unclear. I only know that in 2018, Q2 Tencent Media's advertising revenue was 4.73 billion. The advertising revenue of Tencent Video is included, the proportion is unknown, and the profit and loss are unknown.

Ali has listed Youku Tudou in “Digital Entertainment”. In 2018, the income of this sector was 23.7 billion, with a loss of 15.56 billion. The income and losses were mainly from Youku Tudou, which is unknown.

therefore,The first annual report of iQiyi after its independent listing is “very precious”.

iQiyi: Strategic shift has taken place

In 2015, advertising revenue was 3.4 billion, accounting for 64% of revenue; member service income was 9.7 billion, accounting for 19% of revenue. In 2018, member service revenue reached 10.62 billion (the first time exceeded advertising revenue), accounting for 43% of revenue; advertising revenue has increased to 9.33 billion, and its share in total revenue has dropped to 37%.


In 2018, iQiyi's revenue reached 25 billion, a year-on-year increase of 43.8%. The growth rate dropped slightly from 54.6% in 2017, but the growth rate of various businesses has diverged.

Starting from Q2 in 2018, iQiyi's advertising revenue suddenly “stall”, from Q1's 37% year-on-year to Q2, down 9% year-on-year. At the same time, member service revenue increased by 68% year-on-year, and copyright content distribution increased by 202%.


A reasonable interpretation is that the iQiyi development strategy has undergone major changes.

Practice has proved that the single realization of copyrighted content through advertising is a dead end, a road to death, and Netflix's performance shows that membership service is feasible. In addition, the reason for the surge in content distribution (that is, the sale of copyright) is not the demand, but the peers have always been interested in buying, Iqiyi refused to sell it, and nowadays it doesn't take much.

After changing the strategy, membership services and content distribution became the two engines that drive revenue growth. The former contributes nearly 60% to revenue growth, and the latter also reaches 13% to 28%.


For iQiyi, advertising and membership services are “compared with”, and there are more paid members than advertisements, and the duration of advertisements will decrease. The proportion of paid members in monthly and daily users has increased, and advertising revenue is facing downward pressure. iQiyi should master the pace of development of paying users, and the priority level for increasing per capita payment should be higher than that of Laxin.

It is worth noting that in July 2018, iQiyi wholly acquired Chengdu Tianxiang Interactive & mdash;— a mobile game developer and operator integrating mobile game research and development, mobile game distribution and mobile game operation. In 2018, Q3, Q4, and “Other Income” contributed 25% and 27% to revenue growth, respectively.

In short, iQiyi is trying to find other ways to monetize other than advertising, value-added services, games … … e-commerce is not impossible, it is said that bytedance is pondering this matter.

Iqiyi: The road to burning money turns around?

1) Gross profit margin

In 2017, the odd loss rate of iQiyi was infinitely close to zero, and the gross loss rate in 2018 expanded to 8.6%. In 2018, the gross loss was 2.14 billion, while in 2015~2017, it lost 930 million.


The only determinant of iQiyi's gross profit is the cost of content, and the video giants are hot and cold.

2) Content cost

From 2015 to 2018, iQiyi's content costs were 3.69 billion, 7.54 billion, 12.62 billion and 21.1 billion, respectively. In three years, revenue increased by 370% and content costs increased by 471%.


Video website content cost mainly comes from intangible assets —— amortization of copyrighted content, that is, the outsourced or homemade copyrighted content is first recorded as intangible assets at cost, and then amortized according to certain rules.

Taking 2017 as an example, the amount of purchased and self-made products was amortized by 7.49 billion and 810 million respectively. If you use “Linear Amortization”, Iqiyi’s current copyright cost can be reduced by about 30%. LeTV is doing this.

Iqiyi and Youku potatoes should be cautious about the amortization of copyright.

Taking the cost of content as a numerator, adding the income of advertising, membership services, content distribution, etc. as the denominator, the value obtained has a large amount of “sudden sky”. In 2018, Q2, the content cost is 83% of the relevant income, and the value of Q4 becomes 110%.


The cost of content has risen steadily, market expenses and R&D expenses have remained high. Iqiyi’s operating losses have “rises”. It’s amazing: in 2018, Q1 lost 1.06 billion, Q4 lost 3.32 billion, and the loss rate reached 47%. In 2018, iQiyi operated a loss of 8.31 billion, equivalent to 33% of revenue. #收入三块亏四块钱#


Today, Internet users are inseparable from online video.The loss of the video site is not at the end.Quality long video has become a social benefit, but BAT has the ability to provide it.

Although there is no public data, it is generally believed that the content cost of Tencent Video and Youku Tudou in 2018 will be around 30 billion. Despite a net loss of 9.06 billion in 2018, iQiyi is the least lost of the video giants.

