By Wang Huiying

Edited by Ziye

Has Bilibili evolved?

Once a unique entity in the digital realm, discussions around "whether Bilibili has changed" have intensified in recent years.

Indeed, amidst efforts to cut costs and enhance efficiency, coupled with the acceleration of commercialization, Bilibili has undertaken numerous new initiatives. These include, but are not limited to, expanding into e-commerce, diversifying into gaming, and venturing into other revenue-generating areas.

On January 9, two notable events unfolded at Bilibili. Firstly, Bilibili announced its exclusive partnership with CCTV to broadcast the Snake Year Spring Festival Gala live on its platform on New Year's Eve. Secondly, Bilibili updated its premium membership service agreement, introducing new restrictions on membership usage.

Image source: Bilibili Business Dynamics WeChat Official Account

On that day, compared to the official announcement of its CCTV partnership, Bilibili's update to its premium membership service agreement received relatively little attention.

If not for the need to verify her identity while lending her account to a friend, Wenwen, a Lv5 premium member of Bilibili, would have remained unaware of the update. "Last September, verification was not required," Wenwen told Lianxian Insight.

Behind these two major events lie two significant shifts at Bilibili – moving towards greater popularity while aiming to generate more revenue. In terms of performance indicators, the former is reflected in active users, and the latter in paid members.

Bilibili's third-quarter report for 2024 revealed that the platform had 348 million monthly active users in the quarter, still some distance from the 400 million target set by CEO Chen Rui. During the same period, Bilibili achieved its first quarterly profit.

Clearly, Bilibili's cost-cutting and efficiency-enhancing efforts over the past year, along with its continued exploration of commercialization, have paid off. However, for the long-term growth of its community products, Bilibili still needs to seek expansion in more areas.

Throughout this process, one thing remains unchanged: Bilibili's focus on young people. Although Bilibili continues to expand its content and user base, young people remain its core, its most representative trait, and the foundation for its sustained growth.

In fact, the question of whether Bilibili changes or stays the same is less significant. What matters is that, with one foot already in the door of profitability, Bilibili must find a balance between earning money and maintaining its community within the scope of commercialization.

1. By updating the 'Premium Membership Service Agreement,' is Bilibili learning to make more money?

Entering 2025, Bilibili aims to generate more revenue, but from where will this revenue come?

Before answering this question, let's delve into Bilibili's financial performance and revenue composition.

In the third quarter of 2024, Bilibili generated revenue of 7.31 billion yuan, a year-on-year increase of 26%; adjusted net profit was 240 million yuan, marking its first quarterly profit since going public.

The financial report attributed Bilibili's adjusted profitability in this quarter to the growth of its gaming and advertising businesses. Simultaneously, gross profit increased by 76% year-on-year, and gross margin significantly rose from 25% in the same period last year to 34.9%.

Currently, Bilibili's revenue is primarily divided into four major segments: value-added services, advertising revenue, mobile games, and IP derivatives and others.

In the third quarter of 2024, except for a decline in revenue from the IP derivatives business, the revenue of the top three businesses all increased year-on-year, to 2.821 billion yuan, 2.1 billion yuan, and 1.823 billion yuan, respectively, with increases of 9%, 28%, and 84%.

Although gaming and advertising contributed the most to profitability in the third quarter, in terms of revenue share, value-added services, encompassing live streaming and premium memberships, accounted for the largest proportion of revenue, at 38%.

One obvious challenge is the slowing growth rate of value-added services revenue. The third-quarter financial report for 2024 showed that the growth rate of value-added services was 9%, a decrease of 21.6% quarter-on-quarter and 48.4% year-on-year.

Moreover, the number of Bilibili's active premium members is also declining. In the third quarter of 2024, the number of active premium members was approximately 21.97 million, a decrease of 1.5% quarter-on-quarter compared to 22.3 million in the previous quarter.

In other words, Bilibili's paid user base is facing a growth bottleneck, and this decrease will directly impact its value-added service revenue. To generate more revenue, Bilibili must attract more paid users.

On January 9, Bilibili updated its premium membership user agreement, focusing on adjusting usage restrictions for premium members. According to the agreement, starting from January 16, Bilibili imposed two clear restrictions: first, it stipulated that a maximum of 2 terminal devices can use membership services simultaneously for the same account; second, for mobile devices, the same account can be used on up to 2 devices within 24 hours for membership services.

Image source: Bilibili Membership User Agreement

Simultaneously, Bilibili clearly stipulated that if these limits are exceeded, "Bilibili's premium membership will suspend or terminate the services provided to you based on the situation and reserve the right to take further measures, including but not limited to claiming compensation for losses."

