© Understanding the Internet Original/Production

Author | Yang Yang

Catering to external expectations ultimately amounts to performing with someone else's script; once self-identity is lost, it often begins with flattery and ends in disappointment.

This applies not only to ordinary individuals beset by anxiety but also to listed companies accustomed to meeting expectations and telling capital stories.

Bilibili epitomizes such companies. It excels at meeting market expectations, with nearly every step aligning with them:

In 2019, amid a market hungry for scale, it strived to expand its platform. In 2021, when profitability replaced scale as the new anchor for internet pricing, it focused on delivering profits. Now, with AI becoming a market staple, it is increasing capital expenditures to invest in AI.

These correct decisions, in line with market expectations, once made Bilibili a highly valuable company, with its market capitalization peaking at 400 billion yuan. However, the high market value built on meeting market narratives is unsustainable; Bilibili's stock price has fallen by 87% from its peak.

Besides the rise of AI and the gradual "aging" of internet companies, Bilibili's failure to identify its core monetization scenario remains a critical internal factor.

Its market-driven decisions have led to strategic vacillation and repetition. Today, its four major monetization businesses each face their own issues:

Gaming and IP derivatives have experienced negative growth, while the scale of premium memberships for value-added services has also declined quarter-over-quarter. Advertising, which has seen double-digit growth for 13 consecutive quarters, stands out as a bright spot, but its monetization efficiency remains low.

In 2025, Bilibili's daily active users will be about 30% of Kuaishou's, but its advertising revenue will only be about one-eighth of Kuaishou's. After all, Bilibili's dual-column structure and 5-10 minute video lengths limit its advertising monetization efficiency compared to many other companies.

Bilibili's turbulent journey serves as a reminder to latecomers: while capital narratives can cater to the market, they must not lose sight of their own identity.

/ 01 /

The Maestro of Rhythm in the Internet Era

During the mobile internet era, Bilibili was once among the most adept at enjoying premium valuations in China's internet industry.

At its peak market capitalization in early 2021, Bilibili's PS (TTM) ratio once surpassed 36 times, 2.5 times that of Tencent and 5 times that of Alibaba at the same time.

Subsequently, the internet sector experienced a significant valuation retracement due to three concurrent impacts: changes in the macro environment, tightening liquidity, and the exhaustion of industry dividends. Although Bilibili's PS ratio declined sharply and was surpassed by Tencent and Alibaba, it still maintained a 2-3 times premium over mid-tier players like iQIYI.

During market euphoria, it enjoyed higher dream-rate valuations than giants; during market caution, it maintained a premium over mid-tier companies. The key to achieving this lay in Bilibili's extremely keen "narrative rhythm": when the market chase (chased) scale, it emphasized growth; when capital questioned commercialization, it focused on profits.

When Bilibili first went public, its business model was relatively pure. In 2017, its gaming revenue surged by 518% year-over-year to 2 billion yuan, accounting for 83.4% of total revenue. At that time, it was viewed as a gaming company and an ideal gaming distribution platform.

However, being a gaming company was clearly less valuable than being a platform company, as the latter represented greater scale, more imaginative business prospects, and easier access to high market valuations.

Thus, the "breakout" narrative began, with the core goal of expanding into a full range of youth-oriented content, upgrading from a vertical anime community to a comprehensive PUGV video platform for all Gen Z users, and increasing MAU from tens of millions to hundreds of millions.

Through hefty marketing expenses, Bilibili achieved its goal of 100 million monthly active users in the first quarter of 2019, with quarterly growth rarely falling below 30%. On the revenue side, it also began emphasizing a "diversified structure" of gaming, live streaming, e-commerce, and advertising.

"Content breakout, surging MAU, and diversified revenue" perfectly aligned with institutional requirements for high-growth narratives: during the 2020 bull market, Bilibili's stock price increased tenfold in about a year, reaching a peak market capitalization of over 400 billion yuan.

However, just one year later, Bilibili's market capitalization fell to 60 billion yuan. The trigger was a change in the market's valuation logic: regulatory constraints and the disappearance of industry dividends prompted the market to adjust its pricing approach for internet companies, with profitability replacing scale as the focus.

The cost of Bilibili's breakout was that its losses increased from 500 million yuan in 2018 to 7.4 billion yuan in 2022. The market worried that Bilibili's growth remained dependent on high expenses, with profitability still far off.

Thus, in 2022, Bilibili shifted to a profitability-focused narrative.

On the cost side, it reduced expenses, even at the risk of losing monthly active users quarter-over-quarter, and significantly cut marketing expenses, reducing the marketing expense ratio by 7 percentage points in 2022. On the revenue side, it refocused on gaming, increased advertising efforts, and sought to diversify income sources.

After a series of cost reductions and revenue diversification efforts, Bilibili finally achieved historic profitability in the third quarter of 2024. Several months before the earnings release, the market had already begun speculating, driving its stock price up by over 70% in one month.

Unfortunately, the Valuation recovery (valuation repair) brought about by "delivering profitability" was short-lived. After the earnings momentum faded, Bilibili's stock price once again entered a downward trajectory. Today, its stock price has retracted by 35% from its peak during the profitability realization phase and by nearly 87% from its all-time high.

The logic is simple: the focus of the capital markets has shifted again.

/ 02 /

Continuing to Chase AI, but Returns Remain Unclear

In today's capital markets, internet companies that once thrived on user growth and traffic monetization are showing signs of aging. AI has become the new core asset bet on by the era.

