The viability and profitability of Bilibili's still-evolving live-streaming model remain uncertain.
By SHE Xiaochen
On May 1, LexBurner, an anime and gaming content creator with more than 8 million followers on the Chinese video-sharing website Bilibili, finished his first live stream after he officially signed an exclusive deal with Bilibili as a live streamer. At one point that night, his viewership reached 16 million. The hugely popular event also marked a milestone for Bilibili, which has amassed 172 million monthly active users by Q1 2020.
The website, once a haven for the “Anime, Comic and Games” subculture, is boldly making its way into a wider array of content and revenue streams, pivoting heavily towards live streaming. Since late 2019, it has acquired an exclusive live-streaming deal with the League of Legends World Championships in China, signed top live streamers and influencers, and built an internal workforce solely focused on its live streaming business. Although it has been trying to distinguish itself from other video streaming juggernauts by diversifying its content, the viability and profitability of its still-evolving live-streaming model remain uncertain.
Despite its early days as a platform dominated by uploaded content, live streaming is not entirely new for Bilibili or its star influencers. The recent shift of focus is mostly to align its existing resources in uploaded content, e-commerce, and advertising to better create synergy with the booming media form of live streaming.
On Bilibili’s home page, direct links to relevant accounts’ live stream channels are placed right next to search results and “trending” lists. When viewers tune in to a live stream session, they can click the embedded links to the live streamer’s e-commerce page and make purchases. During the live stream sessions of a 1.4-million follower account featuring electronic product reviews, for example, viewers can place orders for its merchandise items such as computer mouse pads.
The value of live streaming is not limited to selling merchandise. For smaller influencers, live streaming has proved effective in building a massive following and increasing fan engagements. A novice live streamer told Jiemian News that she has been gaining an average of 1500 new followers in each live session recently. Although the increased following hasn’t yet translated to cash income, going live is “still a valuable opportunity” to interact with fans and retain them.
Unlike other live streaming platforms, on Bilibili, the boundary between uploaded content and live streaming is fluid. Content creators, whose uploaded videos generate over 90 percent of the website’s total viewership, can easily leverage their existing fan base and become popular live streamers. This, in fact, has become a tried-and-true model for Bilibili and its personalities. After all, with its more than a million active content creators, the website has a huge reservoir of talent to tap into. One personality called “Hardcore Demigod” (Yinghe de Banfoxianren), for example, who first made a name with his popular business-themed videos, topped Bilibili’s “Most Watched” list shortly after launching a live streaming channel.
With such successful precedents, Bilibili now tries to nudge fledgling influencers onto the “creator to live streamer” path. A novice live streamer told Jiemian News that Bilibili suggested that she “also keep up with content upload” to build a fan base, like many other star live streamers have done before.
For Bilibili, which has long had a small and relatively inactive live streaming business, the recent heavy investment in live streaming has demonstrated its strategic emphasis on user growth, which, in its Q4 2019 earnings release, was announced as the company’s “top priority for 2020 and 2021.”
Since then, Bilibili has been making huge strides. Its monthly active users increased 70 percent year-over-year by the end of Q1 2020, partly thanks to a widely-praised New Year’s gala and a viral “Youth Day” video celebrating China’s Gen Z. Still, there is a long way to the ambitious goal set for 2021 which is 220 million active users.
Live streaming is seen as a fast track to explosive growth. One big change this year is to bring in influencer networks in large numbers, whose content production capacity and roster of live streamers would significantly expand Bilibili’s user base. “There were very few talent agencies like us who partnered with Bilibili before this year,” Mr. Li, a talent agent who has worked with Bilibili, told Jiemian News. Another agent, who had mainly been on Douyin, a Chinese version of TikTok, before signing with Bilibili recently, said that they were “still at a trial and error stage on this new platform.”
Great hope was also placed on game streaming, which, by industry consensus, is a powerful web traffic generator but underwhelming in its profitability. Data from other leading live streaming platforms show that gaming brings in only about half of the revenue per user as other genres, such as fashion. Despite this, Bilibili has gone “all-out” on gaming. It paid an astronomical US$113 million (803 million yuan)for its League of Legend deal, and it has staffed its new live-streaming team with executives from other top gaming platforms.
Bilibili has so far failed to achieve profitability, and in its search for it may potentially get an income boost from an expanded live streaming business in addition to growing its user base. Its highly interactive nature and long watch time would, as industry experts believe, make users more willing to pay for content. In fact, live streaming has scored nearly 100 percent revenue growth in the past two quarters, and by Q4 2019, it already accounted for about a third of Bilibili’s total income. To keep up the momentum, Bilibili has been actively promoting paid content and services. For example, live streamers can only be featured on Bilibili’s “recommended” list after adding paid content in their channels. With these measures, a substantial number of active users have been converted to paying customers. By Q1 2020, the website already has 13.4 million paying users. That’s more than double the number the year before.
Another important source of revenue comes from corporate clients. During the coronavirus pandemic, large corporations including McDonald’s and Xiaomi have released new products virtually through Bilibili live streaming service, which, in response, rolled out a “Product Conference Solution” tailored to the needs of corporate clients, who, in the first quarter, contributed 210 million yuan in advertising income, a 90 percent increase year over year.
In spite of its promising early growth, live streaming’s path to profitability may still be rough. This is partly due to Bilibili’s heavy content focus on gaming, which, in the live streaming world, has always been the underdog in terms of scale and revenue. Although Bilibili has been actively soliciting multi-channel networks specializing in more profitable genres such as fashion, the partnership may be a rocky one. “It takes time to get used to Bilibili’s style and operation, which is very different from their older platforms,” an industry insider said.
A bigger challenge lies in its user demographics. More than 40 percent of Bilibili’s users are under 24. And the average age of the new users acquired in Q1 2020 is only 20. More than half of them live in China’s third-tier and even smaller cities. Their spending power for paid content, especially on live streaming, still remains untested.
This is a particularly serious concern for Bilibili. Unlike other platforms where users spend lavishly on cash gifts to live streamers, there has never been a tradition among Bilibili users to pay for anything. Top live streamers can bring in 50,000 yuan a day in cash gifts on Bilibili, only a small fraction of what their peers on other platforms make, which can be as much as 900,000 yuan a day. “Bilibili’s strategy is to make users happy so that over time, they feel like spending money on their favorite personalities,” Mr. Li said. “This may put off some of the new live streamers, who are used to being showered with gifts on other platforms.”
Bilibili has signaled its ambition in live streaming. But in an arena already crowded with giant platforms like Douyu and Huya, whose active users already far exceed Bilibili’s, it may be fighting an uphill battle. They are not the only competition Bilibili’s faces. Short-video websites such as Douyin and Kuaishou, each with more than 300 million daily active users and abundant business resources, also threaten to cannibalize Bilibili’s market.
Bilibili doesn’t have much time to figure it all out. The company lost 539 million yuan in the first quarter despite its rapid growth. So far, the capital market still has faith in Bilibili’s young user base, who they hope will spend money on the website for decades to come, but investors also need reassurance that Bilibili is not just a bottomless money pit. Live streaming, which Bilibili has placed so much hope on, will have a rocky path to profitability.
