Bilibili is a video sharing website that combines user-generated content, cartoons (mainly Japanese anime), its own produced content, and game publishing. It is known for its “danmu,” or “bullet comment” feature, which allows users to send comments that scroll across a video in real-time for other users to see.
Starting 10 years ago as a gathering place for the ACGN (anime, cartoons, games and lite novels) community, it has since attempted to move away from that niche in order to reach a broader audience. Recently, it made waves on social media for releasing a promotional video targeting the younger generation titled “The Next Wave.”
This article was originally written by Jinlei Bai and published by Beijing News on 05-04-2020. Partially translated from the Chinese by First Link LLC. Translator’s notes are provided in brackets.
In the early hours of Youth Day, May 4th, 2020, many people saw their WeChat Moments [similar to Facebook’s “wall” feature] inundated with shares of a post titled “The Next Wave: Bilibili’s Address to the Young Generation.” The night before, this video promo from website Bilibili was aired on CCTV 1 primetime news. [“Next wave,” 后浪, comes from a common Chinese expression and is contrasted with “prior wave”, 前浪, referring to the new and old generation, respectively.]
One user commented: “The post-90s and post-2000s kids may be thoroughly underwhelmed by this sensationalist video, but it sure has the generation of the 70s and 80s lamenting the passage of time.” From this perspective, it’s difficult to separate the viral video from Bilibili’s ambitions to expand beyond their niche userbase. Indeed, Bilibili has been continuously moving beyond the ACGN [anime, comics, games and lite novels] label with which they defined themselves at the company’s founding.
At the end of 2020, Bilibili celebrated their 10th anniversary with a special gala. Replete with a World of Warcraft-themed opening dance, Harry Potter orchestra music, and a chorus of army veterans performing the theme song to [historical TV war series] Drawing Sword, the event was widely shared among the younger generation with only partial aid from celebrity influencers.
The gala sent Bilibili viral overnight and brought it to the attention of a wider audience. Naturally, industry insiders regarded it as a calculated move to reach users beyond the site’s typical niche. In addition to the gala, Beijing News previously reported in an exclusive scoop that Bilibili was placing a big bet on livestreaming with plans to invest 1.8 billion RMB. Before that, we also reported on the site beating out competitors Kuaishou, Douyu and Huya for an 800 million RMB, three-year contract to exclusive China broadcasting rights for the League of Legends World Championship.
Below is an article we published in January of 2020 titled, “Bilibili Breaks the Mold, Kuaishou Backs AcFun: Waves in the World of ACGN.”
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Data indicates that Bilibili’s year-end gala drew 80 million simultaneous live viewers. As of today, the video has since garnered an additional 43 million views. Among the trending topics on Weibo and WeChat are “I owe Bilibili a membership” and “Give Bilibili some views.” Even Bilibili’s stock price enjoyed three days of growth thanks to the event.
Though it would seem that one night is about to send the 10-year-old Bilibili skyrocketing towards success, one gala isn’t enough to conceal the internal and external challenges faced by the company. “There aren’t any problems with their overall trajectory, and they have a healthy ecology, but their strategy lacks focus and their management, operational and algorithmic capabilities all lag behind leading internet companies. Their employees also have it easy with a nine-to-five schedule. I may be an active Bilibili user, but I wouldn’t recommend their stock,” said one market analyst.
As another securities analyst put it: “The livestream manager doesn’t understand livestreaming, and after spending 800 million RMB on the World Championship broadcasting rights there will be plenty of blame to go around if they mess it up. They over-rely on game publishing when only a limited number of games are actually suitable for the site. Final Gear, for example, was internally projected to bring in over 100 million RMB, but in reality took in only 20 to 30 million.”
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Inadequate management systems and shortcomings in operational and algorithmic capabilities aren’t the only challenges Bilibili faces. They also have to contend with the revival of AcFun, another ACGN-focused danmu video sharing website. After being purchased by [immensely popular video app] Kuaishou, AcFun’s core senior management and technical teams were replaced. Account systems on the two platforms were linked, and AcFun’s underlying technical architecture was optimized. Last month, the site officially released a new positioning statement that places it in square competition with Bilibili: “a community and gathering place for young, hardcore ACGN culture fans.” The question is, as Bilibili moves to break out of the ACGN niche and with Kuaishou now backing AcFun, is ACGN still a good business to be in?
AcFun and Bilibili: Two “Shoddy Sites” from a Past Era
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Though both ACGN community sites, AcFun and Bilibili couldn’t have developed more differently. AcFun is more focused on their vertical and has always relied on user-generated content. Bilibili, on the other hand, implemented a user registration system and gradually moved from a pure ACGN focus to a community space for Generation Z (those born between 1995-2009). In addition to user-generated content, Bilibili also brought in Japanese anime shows and started producing their own content. While AcFun may have been first to get behind livestreaming and incubated “Shengfangsong,” the precursor to Douyu Livestreaming, they lack other channels of monetization. Bilibili made a promise early on not to use pre-video ads, but they have tried other monetization methods such as performance-based ads, paid memberships, livestreaming and game distribution.
