By Wang Huiying

Edited by Ziye

On March 29, 2018, a live broadcast of its IPO became the first finance lesson for many young Chinese people. They began to research what an IPO and market value are.

The protagonist of this live broadcast was the content community Bilibili. Three years later, on the same day, Bilibili returned to Hong Kong for a secondary listing, with a market value approaching HK$400 billion.

Later, Bilibili CEO Chen Rui recalled, "Chinese users are the most adorable because there are too few enterprises in China that treat users as equals. As long as you treat them as equals, they will support you wholeheartedly."

Chen Rui, CEO of Bilibili

In addition to equality, Bilibili's foundation has always been youthfulness. 68% of users who registered on Bilibili in 2009 are still active in the community, and the average age of new users is 22.

Frankly speaking, youthfulness is Bilibili's biggest advantage, but it is also evident that it's not easy to earn money from young people. As other community platforms seek commercialization, Bilibili needs to attract more new users to accelerate its business model. In other words, Bilibili needs to break out of its circle.

In 2024, Bilibili is also telling new stories.

The latest development is that based on its anime ecosystem, Bilibili has joined the "Hundred Model War" competition and claims to be "China's strongest AI-minded community."

In the gaming sector, this year Bilibili is no longer limited to anime games, launching the new product "Three Kingdoms: Strategize the World" to enter the SLG (Strategy Game) field, officially adopting a two-pronged approach in its gaming business.

The e-commerce sector is currently Bilibili's top priority. The story of live streaming e-commerce has been explored by Bilibili for a long time. Bilibili told Lianxian Insight that during this year's 618 shopping festival, Bilibili's e-commerce GMV grew by 146% year-on-year. In terms of its business model, cooperation with external e-commerce platforms such as JD.com, Taobao, and Vipshop has become an integral part of Bilibili's commercialization.

It can be seen that Bilibili's ecosystem has become richer, and there are more commercialization initiatives.

Like other community products, commercialization is something that Bilibili must continue to explore in the context of cost reduction and efficiency enhancement. This relates to the attitude of the capital market and the long-term development of community products.

Achieving break-even in 2024 is a goal that Bilibili set for itself three years ago. Now, with less than half a year left, can these new stories help Bilibili achieve its goal?

1. The closest big model to anime: How promising is Bilibili's new story?

Over 70% of young users, 102 million DAU, 341 million MAU, an average daily usage time of up to 105 minutes, and 20 million users who are "full-attendance" every month...

Standing at the 15th anniversary mark, Chen Rui revealed that "nearly 70% of post-90s and post-00s in China are monthly active users of Bilibili." In Chen Rui's words, Bilibili is the only Chinese internet platform that has maintained rapid growth for 15 consecutive years.

When these numbers are aggregated on Bilibili, a content community, it becomes even more remarkable.

Capturing users' long-term attention is the most important commercial value for Bilibili as a community product and the support for telling new stories.

Riding on the wave of big models, AI is the new story for many internet companies, and Bilibili is no exception. "Bilibili is China's strongest AI-minded community," said Chen Rui, Chairman and CEO of Bilibili, during the 15th anniversary speech.

Behind this, the content ecosystem of Bilibili has become increasingly "AI-heavy" over the past year. Public data shows that the daily video views of AI-related content on Bilibili increased by more than 80% year-on-year, with popular content covering fields such as science popularization, AI technology applications, digital humans, and creative applications.

The people most interested in, most concerned about, and most willing to apply AI are all on Bilibili. Chen Rui said that over 80 million users watch AI content on Bilibili every month, and 60% of AI-related content consumers are post-00s.

In terms of core content, not only do UP masters combine their respective strengths to produce video content about AI technology and applications for knowledge popularization, but technology media and research institutions also invite experts and scholars from well-known companies such as BAT, Huawei, and SenseTime through interviews and live broadcasts to delve into the latest developments and future trends of AI.

At this year's World Artificial Intelligence Conference, Bilibili emerged as a new face, showcasing more AI stories.

At the exhibition, Bilibili exhibited two models, the open-source Index-1.9B chat and Index-1.9B character, which support knowledge question and answer, copywriting, logical reasoning, code generation, and other applications, and can generate Bilibili-attributed content with different styles based on different settings.

Compared to last year's focus on parameters, players are now fiercely competing in applications, and Bilibili naturally needs to answer questions about scenarios, applications, and implementations.

Based on Bilibili's anime gene, Bilibili customized an AI voice bank for Luo Tianyi, the world's first Chinese virtual singer. Through algorithmic tuning, it retains the iconic characteristics of Luo Tianyi's voice while giving it a more natural, fluent, and authentic expression ability, enabling it to easily handle various musical styles and languages.

Image source: Bilibili Commercial Dynamics WeChat official account

Additionally, BiJian Studio, Bilibili's self-developed audio-visual big model, provides UP masters with free 1:1 real-person model customization services. By inputting text or recordings, users can generate live-action-level videos for on-camera broadcasting. Whether for live interaction, short video production, or virtual idol creation, it can significantly shorten the creation cycle, lower the creation difficulty, and enable more creative ideas to be quickly realized.

