Bilibili's advertising revenue soars as e-commerce giants engage in price wars, platform earns money not by selling products itself

According to Bilibili's second-quarter report, its advertising revenue reached 2 billion yuan, a year-on-year increase of 30%. To compete in price wars, Alibaba and JD.com spent an additional 6.5 billion yuan on advertising and buying traffic compared to the same period last year.

Traffic is the starting point for e-commerce platform revenue. Since Douyin and Kuaishou cut off external links in 2020, Bilibili has become one of the few options for Alibaba and JD.com to search for traffic externally.

As consumer expectations decrease and spending becomes more cautious, platforms have to adopt a series of strategies to attract and retain users, such as introducing service innovations like "refund only," "mandatory shipping insurance," and "free shipping for member returns," and urgently seeking high-value users. During this year's 618 shopping festival, more than half of the buyers directed to Taobao through Bilibili were new customers.

Bilibili not only earns advertising fees through this method but also takes the opportunity to cultivate users' consumption habits and lay the foundation for its self-operated e-commerce platform "Member Purchase." In addition to common splash screen ads and product links, Bilibili has also set up a special area for Tmall within its app to showcase products that may interest users.

In terms of e-commerce, Bilibili has been consistently increasing its efforts.

From Bilibili's 618 report, we can see significant progress in its e-commerce business. During this year's 618 period, Bilibili's GMV (Gross Merchandise Volume) for goods sales increased by 146% year-on-year, and the number of product promotion videos increased by 359% year-on-year. Notably, Bilibili brought in a proportion of new customers as high as 50%-80% for consumer brands such as mother and baby products, pets, food, and beverages, indicating that Bilibili has huge potential in tapping into users' consumption power.

In exploring its e-commerce business, Bilibili initially tried the traditional "people-goods-place" model, starting its e-commerce journey by selling peripheral products that align with user preferences, but the results were not ideal. Subsequently, Bilibili shifted to implementing an "open-loop" e-commerce strategy, collaborating with leading e-commerce platforms such as Taobao and JD.com to compensate for its shortcomings in product variety, supply chain, and user shopping habits, directing traffic to these mature e-commerce platforms.

In addition to partnering with Pinduoduo, Bilibili has also collaborated with e-commerce platforms such as Taobao and JD.com. During last year's Double 11 shopping festival, Bilibili temporarily changed the "Member Purchase" entry at the bottom of its mobile app to "Double 11." Moreover, Bilibili and JD.com jointly launched the "Jinghuo Plan," directing users to JD.com for purchase conversions by posting product recommendation videos on Bilibili.

This open-loop e-commerce model appears to achieve a win-win situation for all parties, but in reality, it is more like a compromise for Bilibili on its e-commerce journey. While this model allows Bilibili to avoid investing heavily in building its own product pool, it also means giving up control over product pricing, making Bilibili's e-commerce business to some extent dependent on its partners.

However, content creators on Bilibili can directly promote and sell products on the platform, which may lead to users encountering more ads and promotional information, affecting their experience and the platform's atmosphere.

After Douyin and Kuaishou, Xiaohongshu has already established its closed loop. It remains to be seen whether Bilibili will revisit closed loops and self-operated products in the near future, striving for pricing power.