A stark contrast: Zhipu's annual revenue is less than 3% of Bilibili's, but its market capitalization is 10 times that of Bilibili. For internet companies today, the most effective tool for market capitalization management is to label themselves as AI companies.

Take two domestic giants as examples: in the past few quarters, Alibaba's fundamental financial performance has been less stable than Tencent's most of the time, but the market has been significantly more forgiving toward Alibaba. Over the past year, Alibaba's stock price has remained flat, outperforming Tencent's 23% decline. The underlying logic behind this lies in Alibaba's earlier and more decisive investment in AI, along with a clearer path to commercialization.

It is understandable that AI has become the biggest driver of market capitalization growth for internet companies. On the one hand, as a new productivity tool, AI offers better growth expectations and higher growth rates. From January to July this year, Zhipu's ARR surged from $67 million to $1 billion.

On the other hand, AI companies may also challenge the moats and dominance of consumer internet companies. For example, Doubao and DeepSeek are altering the distribution logic of the internet, impacting the business models of community platforms, search engines, and other companies.

Facing these changes, Bilibili is also eagerly seeking its own AI narrative. In Chen Rui's view, AI represents a "historic opportunity to amplify Bilibili's potential tenfold."

The "opportunity" Bilibili sees does not involve forcibly competing in general-purpose large models like leading industry players. Instead, it aims to use AI as a lever to amplify its existing strengths by increasing the supply of high-quality content through AI and improving the matching efficiency of advertising distribution.

To this end, Bilibili significantly increased its AI investment starting in the third quarter of 2025 and clarified its "accounting" in the Q1 2026 earnings report:

In the first quarter of 2026, capital expenditures reached approximately 200 million yuan, up about 80% year-over-year, primarily for AI servers and computing resources. Full-year AI-related capital expenditures are expected to increase by about 1 billion yuan, mainly allocated to three areas: video understanding (content quality recognition and understanding), video distribution (recommendation algorithm optimization), and video creation (empowering creation tools).

However, after Bilibili increased its AI investment, the market reacted negatively, with the stock price falling by over 5% in a single day. The core reasons are twofold:

First, concerns about the scale of investment. The 1 billion yuan investment is nearly equivalent to Bilibili's 2025 profit, raising market fears that Bilibili, having just turned a profit, is about to resume "burning money."

Second, Bilibili's AI plans focus more on upgrading existing business monetization rather than innovation. The impact on profitability is less direct than that of large models or cloud service providers.

While chasing AI is the right strategic direction, Bilibili needs to find a suitable investment rhythm and a clear path to returns.

/ 03 /

Catering to the Market but Losing Its Own Identity

Reviewing Bilibili's series of capital narratives since its listing, its choices seem to align with the market at every step.

When it went public in 2018, the mobile internet was booming, and abundant liquidity painted a rosy market outlook. Bilibili's strategy of breaking out to transform from a vertical company into a platform company aligned with the market trend of valuing scale as market capitalization.

After 2021, as industry dividends peaked, geopolitical black swans emerged, and regulatory pressures mounted, Bilibili shifted to pursuing profitability, which was also the correct choice at the time. Now, with AI becoming the new asset chased by the market, Bilibili's decision to increase AI investment remains a necessary move in the long run.

However, after making countless decisions that aligned with market expectations, Bilibili has lost sight of itself and still has not found a suitable monetization scenario.

In the first quarter, value-added services, advertising, gaming, IP derivatives, and other revenue streams accounted for 39%, 35%, 20%, and 6% of total revenue, respectively. No single revenue stream exceeds 40%. Optimists may view this as "revenue diversification," but conversely, it suggests that Bilibili has yet to identify a core business suitable for monetization.

Breaking down the specific business segments reveals more clearly:

Value-added service revenue, primarily composed of live streaming and premium membership subscriptions, grew by 3.7% year-over-year in the first quarter. However, the number of premium members declined by 500,000 quarter-over-quarter, approaching the Paid ceiling (payment ceiling). The live streaming industry has long since reached a bottleneck, making significant growth unlikely.

IP derivatives and gaming revenue declined by 4% and 12% year-over-year, respectively. The issue with these two businesses lies in their somewhat conflicting commercial logic with Bilibili's current content investments.

Especially for gaming, blockbuster success depends on the research and development quality of the products themselves, not merely on traffic scale. This forces Bilibili to operate as a "platform company" for its video platform while simultaneously functioning as a "gaming company" for game development, dispersing its resources.

Advertising is Bilibili's bright spot, with revenue growing by 30% year-over-year in the first quarter, marking the 13th consecutive quarter of double-digit growth. This growth is attributed to Bilibili increasing its ad inventory, AI-driven improvements in ad efficiency, and its low base.

However, compared to the industry, Bilibili's advertising monetization remains relatively low. Even when compared to Kuaishou, which has weaker advertising performance, Bilibili's daily active users were about 30% of Kuaishou's in 2025, but its advertising revenue was only about one-eighth of Kuaishou's.

Moreover, Bilibili's low advertising monetization efficiency is difficult to resolve, as it is determined by its product format: Bilibili's dual-column structure (users can choose not to view ads) and 5-10 minute video lengths (low ad playback efficiency) further limit its advertising capacity.

Bilibili's turbulent trajectory illustrates a truth: while capital narratives can cater to the market, the business foundation must not lose sight of its own identity. Going forward, Bilibili needs to take the time to figure out how to establish its core strengths.