Embrace Inflection Point: Baidu'S Third Quarter Financial Report Exceeded Expectations To Acquire YY Live Broadcast To Meet Multiple Interests

The boots finally landed.

On November 17, when the third quarter report of 2020 was released, Baidu officially announced the acquisition of the domestic live broadcasting business (i.e. "YY Live") of Huanju Group with a wholly-owned capital of 3.6 billion dollars. It is said that Baidu has signed a final binding agreement with Huanju Group, and the transaction may be completed in the first half of 2021. The target of this acquisition is YY live broadcast, including YY mobile application, YY.com website and PC YY.

It is understood that after the completion of this acquisition, YY content and technology will be synchronized to Baidu, and YY domestic live broadcast team will also be included in Baidu.

According to the financial report, Baidu achieved revenue of 28.2 billion yuan in the third quarter of 2020, compared with 28.1 billion yuan in the same period last year. The net profit attributable to Baidu reached 13.7 billion yuan, successfully turning around losses on a year-on-year basis, with a net loss of 6.4 billion yuan in the same period last year.

"Baidu has built a dynamic mobile ecosystem in the past few years, so that our non advertising revenue can grow rapidly," said Robin Li, founder and CEO of Baidu, referring to the acquisition announced today. "This transaction will make Baidu a leading real-time streaming media platform and diversify our revenue sources."

Boost diversified realization

The latest financial report data shows that non advertising revenue has become the growth highlight of Baidu.

Specifically, Baidu's core rebounded significantly in this quarter, achieving revenue of 21.4 billion yuan, which is the main force driving Baidu's revenue growth. Among them, Baidu's core online advertising revenue was 18.4 billion yuan, the same as last year; Thanks to the rising revenue of intelligent cloud business, Baidu's core non online advertising revenue was 2.9 billion yuan, up 14% year on year.

The reason for the growth of non online advertising revenue is closely related to Baidu's strategy of continuously consolidating mobile ecological services recently. In the third quarter, Baidu Mobile Ecology continued to upgrade the content and service integration infrastructure, forming a unique closed-loop service ecosystem from search to social interaction, and then to transaction consumption.

Baidu pointed out that the continuously rising user participation and user scale have created great potential for the realization of diversified realization of Baidu mobile ecology. Non online advertising revenue such as live broadcast and member payment will become an important driving force for Baidu's revenue growth in the future.

In fact, YY Live has rich live content such as talent, games, tourism and sports, which can provide rich content supply for Baidu Mobile Ecology, so as to better meet the needs of users for entertainment scenes.

"Baidu's acquisition of YY, in fact, is still building the underlying platform capabilities, so as to further expand Baidu's mobile ecosystem user service scenarios." An analyst pointed out that "Baidu's current core direction of mobile ecology is to improve services and diversified liquidity capabilities, while satisfying more user scenarios and needs, to achieve more food for one fish in mobile ecology."

Data shows that in September this year, the number of daily active users of Baidu App reached 206 million, and the monthly active users reached 544 million yuan. Behind the massive number of users is an increasingly diversified and personalized demand. This is also the direction of Baidu Ecology. At present, the number of Baidu smart applets is nearly three times that of the same period last year, and the number of monthly active users of smart applets on Baidu APP has reached 355 million, up 22% year on year. More and more popular applications such as e-commerce, travel, express delivery and e-government access Baidu to provide users with rich service experience.

"After Baidu acquired YY Live, under the ecological integration of the two sides, Baidu will provide users with more diverse forms and richer content of information, knowledge and services, and the cooperation between the two sides will also bring new huge development opportunities for the live track." Some analysts believe.

Data map.

Welcome to more profits

For both parties, this acquisition will undoubtedly reach a win-win situation.

For YY, with the arrival of a new round of integration in the live broadcast industry, YY needs to find "backers" in the great changes in the industry pattern. And behind Baidu, which has traffic, technology and ecology, and has the latter's flow pool and strong capital injection, YY's imagination is different.

At the same time, the show mode in the past was simple and crude, which was just the initial stage of live interaction. After reaching the upper limit of scale, it would inevitably move to the stage of deep cultivation of users, but the condition for its realization was better technical services. This is Baidu's strength. After this acquisition, YY is expected to consolidate its leading position in the live broadcast platform.

