This article comes from the official account of "Tencent Science and Technology" Wechat.
On March 19th, iQIYI, Inc. 's roadshow PPT revealed that the company will be listed on Nasdaq next week.
The following is a detailed interpretation of the English document of the roadshow PPT.
General situation of IPO release
IQIYI, Inc. IPO issued 125 million American depositary receipts with a price range of $17 to $19, and 1 American depositary receipt = 7 common shares
Pricing date: March 28, 2018
Stock symbol: IQ, listed on the NASDAQ Stock Market
Fund-raising purposes: content acquisition and production; R & D investment; operating funds and general enterprise uses
Lock-in period: 180 days
Underwriters: Goldman Sachs Group, Credit Suisse and Bank of America Merrill Lynch are co-lead underwriters; China Renaissance Holdings Ltd., Citigroup Inc and UBS Investment Bank are co-associate underwriters.
Narrator
Gong Yu, founder of iQIYI, Inc., CEO, and Wang Xiaodong, CFO
Company profile and investment highlights
The Mission of iQIYI, Inc.
Aspire to be a technology-based entertainment giant, bringing fun and joy to people and their families.
A huge market opportunity
China's online entertainment industry has been growing rapidly, and economic growth is expected to continue. According to data provided by iResearch, China's entertainment demand reached 1.06 trillion yuan in 2016 and is expected to increase to 2.769 trillion yuan per person by 2022, with a compound annual growth rate of 17.3 percent.
On the other hand, the size of China's online video membership service market has increased from 400 million yuan in 2012 to 12.1 billion yuan ($1.9 billion) in 2016, and is expected to reach 73 billion yuan by 2022, with a compound annual growth rate of 30.9 percent.
Top business models common in the market
Paid content + content distribution = subscription model
The benefits of the subscription model: increase content investment-- attract more subscribers-- get higher revenue
IQIYI, Inc. 's business model-- supported by the ability to monetize an IP in multiple ways
High-quality video content + paid member service
A large audience
In the fourth quarter ended December 31, 2017, iQIYI, Inc. had an average monthly visit of about 421.3 million mobile users and a daily average of 126 million; the average monthly access of PC was about 424.1 million, and the average daily access of PC was 53.7 million.
In December 2017, users watched 9.2 billion hours of video content on the iQIYI, Inc. platform, and each user watched an average of 1.7 hours of video content on the iQIYI, Inc. app every day. IQIYI, Inc. also owns iQIYI, Inc. Pao Community, China's leading entertainment-based social media platform, which allows fans to follow and interact with celebrities and entertainment communities.
IQIYI, Inc. ranks second in the China Mobile Limited application market in terms of total time spent by users, and iQIYI, Inc. ranks fourth in terms of monthly average visitors.
The scale and growth rate surpass those of the global counterparts.
As of December 31, 2017, the number of iQIYI, Inc. subscribers was 50.8 million; as of February 28, 2018, the number of subscribers had risen to 60.1 million, growing faster than their global counterparts.
Know the entertainment industry like the back of your hand
Know the users like the back of their hand
Get to know users through artificial intelligence and big data
Collect users' search and playback habits, consumption habits and interaction, through intention identification, behavior model, machine learning, etc., to get public opinion analysis, user analysis and personalized recommendations.
The function of social participation makes users more sticky
IQIYI, Inc. Bubble: focus on social networks in the field of entertainment through star dynamic messages and content-oriented topics.
Because of the strong network effect, users are socialized when watching video.
More user behavior data-higher quality content production and refined marketing-increased user engagement and time spent.
Have a deep understanding of the content
Become a pioneer in the industry by continuously providing sensational content
Through innovation in content selection, release mode and content production, iQIYI, Inc. has become a market leader.
IQIYI, Inc. 's original content accounts for five of China's top 10 Internet variety shows and six of the top 10 online original dramas, according to iResearch. IQIYI, Inc. 's high-budget online original TV series "Tomb robbing Notes", released in 2015, generated more than 100 million traffic within 24 hours of release, with a total traffic of more than 4 billion.
Since 2015, iQIYI, Inc. has released several award-winning original dramas, including "Old Nine doors" and "undocumented Crime". The above two episodes generate about 13 billion traffic. The company has also pioneered a series of very popular Internet variety shows, such as "Strange Theory" and "China has Hip Hop," which were released in 2014 and are now in their fourth season, both of which have generated 3 billion traffic.
Case study: "Hip Hop in China"
"China has Hip Hop" has been viewed 3 billion times; short videos have been viewed 8 billion times, occupying 36 seats among the 50 hot topics on Sina Weibo Corp.
The program had a huge economic effect, with a 60-second ad position of 45 million yuan in the finale.
Fine content selection and production granted by artificial Intelligence
Forecasting video traffic and movie box office are key benchmark indicators to help determine the cost of content.
In-depth understanding of partner
Most knowledgeable content partner
IQIYI, Inc. 's content ecosystem and strong publishing and monetization capabilities attract and support different types of content partners, providing them with an optimized return on investment.
IQIYI, Inc. 's partner situation
The functions that iQIYI, Inc. provides to content partners include content management, user and traffic data, and revenue sharing information.