Bilibili's self-developed AI dynamic manga technology opens a new world for manga enthusiasts and creators. Through image-text guidance and dynamic control, it generates and controls character facial features, body movements, camera effects, and constructs complete anime scenes, truly bringing manga to life and significantly reducing the cost and threshold of content production.

The AI big model is already an unstoppable technological wave in the internet industry, and obtaining an AI ticket is crucial. For Bilibili, AI can be a platform for users to learn AI content, a simple tool and source of inspiration for UP masters to create content, and even a new story for Bilibili.

From any perspective, Bilibili's "AI concentration" cannot be low and should not be low.

2. Stepping out of the anime comfort zone: Bilibili cannot afford to lose its gaming foundation

In the first quarter of this year, Bilibili's gaming sector, its foundation, still recorded a loss, albeit with some improvement but not significant.

This is probably the most headache-inducing issue for Chen Rui. For a long time, the gaming business has continuously contributed important cash flow to Bilibili, which is the last sector that should incur a loss.

But reality is cruel. In the past, Bilibili was more like a game publisher, lacking the ace of self-developed games. In the current cooling game market, Bilibili's gaming business has struggled.

Chen Rui began to ponder, "How should the gaming business be done?"

At the end of 2022, Chen Rui returned his focus to gaming and personally took over the gaming business. Over the past year, Chen Rui has conducted numerous reflections and sweeping reforms on Bilibili's gaming business.

In Chen Rui's view, "Bilibili's gaming business has cut projects that do not meet market requirements and cannot make money, and in the future, resources will be concentrated on more market-competitive projects."

Under this thinking, Bilibili has focused on self-developed games and entered a period of gaming business adjustment. In June 2023, Bilibili's Guangzhou Xinyuan Interactive Studio laid off about 220 people from its 427-person team. In October, the Guangzhou game development studio also underwent partial layoffs. Additionally, five game studios with a combined staff of over 1,000 people were reduced to three.

Adjustments come with pain and take time. In November 2023, Chen Rui admitted that most of Bilibili's gaming performance in 2023 fell short of expectations, and these projects, mostly established three years ago, could no longer compete in the current gaming market.

Chen Rui established three new criteria for approving new game projects: long-term operation, being at least a leader or super leader in a niche category, and reasonable costs.

Bilibili's Q1 2024 financial report showed that mobile games, IP derivatives, and other revenues decreased year-on-year. Among them, mobile game revenue was 983 million yuan, a year-on-year decrease of 13%.

The good news is that Bilibili's gaming sector turned a corner in June this year with the release of the strategy game "Three Kingdoms: Strategize the World," exclusively distributed by Bilibili. In the game, players can choose from six professions, recruit generals, develop cities, and explore a world set in the Three Kingdoms era.

Image source: "Three Kingdoms: Strategize the World" Weibo

Nearly a month after its launch, data from Sevenmai showed that "Three Kingdoms: Strategize the World" has earned US$33.13 million in domestic iOS revenue, 4.4 times that of Lingxi's "Romance of the Three Kingdoms: Strategy Edition" and 7 times that of NetEase's "Rise of Kingdoms."

"Three Kingdoms: Strategize the World" is significantly different from Bilibili's previous anime games. It belongs to the SLG genre, specifically referring to "war simulation" games.

In the eyes of many users, "Three Kingdoms: Strategize the World" does not resemble Bilibili's style inside and out. Not only does the game itself lack anime elements, but its target players are not the standard user personas of Bilibili as perceived by outsiders.

Obviously, this is not Bilibili's comfort zone, but the gaming sector has entered a stock period, and breaking out of its circle is a must for Bilibili's gaming business.

SLG games generally have longer life cycles due to their operation, scenarios, and IP's mass appeal. As the popularity of SLG games continues to rise, Bilibili has its own considerations for entering this genre.

According to Lianxian Insight's observations, unlike previous SLG games, during the promotional phase, Bilibili leveraged its content ecosystem and leveraged its advantage of being a "content platform and distribution channel in one" to mobilize content influencers from various fields on Bilibili, including history, lifestyle, travel, food, and even "alchemy UP masters," to engage from their respective perspectives, thereby driving all-round breakthroughs within the platform and attracting the first wave of players to the game.

Not only does Bilibili use UP masters that users love to jointly attract more players to try the game, but in terms of gameplay, Bilibili attempts to attract more casual players by "reducing grind and spending" and lowering the threshold.

The game reduces grind for players through functions such as automatic paving, one-click reservation for siege, upgrading training grounds, general replacement systems, and land development. Meanwhile, it reduces spending by abandoning small card packs for new cards, eliminating building upgrade waiting times, and requiring only resource consumption for paid features.

Stepping out of the anime comfort zone and entering the SLG genre, "Three Kingdoms: Strategize the World" not only shoulders the growth of Bilibili's gaming business in the second half of the year but is also an important step in reshaping Bilibili's gaming image. Standing on this path are powerful players like NetEase and Tencent, making it a challenging journey. However, as the foundation, Bilibili cannot afford to lose and must find ways to win.

