On June 5th pre-market trading, Douyu (DOYU.US) announced its Q1 2024 financial report.

Looking at Douyu's latest financial report, there are some highlights: as the second growth curve, non-live-streaming business is quite impressive this time. With the rapid growth of the company's commercial data. This business is releasing economies of scale and is expected to become an engine for the company's continuous performance growth.

I. The second growth curve is releasing economies of scale and is expected to enter a new stage of growth.

For a long time in the past, the revenue of game live streaming platforms such as Douyu, Huya, etc. depended mainly on the single source of revenue from game live streaming donations, which accounted for more than 95% of the platform's revenue contribution. How to get rid of the reliance on a single business? From the first quarter of this year's financial data, Douyu seems to have found a new solution.

In Q1 2024, Douyu's total revenue was RMB 1.04 billion. Among them, the company continued to deepen its services and cooperation in the game industry, and through the development of game props sales, game advertising and distribution services and other businesses, it realized a sharp increase in advertising and other businesses. This business realized revenue of RMB 239 million, a year-on-year increase of 109.3%.

This also drove further improvement in Douyu's revenue structure. The financial report showed that Douyu's advertising and other business revenues increased from less than 4% in Q1 2023 to 23% in Q1 2024.

It seems that Douyu's revenue structure is becoming more balanced, and its growth potential is gradually expanding. This in a certain way proves the effectiveness of Douyu's strategic transformation and the sustainability of its long-term development.

So why does Douyu continue to push for diversified business transformation?

From the market perspective, according to the "2023 China Game Industry Report" data, in 2023, China's actual sales revenue in the game market was RMB 302.964 billion, a year-on-year increase of 13.95%, exceeding RMB 300 billion for the first time; the user scale reached 668 million, a year-on-year increase of 0.61%, which means that there is still market increment in the game industry.

In the fierce competition of the industry, game developers naturally devote a lot of effort to promoting the success of the game, which creates new opportunities for revenue growth of game live streaming platforms represented by Douyu.

In addition, the game live streaming industry has reached a crucial turning point, and the competition between the industry has risen from a single dimension to the ecological level and diversified business competition. Improving the content ecosystem and exploring new diversified business income channels while retaining existing users and continuously attracting new users are key.

II. Under the new competitive pattern, how can Douyu seize the opportunity?

In the context above, instead of focusing solely on anchors and users, it is better to deepen cooperation with game developers and provide services to users and developer partners in more dimensions. This not only enriches the live streaming platform's ecosystem, but also brings huge value.

Douyu has keenly observed the industry trend and has put forward and continuously practiced the development strategy of "a diversified content ecosystem platform centered on games" based on its judgment of the future direction of the industry. According to Douyu's temporary management committee, in Q1 2024, the platform adhered to the long-term development strategy of "a diversified content ecosystem platform centered on games", integrated and utilized the platform's abundant anchor resources, rich content ecosystem, agile operation mechanism, and close cooperation with game developers and other advantages, and devoted itself to realizing the long-term growth and sustainable development of the platform.

Specifically speaking, in the past quarter, Douyu further connected games, anchors and players through prop sales services. Taking the CrossFire Segmentation CFS Championship Welfare Season as an example, the game launched Douyu platform and anchor exclusive skins, and the anchors promoted relevant game props in the Douyu live streaming rooms. On the one hand, this can strengthen the connection between anchors and fans and effectively increase sources of income; on the other hand, it can also attract more users to the game, effectively promoting the liveliness of the game ecosystem. Based on this, an interactive effect between the game and the platform was formed, achieving mutual empowerment.

Image source: Official WeChat account

It should be noted that promoting the development of new non-live-streaming businesses does not mean that Douyu has neglected live streaming businesses. On the contrary, Douyu's live streaming business has always been the company's foundation. It is precisely the stability of the foundation that can support Douyu's continuous proactive changes and the establishment of new growth curves.

In the first quarter, Douyu continued to strengthen its moat around the content ecosystem and upgraded on the three levels of competition, products, and collaboration. Specifically, in terms of competition, Douyu transferred nearly 30 official large-scale events during the reporting period and produced more than 40 e-sports events. In terms of products, Douyu upgraded its product functions, added a 'competition' category, and further enhanced the user's experience.

More importantly, at the collaboration level.

Since the first half of this year, Tencent's major game IPs, including 'King of Glory' and 'League of Legends', have started to open up live broadcast permissions to the Douyin platform. The gaming industry is moving from traditional competition to cooperation and mutual benefit, showing a new trend in the industry competition pattern.

Douyu actively grasps the trend, breaks the platform barriers, and deepens its cooperation with Internet giants and peers. From cooperating with Taobao in the fearless contract zone to cross-platform cooperative events represented by the 'E-sports All-Star New Year Competition', Douyu further enhances the depth of collaborative linkage, explores various modes of cooperation, and brings users more high-quality content.

In the long-term view, the new competition and cooperation relationship will inevitably accelerate the trend of refinement. Although this brings challenges to the niche platform, based on Douyu's moat in the content ecosystem, its platform value is further highlighted, and it can bring new growth points to Douyu.

III. Conclusion

Overall, the improvement of Douyu's revenue structure in the first quarter is of great significance.

However, such a high-quality company is deeply undervalued in the capital market. The author observed that as of March 30, 2024, Douyu had a total of $937 million in cash and cash equivalents and other. Contrary to the ample cash in hand, as of June 5, Douyu's market cap was only $318 million.

It is foreseeable that in the face of the rapid evolution of the game live streaming industry, Douyu is following this long-term sustainable path to further enhance its commercial strength and competitiveness. In the context of the industry recovery, Douyu's value return is only a matter of time.