"The most important problem for YY in China is that there is no flow. It is a cash flow business. It is not impossible for YY to double or even multiple its revenue if Baidu's flow is added," said an analyst.

It should be noted that although the growth of users of YY Live has slowed down significantly, the user payment rate is still higher than that of Douyu and Tiger Teeth by virtue of its advantages in the live show field. According to some data, although YY's live broadcast daily activity is ten times less than that of Tiaoyin Fasthand, the gap in revenue is only two or three times.

"This means that YY's liquidity efficiency is very high. After the completion of the acquisition, coupled with the super flow brought by Baidu, YY will quickly break through the growth bottleneck in the future, and will also bring considerable cash income to the new owner Baidu. " According to the analysis.

For Baidu, which has strengthened its content ecology and live broadcast capability, this is no different from a multi profit. On the one hand, YY's domestic business can expand Baidu's business boundaries, enrich Baidu's search content orientation, and help Baidu supplement content forms other than graphics and text, short videos, and improve the user experience and user stickiness of search information flow services.

On the other hand, the acquisition of YY can also achieve strategic synergy from within Baidu Mobile Ecology. It is understood that Baidu ecology has users such as post bars, novels and videos that match the live broadcast of the show, which will bring scale effect after YY's integration. At the same time, Baidu Mobile's ability to provide users with entertainment information has been enhanced, and the corresponding entertainment ads are expected to grow in synergy.

In addition, the acquisition of YY Live can not only meet Baidu's diversified liquidity needs, but also provide Baidu with additional cash flow to support the development of other capital intensive businesses, such as AI, long video, etc.

"This acquisition is actually the desired result of Baidu and the Happy Gathering Times," said Pan Helin, executive director of the Digital Economy Research Institute of Zhongnan University of Economics and Law. "Baidu is currently committed to building a content service ecosystem, because the ultimate goal of user search is to obtain content. If there is more layout in the content industry, it can complement and complement the search business. For Baidu, YY's short video, live broadcast and other directions in the future can help it expand its business boundaries. "

New Imagination Space

Baidu, which is strong enough to complement the live broadcast segment, also makes its future full of possibilities.

This is related to the imagination of the live broadcast industry itself. Ai Media Consulting believes that due to the pan entertainment characteristics of live broadcast, the refined and high-quality development of content, and the continuous improvement of e-commerce live broadcast technology, consumers will have a better shopping experience.

In other words, live broadcast is a combination of the advantages of BAT. It is not only the demand traffic portal (Baidu), but also the transaction service carrier (Ali), and also carries the possibility of games and social networking (Tencent). From this perspective, the layout of live broadcast business can not only consolidate the core business competitiveness of platform enterprises, but also further expand the competitive boundary of enterprises.

According to the prediction of iMedia Consulting, it is estimated that by the end of 2020, China's online live broadcast users will reach 526 million, and the size of China's live broadcast e-commerce market will reach 961 billion yuan. In the first three quarters of 2020, nearly 25000 enterprises related to live broadcasting were added, up 565.32% year on year. In the third quarter, 11000 related enterprises were added, up 11.75% month on month.

"In the second half of the live broadcast, the refinement of the subdivision of the field has become the key consideration of the major live broadcast platforms. The transformation of the live broadcast platform, coupled with the continuous improvement of the diversity of live broadcast content and interactive effects, the live broadcast market still has great potential." said the consulting side of iMedia.

According to the analysis, after Baidu acquires YY Live, a new round of live broadcast battle will continue, but the protagonists will evolve into several domestic giants such as Tencent, Baidu, Ali, etc. This also means that the live broadcast has officially entered the era of "Three Kingdoms Killing".

Among them, Baidu focuses on the live broadcast positioning of knowledge, plus YY's accumulation in the live broadcast of the show, the combination of the two may lead to a new way of playing live broadcast e-commerce, achieve a differentiated position, and obtain a unique market space. "Baidu has chosen to increase its live broadcast at this time to win the leading live broadcast target in the current domestic market. Its ecological value and strategic value are immeasurable."