YY Live Broadcast $3.6 Billion "Selling Oneself" Baidu: What Is Left Of Huanju Group?

YY has always been a synonym for the era of happy gathering. Until the end of 2019, the name of happy gathering era was changed to "joy gathering group", and its English name was changed from "YY Inc." to "joy Inc.".

Li Xueling, chairman and CEO of huanju group, said at the time, "the renaming represents an important milestone for the company, and also reflects the company's continuous transformation towards becoming a leading global video social media platform."

"Global video social media platform" is the new goal of huanju group. In this context, joy group's rich products, with 12 years of development history, has also completed its mission.

On November 17, huanju Group signed a final agreement with Baidu. Baidu will purchase YY live broadcast of huanju with cash of about $3.6 billion, including but not limited to YY mobile app, yy.com website and YY PC. the transaction is expected to be completed in the first half of 2021.

In fact, after the acquisition of bigo in the first half of 2019, huanju group's overseas product matrix has been formed. With huanju group's Huya and YY products respectively handed over to Tencent and baidu this year, huanju's domestic business has little left.

In response, Li Xueling said in the financial report teleconference that huanju group is not giving up the Chinese market, but implementing a long-term strategy, that is, "focusing on China's advantages and doing global development.". In its view, China has many advantages in technology, business model and industry, which can also gain advantages in other fields of the world. What huanju group needs to do next is to bring China's advantages to the world.

According to its disclosure, last year, huanju group has made exploration in the field of e-commerce. In fact, in June this year, huanju Group invested US $100 million to lead the c-round financing of "same journey life" of community fresh e-commerce. At that time, it was also considered that huanju group intended to cross-border into the lively community e-commerce.

Li Xueling said that investing in e-commerce in China does not mean that he wants to do e-commerce in China, but expresses his concern for the operation mode and business status of e-commerce. From the perspective of huanju group, China's products will be brought to the world in the future. As for what form huanju group will do e-commerce, Li Xueling did not disclose too much, which is also a suspense left to the outside world.

All in overseas market

In March 2019, huanju group announced its wholly-owned acquisition of overseas video social platform bigo. In the transaction, huanju group purchased the remaining 68.3% shares of bigo for about US $1.45 billion, including US $343 million in cash, and about 38.32 million shares of YY's class B common shares and about 313 million shares of YY's class a common shares.

Prior to the deal, huanju group had held about 31.7% of bigo's shares and was its largest shareholder. In June 2018, huanju Group invested $272 million to participate in the d-round financing of bigo.

Bigo is a company established in Singapore in 2014. Its main goal after its establishment is to globalize around overseas strategy. Li Xueling once said with emotion that "we have finally won the important bridgehead of globalization" for the inclusion of bigo.

The joining of bigo will bring immediate effect to the change of huanju group. According to the Q1 financial report in 2019, huanju group's global mobile terminal has a monthly life of more than 400 million, of which more than 77.5% come from overseas. At the same time, the product ecology of huanju group has become more diversified from the original single live broadcasting field.

With the help of bigo, the product ecology of huanju group has increased video communication and short video services, and brought nearly 300 million monthly live users, including 210 million monthly live users from IMO, and nearly 78.7 million monthly live short videos from bigo live and like (later renamed like).

According to the Q3 financial report of 2020 just released, the revenue of huanju group increased by 36.1% to 6.286 billion yuan year-on-year, mainly due to the continuous growth of bigo users and global business expansion. Under non US GAAP, the net profit attributable to huanju group increased by 64.0% to 809 million yuan.

However, in terms of user data, due to the blocking of some Chinese applications by the Indian government, which also involves three applications of bigo live, like and Hago under huanju group, the overall user data of huanju group declined during the reporting period.

On user data, Li Xueling said that despite the short-term negative impact of the Indian market, the size of users remained stable compared with last year due to our rapid growth in other regions. Among them, bigo live continued to maintain a strong growth trend in this quarter, and its business regions were further decentralized, with the revenue growth rate of 270% and 231% in Europe and the eastern Pacific region respectively.

In the conference call, Li Xueling told reporters that in overseas markets, bigo live has always maintained a state of double growth of users and income, and its development is very healthy. At present, likee is still dominated by user growth, but in the future, it will further increase commercial realization.

As for the overseas short video business, Li Xueling said that huanju group will continue to compete, but at present, the smarter way is to watch the situation change and wait for the opportunity, on the other hand, let the business development return to balance.

When asked about the division of data departments after the sale of YY, Li Xueling stressed that after the acquisition of bigo, the data of huanju group's overseas business and China business were completely separated.

The house of reunion and the gain of Baidu

In fact, Li Xueling began to lay out her plans for the exploration of globalization. However, today, both in terms of user size and revenue, huanju group's overseas business has begun to take shape, which also gives it the courage to "all in" overseas.

But at the same time, why should we abandon YY at home? This may be closely related to YY's current development bottleneck. According to Q3 financial report, YY's monthly live users were 41.3 million, a year-on-year increase of 3.4% and a month on month increase of only 100000. So YY has met the ceiling in terms of user scale.

What's more, YY's total number of paying customers fell 4.7% to 4.1 million, compared with 4.1 million users in the last quarter. In terms of revenue, huanju group disclosed in Q2 that bigo's live broadcasting revenue accounted for more than half of the group's live broadcasting revenue for the first time. At that time, bigo contributed 2.95 billion yuan of live broadcasting revenue and YY's of 2.657 billion yuan.

In Q3, the live broadcast revenue of huanju group increased by 40.1% to 6.049.1 billion yuan, which was mainly due to the continuous growth of bigo's live broadcasting revenue, which had little to do with YY.

As for the decrease in the number of paying users, huanju group said that it was affected by the epidemic, which is consistent with Momo, whose main business is also live broadcast for the show. In the first quarter of this year, Momo's monthly live and paid users both showed negative growth, and Momo gave the reason that was also caused by the epidemic.

However, it is interesting to note that douyu and Huya, which mainly play live games, are also affected by the epidemic this year, but they have brought about the growth of active users and paid users. Therefore, regardless of individual platforms, the user stickiness of game live broadcasting may be stronger than that of show live broadcasting. Under the impact of epidemic situation and short video platforms such as shaking tone and quick hand, the ceiling of live game broadcasting has already appeared.

Therefore, the sale of YY at this time can be regarded as a cash opportunity for huanju group. As of September 30, huanju group had cash and cash equivalents, restricted cash and cash equivalents, restricted short-term deposits and short-term investments totaling 24.468 billion yuan (US $3.604 billion), equivalent to half of the company's market value. In addition, YY will have enough cash for its overseas market development.

However, the joy gathering group does not want YY, baidu but spend a lot of money to take a bid, is Baidu another failed investment? First of all, the live broadcast business of Baidu will not be reached this year.

Later, the development of tentacle live broadcasting encountered problems, and eventually became another fallen live broadcasting platform. It was also reported that Baidu intended to take over the dish, but it was not settled in the end. The YY acquired by baidu this time is a mature product with a large market share. After the acquisition, YY's entire team including content and technology will be assigned to Baidu, which is undoubtedly an important complement to Baidu's development of mobile ecological platform.

In addition, Li Xueling also said that the wholly-owned acquisition of Baidu will enable YY live to achieve business growth in a larger ecosystem and release greater value.

In fact, this is not a polite word. As mentioned above, YY's current development bottleneck is essentially that active users and paying users encounter the ceiling, while Baidu's ecosystem itself is a huge flow pool, and in terms of flow realization, Baidu's resources are more abundant than huanju group. Therefore, it is worth looking forward to whether YY can achieve another outbreak under the embrace of Baidu.

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