3. Live streaming e-commerce: Bilibili is still striving to break out of its circle

For a long time, being too concerned about community atmosphere made Bilibili seem out of place in the commercial world.

The balance between community atmosphere and commercialization is inherently difficult, and many community products have swayed and hesitated on the road to commercialization. However, the industry's winds have shifted in recent years: Xiaohongshu placed live streaming e-commerce in an important position, shouting out about buyer e-commerce and accelerating commercialization; Zhihu also participated in this year's 618 through live streaming e-commerce and explored concepts such as Zhihu Zhixuetang and New Professionals.

The move towards commercialization and accelerating commercialization for community platforms is inevitable, as every product must answer the question of how to make money.

The uniqueness of Bilibili lies in being a strongly segmented content platform where content and commerce influence and drive each other, meaning that the content and commercial ecosystems are always the core of Bilibili.

Li Ni, COO of Bilibili, once said that deeply influencing consumer mindset is the cornerstone of Bilibili's commercialization and its unique, irreplaceable value.

Especially this year, content generated on Bilibili based on users' various consumption needs is releasing greater value. Data shows that in the first quarter of 2024, the daily views of home furnishing, travel, fitness, and other categories on Bilibili increased by more than 45% year-on-year. Among them, the growth in content consumption demand from female users was particularly notable, with the daily views of fashion categories increasing by over 40% year-on-year and the daily views of mother and baby categories increasing by over 110% year-on-year.

However, within Bilibili UP masters' own live broadcasts, Bilibili's live streaming e-commerce model is still in its growth stage. In terms of platform ecology, Bilibili users are still accustomed to entering live broadcasts through UP master updates or live broadcast previews.

Unlike other content platforms engaging in e-commerce, Bilibili does not earn money from merchants but rather from e-commerce platforms. More specifically, Bilibili is selling its traffic to e-commerce platforms.

During this year's 618, Bilibili further deepened its "Big Open Loop" strategy, strengthening cooperation with Alibaba and JD.com while also establishing open-loop cooperation with Pinduoduo. At the same time, Bilibili comprehensively upgraded three dimensions: product tools, traffic support, and new customer incentives, bringing more benefits to the platform and merchants.

During major promotions, Bilibili's performance advertising revenue driven by e-commerce saw a 93% year-on-year increase. E-commerce platforms, digital appliances, and home decor became the top three fastest-growing sectors in terms of Bilibili’s advertising revenue during this 618 shopping festival, with advertising revenue from e-commerce platforms being 14 times higher than the same period last year.

Following the "big open loop" strategy, Bilibili has become one of the largest sources of new customers for e-commerce on the internet. According to the "Spark Plan" data from the collaboration between Bilibili and the Taobao Alliance, Bilibili brings in a new customer rate of over 50% for all vertical industries, with rates exceeding 70% for maternal and child care, as well as household daily necessities.

This is still determined by Bilibili's characteristics. As mentioned earlier, Bilibili hosts the largest group of young users and has continually growing traffic, which is vital for e-commerce platforms and brands. More importantly, Bilibili's commercialization relies on advertising, and the essence of the "big open loop" strategy is precisely advertising.

In fact, the new AI stories mentioned earlier about Bilibili are also closely tied to advertising.

Over the past year, ad slots in Bilibili’s information stream have frequently featured Wenxin Yiyan, Kimi, and Tongyi Qianwen, as well as various work records of frontline staff. For example, AI courses and startup insights from former Amazon senior chief scientist Li Mu have become some of the most popular AI content among users.

Reflecting on Bilibili's content creators, many have received collaboration offers from AI companies. In Bilibili's 15th-anniversary speech, Chen Rui mentioned that over 90% of AI companies in China currently choose to communicate with users on Bilibili.

For instance, during the WAIC conference, Bilibili showcased a collaboration case between Intel and the content creator @影视飓风, utilizing AI technology to create and promote the virtual persona "Wasili" on Bilibili.

Bilibili acts like a "translator" for AI companies in the implementation of scenarios. In this narrative, content creators on Bilibili can connect with professional content on the business side (B-end) and also explain AI stories to the consumer side (C-end), making Bilibili a natural choice for many AI companies to place advertisements.

For Bilibili, while in the past only gaming could be commercialized, now live-streaming e-commerce, e-commerce advertising, and content collaborations can all be monetized.

Perhaps for this reason, Bilibili is optimistic about achieving a break-even point by 2024. "Based on the current business development trend, we expect our gross profit margin to continue to improve quarter by quarter, reaching 30% in the third quarter, and achieving non-GAAP break-even in the third quarter, driven by the continued fast growth in advertising revenue and the recovery of the game business. We are very confident about this," said Chen Rui in a conference call.

In Chen Rui's view, Bilibili users are also maturing, "They now think Bilibili is a company that must make money. When we introduced early access for premium members, there was almost no opposition."

Users are accepting that Bilibili is a community that needs to be profitable, giving Bilibili the confidence to explore various new narratives. Although the progress is not fast, it holds a lot of potential for imagination. Judging by Bilibili's actions this year, it is becoming more open and diverse.