Photo source: Visual China

Blue Whale financial reporter Xu Xiaochun

Whipped eggs, which are popular all over the country, brought Yao Ji Technology, the big winner behind it, to the front stage. In 2023, Yao Ji Technology's playing card business revived, and sold playing cards alone to reach 1.1 billion yuan.

At the beginning of its listing, Yao Ji Technology's main business, the production and sale of playing cards, was questioned about its single business. Until 2018, the second generation took over. After a series of capital operations, Yao Shuobin brought Yao Ji Technology's playing cards to the Internet. Up to now, the digital marketing business around the “Byte System” has supported half of Yao Ji Technology. Online games such as fishing have become the company's main source of profit, and the rejuvenating poker business has instead become a “side business” for Yao Ji Technology.

Selling poker brings in 1.1 billion yuan a year

The whipped egg craze set off in recent years is driving the development of industries such as poker card manufacturing and online board games. Recently, the State Administration of Sports also proposed a new quality of productivity to add a “new engine” to the sports industry. Behind this, Yao Ji Technology, which has the largest market share in the domestic playing card industry, waited for spring and reached 1.1 billion yuan a year by selling playing cards.

In 2023, Yao Ji Technology's total revenue was 4.307 billion yuan, up 10.01% year on year, and realized net profit of about 562 million yuan, an increase of 61.37% year on year. Currently, Yao Ji Technology's business is divided into three segments: playing cards, games, and digital marketing. Last year, gaming was already the highest-grossing business segment of Yao Ji Technology, accounting for about 28.47% of sales, and the playing card business achieved revenue of about 1.09 billion yuan, accounting for about 25.31%.

In 2008, Yao Wenchen founded Shanghai Yao Ji Poker Co., Ltd., the predecessor of today's Yao Ji Technology. In 2011, Yao Ji Technology landed on the Shenzhen Stock Exchange. When it first went public, Yao Kee Technology was also called “Yao Kee Poker,” and the playing card business was the company's only source of revenue. In 2010, the production capacity of Yao Ji Technology's playing cards was 70,000 decks per year, and production capacity was basically saturated. Judging from the sales area, the Northeast region was the most important market for Yao Ji Poker, accounting for about 28.76% of sales in 2010, far higher than other regions.

In the first year of listing, Yao Ji Technology sold about 674 million decks of playing cards in 2011, achieving revenue of about 621 million yuan. Back then, due to rising prices of paper, labor, etc., Yao Ji Technology raised the sales unit price of playing cards from 0.85 yuan/copy to 0.92 yuan/pair, driving the gross margin of the poker business to 20.86%.

In 2014, Yao Ji Technology sold close to 800 million decks of playing cards, becoming the historical peak of the company's playing card sales. Since then, Yao Ji Technology's playing card sales have continued to decline. In 2015, the sales volume of Yao Ji Technology playing cards was about 789 million. By 2018, the sales volume of Yao Ji Technology playing cards had dropped to 586 million.

Although Yao Ji “dominates” in the poker segment, Yao Ji Technology's performance fluctuated drastically and declined under the torrents of the times. The gross margin of Yao Kee Technology's poker business peaked at over 28%, and the gross margin fell back to 20.35% in 2018. The main poker business contracted, causing Yao Ji Technology to enter a period of negative growth of three consecutive years of deducting non-net profit starting in 2015.

In response to the 2018 Annual Report inquiry letter, Yao Ji Technology mentioned that the poker industry is also facing the impact of diversification of entertainment methods, including but not limited to emerging forms of entertainment such as mobile games and short videos. Presumably based on the idea of breaking in after not being able to play, at the end of 2018, Yao Wenchen resigned and took over for the second generation, and Yao Ji Technology embarked on the path of gaming and traffic. As for the poker business, which made a fortune, I finally waited until the whipped egg game became popular.

The whipped egg game itself originated in Nanzha Township, Huai'an in the 1960s. In 2017, the Board and Card Sports Management Center of the State Administration of Sports officially released the “Huai'an Whipped Egg Competition Rules”, and the whipped egg game began to have uniform rules at the national level. Over the next few years, the whipped egg game gradually became popular all over the country. According to the rules, the whipped egg game required two playing cards, and Yao Ji Technology was once again at the table.

In 2019, Yao Kee Technology's playing card business revenue surged 27.56% to reach 680 million yuan, with double-digit growth in the following years. In 2022, Yao Ji Technology was able to collect 1,107 billion yuan by selling playing cards alone. In 2023, whipped eggs will be held at the Spring Festival Gala. In April of the same year, a whipped egg professional committee was established.

Influenced by the continued popularity of whipped eggs, Yao Kee Technology's playing card business revenue fell slightly by 1.57% in 2023, and was still 1.09 billion yuan. At the same time, gross margin increased 3.4 percentage points, and rebounded to 26.56%.

The Yao Family's Capital Operation

Yao Ji Technology is a typical family business.

Prior to listing and issuance in 2011, Yao Wenchen and her spouse Qiu Jinlan, eldest son Yao Shuobin, second son Yao Shuoyu, and daughter Yao Xiaoli were the actual controllers of the company, with a total shareholding ratio of 93.86%. Among them, Yao Wenchen directly held 19.57% of the shares, while Qiu Jinlan, Yao Shuobin, Yao Shuoyu, and Yao Xiaoli each held 18.57% of the shares separately. After the listing, the Yao family also held more than 70% of the shares.