Bilibili's move is understandable. On the one hand, it is aligning with other video platforms in the industry to enhance the standardization of its premium membership business. Limiting the number of devices members can log in to is an industry consensus. Previously, the four major long-form video platforms – Youku, iQIYI, Tencent Video, and Mango TV – have imposed clear restrictions on the number of devices members can log in to.

On the other hand, it reduces the "sharing" behavior of Bilibili platform users. In the past, without device restrictions, one member account could be logged in to multiple devices, which not only did not help Bilibili increase its paid revenue but also increased bandwidth costs for online video viewing.

After making these adjustments, Bilibili can both reduce costs and attract more paid members, seemingly a win-win situation. However, a new question arises: Are Bilibili's users satisfied?

Wenwen told Lianxian Insight that the change to the membership terms without prior notice made her uncomfortable.

"Modifying the terms without my knowledge and passively bearing the risk makes me very unhappy," Wenwen told Lianxian Insight. Bilibili did not have a clear notification push but instead placed it in the user agreement that needed to be checked when paying, with very small font that was easily overlooked.

"In this situation, if I exceed the device limit, there is a risk of my membership being suspended or even facing economic losses," Wenwen mentioned.

Another recently renewed Bilibili premium member told Lianxian Insight that this restriction by Bilibili is unnecessary.

"Bilibili's videos have a stronger personal attribute. Sometimes I don't want others to know what I like, so I basically don't lend my Bilibili membership to others and only log in on my own devices. But now there are restrictions even for logging in on my own devices," the aforementioned Bilibili member said frankly.

Today, Bilibili still holds a somewhat unique position. On Bilibili, there are many young users, but their tolerance is not high, especially their reluctance to pay, which is also the key reason why Bilibili has always struggled to generate revenue. With the current adjustments, Bilibili may lose some users, but perhaps this is a necessary sacrifice on its path of exploration.

2. By broadcasting the Spring Festival Gala for the first time, Bilibili embraces mainstream culture

In recent years, as other community platforms have sought commercialization, the most significant change Bilibili has made to quickly implement its business model is to break out of its niche.

The significance of breaking out of the niche is multifaceted. Whether it's users or content, Bilibili is attempting to move from niche to mainstream. The goal remains the same: to expand its business through this transformation and ultimately achieve profitability.

Less than 20 days before this year's CCTV Spring Festival Gala, Bilibili took the first step in breaking out of its niche in the new year – partnering with the Gala to become its exclusive Danmaku video platform.

This is the first time in Bilibili's 15-year history that it has broadcast the CCTV Spring Festival Gala. Bilibili will customize new interaction and viewing functions for the Gala live broadcast, and CCTV will also open a Gala account on Bilibili to bring users exciting content from past Galas.

The Spring Festival Gala is an excellent opportunity for Bilibili to transition from niche to mainstream.

As an "electronic New Year's Eve dinner," the Spring Festival Gala is a top-tier IP in terms of both influence and traffic, making it a target for internet companies to compete for. The companies' goal is consistent: to increase their exposure on this "national-level" program watched by over a billion people and attract new users through various interactive forms, who can then be converted into platform consumers.

From the perspective of broadcast rights, in previous years, the Gala was primarily obtained by long-form video platforms such as Youku and Tencent, which are backed by internet giants. Starting last year, short-form video platforms also secured a piece of the pie, with Douyin and Kuaishou obtaining the broadcast rights for the Gala, and WeChat Video getting the exclusive vertical screen broadcast rights.

A significant change is that in the past, the internet companies active on the Gala were mostly traditional giants and platform enterprises. Relatively speaking, Bilibili is more niche and younger, making it a relatively unique presence among the Gala's partners.

Behind this lies Bilibili's growth anxiety.

As market competition intensifies and users' video viewing habits become increasingly diverse, Bilibili's monthly active user growth rate has visibly slowed down.

According to the third-quarter financial report for 2024, Bilibili's monthly average active users were 348 million, with a growth rate of only about 2% compared to the same period last year. With this growth rate, it will be challenging for Bilibili to achieve its goal of 400 million monthly active users.

Looking at a longer time frame makes it more intuitive. In the fourth quarter of 2020, Bilibili had 202 million monthly active users, with a year-on-year increase of 55%; in the fourth quarter of 2021, Bilibili's monthly active users reached 272 million, with a year-on-year increase of 35%; by the fourth quarter of 2022, Bilibili's monthly active users were 326 million, with a year-on-year increase of 20% and a first-ever quarter-on-quarter decline.

