Chinese streaming service iQiyi is expected to list on Nasdaq next week, raising up to $ 2.7 billion to support the company in its cut-throat competition with Tencent Video and Alibaba’s Youku.
KrASIA recently came across its roadshow deck on the internet. The file, used to tout to potential investors, gave us an insightful and rare peek into its business.
iQiyi plans to issue 125 million ADSs priced at $17-19 per share. Underwriters can sell 18.75 million additional shares.
The company was founded by GONG Yu in 2007.
Entertainment market in China is expected to rise from RMB 1060 billion ($ 167 billion) in 2016 to RMB 2769 billion ($ 437 billion) by 2022, according to market researcher iResearch.
iQiyi believes there is a high potential for underpenetrated paying user base which was 0.4 billion in 2012 and then surged to 12.1 billion in 2016 with a CAGR of 135.2%. The number is expected to reach 73 billion by the end of 2022.
iQiyi is the #1 streaming app by MAUs (421 million), #2 by DAUs (126 million), #3 by total time spent (1.7 HRs per user).
iQiyi has 50.8 million subscribing members by December 31, 2017 and 60.1 million by Feb 28, 2018. The growth rate outpaced streaming companies Spotify and Netflix Domestic.
The company leverages on AI technologies and big data to provide personalized recommendations and to achieve better user interaction.
The platform glues users by improving Social engagement. It has iQIYI Paopao, an SNS dedicated to celebrities feeds. The platform also rolls on-screen commentary feed.
iQiyi is good at delivering blockbuster content. Its drama series, The Lost Tomb has 4.4 billion views.
The phenomenal Rap of China generated 3 billion video views and RMB 45 million (approx. $7.1 million).
Its model for the forecast of video views has over 80% accuracy rate.
iQiyi’s content includes professionally-generated content, partner-generated content and user-generated content.
For advertising partners, iQiyi provides pre-video advertisements, pop-up advertisements, in-feed advertisements and innovative advertisements based on content.
iQiyi leverages on AI & cloud computing technologies to enhance user experience.
Team member: GONG Yu-Founder and CEO, WANG Xiaohui- Chief Content Officer, TANG Xing- Chief Technology Officer.
Users spend 310 billion hours on internet videos in 2017 and China’s entertainment market is projected to reach RMB 2,769 billion (approx. $ 437 billion) by 2022.
iQiyi plans to leverages on AI and big data technologies to fuel its future development. The company will also recruit top talent and strengthen relationships with upstream industry participants.
Opportunities for monetization include membership service, content distribution, advertisement, virtual tipping, IP Licensing, e-commerce, online game and paid reading.
iQiyi’s membership service saw a rapid growth in revenue in the recent three years and accounts for 37.6% of its total revenue in 2017. The company’s total revenue stands at RMB 17 billion (approx. USD 2.7 billion) in 2017.
Its revenue per mobile DAU was 137.9 yuan (approx. $ 22) in 2017 and its revenue per thousand view hours was 158.7 yuan (approx. $ 25) in 2017, with a 51.3% and 36% CAGR respectively.
The overall cost of revenue kept rising from 2015 to 2017 as the cost of content kept surging. In 2017, the cost of revenue was RMB 17.38 billion (approx. $ 2.74 billion), consisting of RMB 12.617 billion (approx. $ 1.99 billion) in content costs, RMB 2.19 billion (approx. $ 340 million) in bandwidth costs.
iQiyi’s operating expenses account for 32% of its total revenues.