When it first went public, questions about Yao Ji Technology's sole reliance on the playing card business continued to appear in the market, so in the second year of listing, Yao Wenchen began a series of cross-border experiments.

For example, in 2012, Yao Ji Technology and Beijing Lianzhong formed a joint venture to launch the “Yao Ji Lianzhong Poker Online” platform. Yao Ji Technology held 49% of the shares with 980,000 yuan. In December of that year, Yao Ji Technology also planned to obtain 30% of the shares of China Acrobatic Troupe Co., Ltd. through a capital increase. In 2013, Yao Ji Technology reached a cooperation with “500 Lottery Network” to customize no less than 100 million playing cards with the “500 Lottery Network” logo and carry out cooperative promotion for Internet lottery sales customers.

Yao Ji Technology also never went back on the road to crossing the Internet lottery. In 2014, Yao Ji Technology established another subsidiary, Yao Ji Yucai, to operate lottery betting and set up an internet lottery sales business. In addition, in 2014, Yao Ji Technology also experimented with game development and operation, increased the capital of the Shanghai Cell Therapy Engineering Technology Research Center by 130 million yuan, set up a biotechnology company, and acquired part of the Chinese and German Solomon shares in smart bikes.

After being at the helm for ten years, at the end of 2018, 67-year-old Yao Wenchen resigned from a series of positions such as chairman of the company and chairman of the strategic committee due to personal reasons, and officially took over for the second generation. His eldest son, Yao Shuobin, who was born in 1983, was elected as the chairman of the board.

In the context of the Internet + era, Yao Shuobin is even more determined to connect to the Internet with Yao Ji playing cards, and Yao Shuobin's transformation path is more clear. In 2019, Yao Ji Poker changed its name to Yao Ji Technology. In the same year, the game business overtook the poker business, accounting for 58.64%, making it the most important source of profit for Yao Ji Technology. This year, Yao Ji Technology's net profit increased by more than 150%, and the recovery in performance was mainly due to the acquisition of two game companies.

In August 2018, Wanshengda Poker, a subsidiary of Yaoji Technology Holdings, and Shanghai Yaoqu acquired 25% and 26% of the shares of Big Fish Sports in cash, respectively. At that time, the overall valuation of Big Fish Sports was about 477 million yuan. Shanghai Yao Qu has 66% of the shares held by Yao Xiaoli, and Yao Shuobin participated in the shares and is the actual executive partner. Shanghai Yaoqu is a company set up specifically to acquire shares in Big Fish Sports.

In November 2019, 26% of the shares of Big Fish Sports were sold to listed companies after being taken in the hands of Yaoqu in Shanghai. At this point, the valuation of Big Fish Sports reached 630 million yuan. Yao Shuobin made nearly 40 million yuan with this change of hands.

Also in 2018, Yao Kee Poker also invested 668 million yuan to acquire 53.45% of Chengxi Technology's shares. An operation similar to Big Fish Competition is that in the year before the listed company acquired Chengqi Technology, Yao Shuobin first took a stake in Chengqi Technology and sold part of his shares to the listed company the following year. The related transaction premium was 2314.61%. Later, Yao Ji Technology acquired the remaining shares and achieved full ownership of Dayu Sports and Chengxi Technology.

Chengqi Technology itself was founded in 2013 and mainly operates the game platform “Fish Ball Game”, which covers various casual games such as fishing, chess, and arcade machines. At the beginning of 2018, Chengxi Technology launched the game “Yao Ji Fishing”, endorsed by Wu Mengda, and the monthly water flow reached 10 million levels. Before the Spring Festival, Yao Kee Technology also launched the board game “Little Mei Dou Landlord”, which is considered to have actually brought Yao Kee Poker online.

Unlike the traditional game model where you pay for items, “Xiaomei Dou” is Yao Ji Technology's first mobile game to monetize through an ad network. The profit model of “Xiaomei Dou” completely relies on gamers watching advertising videos to receive rewards.

Behind the operation of “Xiaomei Doudou”, Lu Ming Technology acted as an “intermediary” and mediated between Yao Ji Technology and the “Byte” company. In the end, Ohayoo, a game distribution platform owned by ByteDance, took over the exclusive agency rights of “Xiaomei Dou Dou”, with traffic support from the “Headline” channel.

This also gave Yao Ji Technology a new idea of crossing borders. In 2019, Yao Ji Technology increased its capital by 30 million yuan to subscribe for 12% of the shares of Luming Technology, a purchasing platform operated around ByteDance, making it its third largest shareholder. The following year, Yao Ji Technology bought the remaining 88% of Luming Technology's shares by selling houses to raise money.

At this point, Yao Ji Technology has formed the main business pattern at present. In 2023, the digital marketing business contributed 44.38% of revenue to Yao Ji Technology, supporting the revenue scale of listed companies. However, the digital marketing business is far less bright than the surface. The gross margin of this business in 2023 was only 5.45%. Yao Ji Technology's main source of profit is the game business. The gross margin of the game business reached 96.01% in 2023, achieving gross profit of about 1,177 billion yuan.

Although Yao Ji Technology has not had an acquisition period that had a significant impact on the company's strategic development in recent years, the Yao family's capital operation has not stopped. On April 29, Yao Shuobin just sold an office property in the Chengdu High-tech Zone for 16.483,200 yuan to Luming Network as an office space for its innovative Internet marketing business, with a total construction area of 969.6 square meters.

In 2023, 72-year-old Yao Wenchen and the Yao family behind him had a wealth of 7.3 billion yuan.