The apparent loss of users ultimately affects Bilibili's commercialization path, as it touches on everything.

As mentioned above, advertising and gaming were crucial to Bilibili's quarterly profitability in the third quarter of 2024, especially as the advertising business is roughly proportional to the user base.

Continuous user loss is bound to affect advertisers' choices. Compared to Douyin, which has nearly 800 million monthly active users, Bilibili is naturally less attractive to advertisers. More critically, Bilibili's community atmosphere and platform attributes determine that there are fewer advertising opportunities and a longer commercial conversion path on the platform.

Essentially, partnering with the Gala may be Bilibili's way to alleviate its anxiety about user growth and user value. With the help of this national-level IP's traffic pool, Bilibili may enter a new turning point, further breaking out of its niche and moving from niche to mainstream while expanding its influence.

3. The anime attribute fades, but young people remain Bilibili's core

"Watch the Spring Festival Gala with 300 million young people," from Bilibili's slogan, we can see its emphasis on young people.

At the recently concluded Bilibili New Year's Eve Gala, with its variety of memorable performances, Bilibili also tried to prove that it is the internet platform that understands young people best.

Returning to Bilibili's live broadcast on the day of its IPO in 2018, it was the first finance lesson for many young Chinese people.

Frankly speaking, Bilibili has been on the path of attracting young people for the longest time. Youthfulness is Bilibili's biggest advantage, but now it is becoming increasingly difficult to generate revenue from young people, and Bilibili has also undergone some noticeable changes.

On Bilibili, the word that appears most frequently alongside youthfulness is anime, an attribute ingrained in Bilibili's DNA.

As Bilibili accelerates its commercialization and breaks out of its niche, the niche anime attribute is no longer the focus, replaced by attributes that appeal to many different circles.

Taking the gaming business as an example, as Bilibili's once fundamental business, significant reforms were made in 2024. The most prominent manifestation is that Bilibili is no longer limited to anime games, launching a new product "Three Kingdoms: Strategies of the World" and entering the SLG (strategy game) field, officially taking a two-pronged approach in its gaming business.

A game that seems obviously not in Bilibili's style targets players who are not necessarily Bilibili's standard user profile. However, as the gaming sector has entered a stock period, developing SLG games with stronger mass appeal is the only way for Bilibili to make its gaming business profitable.

As early as the end of 2022, after Chen Rui took charge of the gaming business, it was made clear that "Bilibili's gaming business has cut some projects that do not meet market requirements and cannot make money, and will focus resources on more market-competitive projects in the future."

Guided by this philosophy, Bilibili has invested in self-developed games and is currently navigating an adjustment phase in its gaming operations. In June 2023, the company's Guangzhou Xinyuan Interactive Studio laid off approximately 220 employees from a total team of 427. Further, in October, the Guangzhou game development studio also undertook partial layoffs, reducing its five game studios, which collectively employed over 1,000 people, to just three.

From a broader content perspective, Bilibili's viral content in recent years has spanned diverse genres, from anime to the New Year's Eve Gala, the "Post-90s" promotional video, and "The Rap of China." This evolution signifies that Bilibili has transformed from a niche anime community into a vibrant cultural hub encompassing a wider audience and diverse circles.

Similarly, the annual "Top 100 Content Creators List" reflects this diversification. Among the content creator segments featured on the list, gaming, knowledge, and lifestyle segments collectively account for half of the selections.

Examining the industries that significantly contributed to Bilibili's advertising business in the third quarter of this year, we find gaming, e-commerce, digital appliances, network services, and automobiles leading the way. This underscores that while Bilibili's anime roots remain, its broader appeal and breakout potential have strengthened.

One constant, however, is Bilibili's commitment to engaging young people. Regardless of the circle, Bilibili targets Generation Z. According to Bilibili's data, 68% of users who registered on the platform in 2009 are still active, and the average age of new users stands at 22 years old.

When Bilibili went public, the average age of its users was 21; today, it has risen to 25. While youth may age, Bilibili's appeal to the younger generation persists.

In its partnership with the Gala and shift towards the mainstream, Bilibili's primary focus remains young people. From both an engagement and purchasing power standpoint, prioritizing this demographic paves the way for commercial success. Bilibili's ability to achieve sustainable profitability hinges on the continued engagement and spending of young users.

Reflecting on the question, "Has Bilibili changed?" it becomes evident that as the platform accelerates its commercialization journey, it must also embrace necessary exploration and change. This is a reality that Bilibili users must embrace.

(At the request of the interviewee, "Wenwen" is a pseudonym. The header image for this article is sourced from Bilibili's Investor Relations website.)