Bilibili is a Shanghai-based online platform that provides a wide range of entertainment services. These include online games, videos, live broadcasting and e-commerce. A typical user may join Bilibili’s platform initially for its animation, comics and games (ACG) content but may move on to content of other genres, including lifestyle, games and dramas.
Bilibili monetises its user traffic through game publishing (39.5% of 3Q2020 revenue), value-added services (30.4%), online ads (17.3%) and e-commerce (12.8%). Its game-publishing segment publishes and distributes exclusive mobile games as well as the games of third-party developers. Its value-added service segment operates and maintains live broadcasting channels and sells virtual items to users. Its ACG users are mainly Gen Z Chinese consumers born between 1990 and 2009.
Its web traffic comes from China (86.8%), Taiwan (2.8%), the U.S. (2.7%) and Japan (2.6%) (Figure 1). Almost all of its revenue stems from China.
We expect non-gaming growth to continue. COVID-19 had bumped up monthly active users by 54% YoY in 3Q20. More user data allows for better ad-targeting and potentially higher advertising pricing. The number of content creators with more than 10,000 fans had also increased 75% YoY, providing a strong backdrop for growth in its value-added segment.
We have a TECHNICAL BUY rating on Bilibili. Do refer to our recent technical report on Bilibili at https://www.stocksbnb.com/tech-pulse/technical-pulse-bilibili-inc/, dated 16 February 2021.
Figure 1: Bulk of web traffic is from China (85.2%). The rest is from the U.S. (3.3%), Taiwan (3.2%) and Japan (2.7%)
Figure 2: Bilibili monetises its user traffic through game publishing (39.5%), value-added services (30.4%), online ads (17.3%) and e-commerce (12.8%)
Figure 3: Growth of non-gaming segment has accelerated from 1Q19, lifting gross margins
Figure 4: MAUs increased 9.79% in the past 10 quarters, to 197mn in 3Q20. Average monthly paying users (MPUs) also increased, from 3.2% of average MAUs in 1Q18 to 7.6% in 3Q20
Figure 5: Bilibili has higher website traffic engagement than some of its rivals
Figure 6: Operating expenses increased faster than revenue in the past 10 quarters. Investments in sales and marketing and R&D are expected to continue, which may widen losses in the near term