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These are all indirect causes of each site’s commercial success. As revealed in financial data released when COL Digital Publishing invested in AcFun, in 2015 the site took in 3.64 million RMB in operating revenue and sustained net losses of 113 million RMB; in the first 9 months of 2016, it took in 710,000 RMB in revenue with net losses of 146 million RMB. With approximately 36.26 million RMB in assets, AcFun has racked up 148 million in debt. Bilibili’s finances show a different picture. According to their prospectus, net revenue was 131 million in 2015, 523 million in 2016 and 2.468 billion 2017, representing growth of 299% in 2016 and 372% in 2017.
A senior ACGN industry insider told Beijing News that AcFun’s emphasis on “sentiment” and “determination not to take money from its users” leaves it with severely limited opportunities to commercialize. Bilibili, on the other hand, has made use of mobile games, ads, livestreaming and value-added services. “Right now in the ACGN space anime and manga are great for drawing in users, but have limited monetization potential,” said the insider. “Typically, games and livestreaming are where the ROI occurs. AcFun has unprecedented user stickiness, but lacks the follow-up monetization.”
Bilibili’s Breakout: From Independent Niche to Mainstream Appeal…
The majority of Bilibili’s revenue comes from four sectors: mobile games, livestreaming and value-added services, ads and e-commerce, and other. In Q3 of 2019, their respective revenues were 933 million, 453 million, 247 million and 226 million RMB; livestreaming came in second.
Though no data has ever officially been published, [Bilibili CEO] Rui Chen says that their livestreaming has consistently maintained growth of approximately 100%: “Bilibili hasn’t gone after big influencers or invested large capital on competing in the livestreaming space, but our livestream operations are experiencing very healthy growth.”
But are Bilibili’s livestreaming operations really as healthy as Rui Chen says? Many people interviewed for this piece told Beijing News that their livestreaming payment scale, product logic and operational integration leave much to be desired.
One typical example is when they added a new subscription feature. Rather than being developed by the site’s core video team, it was the livestream team that took the lead on development. The reason? The VP of product development was too complacent and the more ambitious livestream manager went straight to Rui Chen to ask for permission to develop this new feature.
According to one senior livestream industry worker, “the logic behind Bilibili’s livestream categories isn’t clear. On the desktop version of the site it’s very difficult for users to find the content they’re looking for, which makes it hard to retain users that have defined goals.” One e-sports tournament operator says that the site has a workforce of “over 5,000 employees with severely overlapping job responsibilities. They’re masters in competing against each other for projects and then passing the buck when anything goes wrong.” After acquiring the League of Legends World Tournament broadcasting rights, one employee even said, “with all the money the company spent on it, whether we execute well or not someone’s going to get blamed for something either way.”
Rui Chen has been taking steps to correct these issues. In 2018, Bilibili began making changes to its vitality curve performance ranking system.
It was pressure to grow their userbase and an over-reliance on gaming revenue that led Bilibili to bet on livestreaming.
Bilibili has always been seen as a gaming company masquerading as a video sharing site. Gaming has accounted for up to 80% of the site’s total revenue for a long time, and even that is largely thanks to one title: Fate/Grand Order. For the three years its been online, this game has singlehandedly propped up Bilibili’s revenue.
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After releasing their Q3 report, Rui Chen told a group of analysts that Bilibili currently has 30 games in the pipeline, 8 of which have already received publication numbers [indicating approval from SAPPRFT, the government agency responsible for regulating video games]. With the fast overall growth of the gaming industry and unmet demand for youth games, Rui Chen is optimistic about Bilibili’s game operations over the next two to three years.
However, it’s hard to ignore the fact that Bilibili has yet to turn a profit. In Q3 of 2019 total revenue was 1.859 billion RMB, representing a year-on-year growth of 72%, but overall sustained net losses of 407 million RMB, a year-on-year increase of 66%. The day after the earnings report came out, Bilibili’s stock fell 7.33% to $15.18 before rebounding to $15.73 by market close that day.
Bilibili is facing a transitional period as they shift from a niche ACGN community to a mainstream site with broad appeal.
On October 1st, 2012, Bilibili implemented a user registration system with an intention to expand beyond its ACGN userbase. They used a test to filter out users whose views did conform with the general tone of the community. Starting in May of 2013, users that wanted to send danmu or leave comments had to first pass a 100-question test to become an official member. As of the first quarter of 2019, there were a total of 49.3 million members on the site. By December of the same year, the retention rate for that group of members was 80%.
The content on Bilibili is well-diversified, but a portion of older users question the site’s choice to abandon its ACGN focus. Someone close to senior management said that Bilibili is targeting lifestyle, which makes up a relatively high ratio of overall revenue without having high costs. Anime and comics, on the other hand, come with royalty fees and provide no income other than increased users.