Bring innovative solutions to advertising partners
IQIYI, Inc. 's solutions for advertising partners include video front-end and pop-up advertising, In-Feed advertising and content-based innovative advertising.
Leading artificial intelligence technology enhances user experience
Through artificial intelligence, big data and cloud computing, iQIYI, Inc. has the capabilities of intelligent creation, intelligent output, intelligent tagging, intelligent publishing, intelligent viewing, intelligent monetization and intelligent customer service.
IQIYI, Inc. 's management team
Gong Yu, founder and CEO of iQIYI, Inc.; Wang Xiaohui, Chief content Officer; Tang Xing, Chief Technology Officer; Wang Xiaodong, Chief Financial Officer; Wang Xiangjun, Chief Marketing Officer; Yang Xianghua, Senior Vice President; Duan Youqiao, Senior Vice President
Understand the entertainment industry through unique corporate culture
IQIYI, Inc. has the genes of technology and innovation, and has the characteristics of inclusiveness and mutual respect.
IQIYI, Inc. 's growth Strategy
IQIYI, Inc. 's growth Strategy
In the field of original content, iQIYI, Inc. will recruit top talent, systematically produce phenomenal original content, and strengthen the relationship with upstream industry participants.
In terms of technological innovation, iQIYI, Inc. will use artificial intelligence and big data to produce content, enhance entertainment experience, launch content recommendations, and serve advertisers and content partners.
In the content delivery ecosystem, iQIYI, Inc. will expand long-tail content coverage, increase the number of iQIYI, Inc. partner accounts, and further develop content in new media formats.
In terms of user base, iQIYI, Inc. will increase its attractiveness to users of different age groups, provide excellent and personalized experience, and strengthen content release.
In the monetization channel, iQIYI, Inc. will increase the penetration of paying users, establish a multi-tier paying subscriber system, expand In-Feed advertising services, and develop other monetization channels.
Financial highlight
Capture the monetization opportunities of diversification
IQIYI, Inc. 's monetization opportunities include membership services, content distribution, online games, paid reading, online advertising services, copyright licensing, e-commerce and so on.
Rapid and diversified revenue growth
IQIYI, Inc. 's total revenue in 2017 was 17.3784 billion yuan ($2.671 billion), up 54.6 percent from 11.2374 billion yuan in 2016 and 5.3186 billion yuan in 2015.
IQIYI, Inc. 's revenue from membership services in 2017 was 6.536 billion yuan ($1.0046 billion), up 73.7 percent from 3.7622 billion yuan in 2016 and 996.7 million yuan in 2015.
The share of member services revenue in total revenue rose from 18.7 per cent in 2015 to 33.5 per cent in 2016 and further to 37.6 per cent in 2017.
IQIYI, Inc. 's online advertising revenue in 2017 was 8.1589 billion yuan ($1.254 billion), up 44.4 percent from 5.6504 billion yuan in 2016 and 3.3999 billion yuan in 2015.
Enhanced monetization capability
IQIYI, Inc. 's average revenue per mobile daily active users rose from 60.20 yuan in 2015 to 89.6 yuan in 2016 and 137.9 yuan in 2017, with a compound annual growth rate of 51.3 percent.
IQIYI, Inc. 's revenue per 1,000 visit hours rose from 85.8 yuan in 2015 to 118.5 yuan in 2016 and 158.7 yuan in 2017, with a compound annual growth rate of 36.0%.
Revenue cost
IQIYI, Inc. 's total revenue cost in 2015 was 6.042 billion yuan, of which the content cost was 3.694 billion yuan, the bandwidth cost was 1.167 billion yuan, and the other costs were 1.18 billion yuan. The total revenue cost in 2016 was 11.437 billion yuan, of which the content cost was 7.541 billion yuan, the bandwidth cost was 1.875 billion yuan, and the other costs were 2.021 billion yuan. The total revenue cost in 2017 was 17.387 billion yuan, of which the content cost was 12.617 billion yuan, the bandwidth cost was 2.19 billion yuan, and the other costs were 2.579 billion yuan.
IQIYI, Inc. 's gross profit margin was-13.6% in 2015,-1.8% in 2016 and 0.0% in 2017. IQIYI, Inc. 's revenue cost accounted for 113.6% of total revenue in 2015, 101.8% in 2016 and 100.0% in 2017.
Operating expenses
IQIYI, Inc. 's operating expenses were 21.3313 billion yuan ($3.2786 billion) in 2017, up from 14.0269 billion yuan in 2016 and 7.7462 billion yuan in 2015. Of this total, revenue cost was 17.3866 billion yuan ($2.6722 billion), up from 11.4366 billion yuan in 2016 and 6.0418 billion yuan in 2015. Sales, general and administrative expenses were 2.675 billion yuan ($411.1 million), higher than 1,785.8 million yuan in 2016 and 1.204.5 billion yuan in 2015. Spending on R & D was 1.2698 billion yuan ($195.2 million), up from 824.5 million yuan in 2016 and 500 million yuan in 2015.
Stocks that must be owned
Why is iQIYI, Inc. worth investing?
IQIYI, Inc. 's reasons for investing include: a leading position in the market; an advanced business model that captures market opportunities; a deep understanding of China's entertainment industry; top original production capabilities; and orderly and efficient investment in content.
China's entertainment industry will become a trillion yuan market.