The good news is that content costs are expected to drop significantly. In 2018, the government's relevant departments attacked and cooperated with video websites and media companies, and the phenomenon of sky-high pay was initially contained.

In addition, with the improvement of the self-made ability of video websites, the success rate of pushing new people under the help of big data is getting higher and higher.“The intern who manages to eat and manage” is not necessarily worse than the 150 million paid game. The situation in which the whole industry is working for several plays will change.

iQiyi & ldquo; merits & rdquo;

1) Improve online marketing services

In 2018, Baidu Core (Baidu Core) recorded large revenues of 78.3 billion and iQiyi advertising revenue of 9.93 billion. In 2017 and 2018, the ratio of iQiyi advertising revenue to large search revenue was 12.1% and 11.9%, respectively, with little change.


Adding two business revenues is 5.69 billion higher than “online marketing revenue”, which is equivalent to 61% of iQiYi advertising revenue. In 2016 and 2017, the proportions were 10.5% and 33% respectively.

If only because of the strong ability of the customer, and transfer some of the ads to iQiyi (formally expressed as the purchase of advertising services to Aiqiyi), then the proportion of such income in the advertising revenue of iQiyi should be It is reasonable to decline year by year.

Search engines are the most important form of internet marketing, but advertisers have other needs. iQiyi has taken over this demand (network video is more suitable for brand advertising), and has improved Baidu's online marketing service capabilities. It can also be said that the short board has been completed. Tencent's efforts to develop social advertising are shortcomings to supplement its own performance advertising.

Among the Internet advertising giants, only Baidu and Tencent are the only ones for brand advertising and performance advertising. On the effect of advertising Baidu has no rivals, iQiyi rushed out to compete for brand advertising, coupled with the rapid rise of streaming media advertising, Baidu online sales in the dominance of the field is difficult to shake.

2) Member services don't open up

If the brand advertisement of iQiyi is the icing on the cake, then the membership service can be said to be open to the world. From 2015 to 2018, the number of registered members of iQiyi was 10.7 million, 30.2 million, 50.8 million and 87.4 million, of which 98% were paid members.

In 2018, iQiyi's membership service revenue was 10.6 billion, plus revenues from content distribution and game operations totaled 15.7 billion, accounting for 15.3% of Baidu's total revenue.


On February 23, 2019, Tiger sniffed "Baidu changed the sky" article that Baidu used to grow under the ceiling of Internet online marketing. In a total of less than 300 billion "large market", Baidu won 80 billion, further The imagination of growth is limited, which is an important reason for the valuation.

Emerging businesses such as membership services, cloud computing, and unmanned driving will make Baidu's years under the “Internet online marketing” rdquo; ceiling. In this process, iQiyi took the lead.

3) Baidu's core business is reasonably valued at US$80 billion

About 95% of Baidu's core business (Baidu Core) comes from online marketing, namely Baidu Dasou. Revenues from 2015 to 2018 were 61.2 billion, 59.5 billion, 67.7 billion, and 78.3 billion, respectively.

In 2018, Baidu's gross profit was 52.9 billion, with a total cost of 29.1 billion. Operating profit was 23.8 billion (up 20.5% from 2017) and operating margin was 30%.


Baidu's core business is in a stable development, belonging to "slow cow", and with the help of iQiyi, it is stable and "the first share of Internet marketing". In 2018, Baidu's online marketing (ie Internet advertising) revenue was 87.6 billion (there is no need to eliminate internal transactions), accounting for 25% of the Internet advertising market.

As early as 2015, how much does Tiger sniff? "Proposed a valuation method for Baidu's segment, which is to separately value each business, and then add up. However, the capital market has always only looked at the core business of Baidu. From O2O to Baidu map, unmanned driving and cloud computing, it is a cloud in the eyes of investors.

Baidu's core business is valued at US$60 billion to US$100 billion (the market value in March 2018 is close to US$100 billion, based on the closing price on March 15, 2019, with a market capitalization of US$59.6 billion). Confidence with Baidu in the broader market and capital markets. Fluctuations fluctuate and fluctuate, but as long as Baidu’s position in China’s Internet advertising is unwavering, its core business is worth $80 billion. This value is not what several investors have come up with, but the median performance of the Baidu market in recent years.

Iqiyi membership service, driverless, cloud computing, large and small unicorns will sooner or later get capital market recognition, saying that their current value of 20 billion US dollars is not an exaggeration. # Actually, the market value of iQiyi has already reached 20 billion US dollars#

According to the idea of ​​segment valuation, Baidu's valuation of 100 billion US dollars is relatively fair.

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