Bilibili has finally caught a good break. On August 22, after Bilibili released its Q2 and mid-year financial reports for 2024, the author couldn't help but feel this way.

The financial report showed that Bilibili's gross margin improved to 29.9% quarter-on-quarter for eight consecutive quarters, with gross profit up 49% year-on-year and adjusted net loss narrowed by 72% year-on-year in Q2.

Additionally, it's worth noting that Bilibili's advertising revenue performed exceptionally well in Q2, achieving a 30% year-on-year growth and exceeding 2 billion yuan for the first time in a single quarter.

Regarding this performance, Chen Rui, Chairman and CEO of Bilibili, stated during the earnings call that the growth in advertising revenue was based on the expansion of Bilibili's user base and the improvement of its commercial tools. Simply put, it involves both the community ecosystem and infrastructure. In fact, this could be the reason not only for the growth of Bilibili's advertising business but also for the platform's overall stable development.

Bilibili has always stood out among internet platforms for its high-quality content ecosystem, offering a diverse range of content including PUGV (Professionally-Generated Video), advertising, gaming, long-form videos, and live streaming. Compared to platforms with a single content type, Bilibili has multiple legs to stand on. The growth of its advertising business in Q2 is a testament to Bilibili's long-term investment and hard work.

This undoubtedly sends a positive signal: Bilibili is getting closer to achieving its goal of turning profitable in Q3 2024, as mentioned by its management earlier.

01

Unique Content Ecosystem

Observing Bilibili's Q2 financial report, it is remarkable that the platform has maintained strong user engagement despite rapid user growth. In Q2, Bilibili had 102 million daily active users and 336 million monthly active users, with an average daily usage time increasing from 94 minutes in the same period last year to 99 minutes. The average age of users is 25 years old.

These numbers contribute to Bilibili's content and commercial value as a community product and have positively impacted industries like the domestic 3A game Black Myth: Wukong (hereinafter referred to as Black Myth), which has gained immense popularity on Bilibili recently.

In 2020, the first video of Black Myth went viral on Bilibili, reaching the top of the trending list within two hours and surpassing 10 million views within 24 hours. Since then, all its video trailers and exclusive live streams of offline demos have been hosted on Bilibili, attracting many popular UPs to create detailed analysis videos, which fed the highly anticipated Bilibili users.

Source: Bilibili

Data shows that over 2 million people watched the live stream of Black Myth's official launch on Bilibili, even surpassing the peak number of online players on Steam at one point.

The reasons why Bilibili has become an essential venue for the popularity and content development of Black Myth are not hard to understand. On the one hand, ACGN content has always been part of Bilibili's ecosystem, and watching gaming content on Bilibili has become a norm for the younger generation. In Q2, the number of video views in Bilibili's gaming category increased by over 20% year-on-year.

On the other hand, Bilibili's PUGV content ecosystem covers various circles, and its core users overlap significantly with Black Myth's target audience. Bilibili users are generally younger, interested in traditional mythology, knowledge, and gaming live streams. The platform is also home to numerous fan creations based on classic themes like Journey to the West and Romance of the Three Kingdoms, making it easier for related games to reach their core audience.

This logic also applies to the strategic game San Guo: A Plan to Win the World (hereinafter referred to as San Guo), which was exclusively published by Bilibili this year. After its launch, various types of videos, including strategic game guides, hero combinations, resource allocation, and humorous content, emerged on Bilibili and spread across the internet.

It is understood that after the launch of San Guo, it not only consistently ranked among the top two in iOS game downloads, significantly exceeding market expectations, but also generated far more revenue than similar products. It is predicted that San Guo's daily revenue in its first month could reach 30 to 50 million yuan, with total revenue exceeding 1 billion yuan.

It can be predicted that under the influence of Bilibili's content ecosystem, these hit games will not be isolated cases.

02

Advertising Business Shines

Bilibili's advertising business continued to shine in Q2, with advertising revenue increasing by 30% year-on-year to 2.04 billion yuan, accounting for one-third of total revenue, and the number of advertisers increasing by 50% year-on-year.

One of the key supports for Bilibili's advertising revenue is its accelerated commercialization process in recent years, which has profoundly influenced young people's consumer mindset and made its transaction ecosystem increasingly prosperous.

Chen Rui revealed that over 70% of young people in China use Bilibili, and the average age of its users has reached 25, a stage where consumption demand and ability are rapidly growing.

Data shows that video views related to home furnishing, real estate, automobiles, fashion, and beauty increased by 30% year-on-year in Q2, and the number of users engaging in consumption-related activities increased by 70% year-on-year in the first half of the year.

With a fertile transaction environment, it's natural that Bilibili has gained recognition from an increasing number of advertisers.

In the first half of this year, the top five advertiser industries on Bilibili were gaming, e-commerce, digital products and appliances, automobiles, as well as food and beverages. More advertisers from emerging industries are also joining Bilibili, with AI vendors accounting for over 90% of coverage.

A search for "AI" on Bilibili or browsing through a few videos will reveal products from mainstream AI vendors such as Zhipu AI, Doubao, Tiangong AI, and Xingye.

In today's era of stock market, advertisers are more focused on the precision of their ads and prefer to see tangible results. Bilibili's highly engaged users represent a natural advantage that better meets this demand for targeted advertising.

Bilibili is also continuously optimizing its advertising infrastructure to improve delivery and matching efficiency. For example, in March this year, Bilibili launched the "Bihuo Promotion" heating tool on its mobile app, helping UPs and merchants to make autonomous ad placements on mobile devices, thereby enhancing overall delivery efficiency.

While other platforms are scrambling to build closed-loop e-commerce ecosystems, Bilibili adheres to an "open-loop" strategy, partnering not only with Alibaba and JD.com but also expanding its cooperation to include Pinduoduo and Vipshop, providing merchants with more options.

Bilibili may have become the largest source of new customers for e-commerce on the internet. According to data from Bilibili's "Spark Plan" collaboration with Taobao Union, Bilibili contributed over 50% of new customers to all vertical industries, exceeding 70% for industries like maternal and child care and household daily necessities.

Judging from the financial report, Bilibili's early layout has already brought considerable returns. In terms of revenue alone, Bilibili still has considerable room for growth due to its parallel advantages of C-end user payments and B-end advertiser payments. On the C-end, Bilibili generates revenue through content subscriptions (e.g., copyrights, live streaming) and UP-generated PUGV content. On the B-end, Bilibili builds an advertising platform to earn advertising revenue. Future efforts in Bilibili's gaming, membership, and live streaming businesses will undoubtedly tap into even greater commercial potential.

Opportunities are emerging at an unprecedented pace for Bilibili.

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