36Kr Holdings, a domestic technology media leader listed on US stocks, released its third-quarter results for the third quarter of 2019, its first since it went public. The data show that revenue during the period was 131 million yuan, an increase of 59.1% over the same period last year, maintaining a strong growth in revenue; at the same time, in accordance with the requirements of the US GAAP accounting standards, a net loss of 12.4 million yuan was recorded during the period; excluding the US general accounting standards, the adjusted net profit was 13.4 million yuan, an increase of 22% compared with 11 million yuan in the same period last year.

As the first share of "New Economic Services", 36Kr Holdings's business is mainly divided into three sectors, namely online advertising, enterprise value-added services and user subscriptions. Judging from the financial data in the first half of this year, 36Kr Holdings's revenue from enterprise value-added services reached 101 million yuan, accounting for 50% of the total revenue at that time, and became its main source of revenue. The new results for the quarter show that revenue from value-added services still accounts for 48.9% of the total revenue during the period. It can be seen that 36Kr Holdings is gradually breaking away from the profit model in which the media takes advertising as the main source of income and turning to relying on enterprise value-added business to make hematopoiesis has once again been verified.

Although 36Kr Holdings recorded a loss of 12.4 million yuan in the third quarter, in addition to his listed media business, he also has krypton space and whale quasi-other two major platforms to cooperate with each other. In contrast, he has a moat more than his competitors in the industry. And the currently listed media business also seems to have found a new revenue growth point in the enterprise service market, and there is still more optimistic growth potential in the field of technology media in the future. American Stock Research uses its latest earnings report to analyze its current challenges and future growth space.

Revenue increased by 59.1% year-on-year

Enterprise value-added services achieve rapid growth of 202.8%

According to 36Kr Holdings's new financial report for the third quarter, revenue during the period was 131 million yuan, an increase of 59.1% over the same period last year. Of this total, revenue from online advertising services was 54.1 million yuan, up 4.6 percent over the same period last year; revenue from enterprise value-added services was 64 million yuan, up 202.8 percent over the same period last year; and revenue from subscription services was 12.9 million yuan, up 36.2 percent from the same period last year. It can be seen that this quarter's financial report continues the growth trend of the previous financial report.

In the proportion of total revenue, enterprise value-added services still play a leading role, accounting for 48.9% of total revenue; online advertising accounts for 41.3%; and subscription services account for 9.8%.

In terms of profit, the adjusted net profit under non-GAAP was 13.4 million yuan, up 22% from 11 million yuan in the same period last year. According to the requirements of US GAAP accounting standards, the net loss in the third quarter was 12.36 million yuan, while the net profit in the same period last year was 9.78 million yuan, turning into a loss over the same period last year. This is mainly due to recording the behavior of issuing options as a loss item, not caused by a business loss.

In terms of cost, the cost in the third quarter was 77.9 million yuan, an increase of 139% over the same period last year. Of this total, sales and marketing expenses were 31.8 million yuan, an increase of 69 percent compared with 18.8 million yuan in the same period last year, and management expenses were 37.4 million yuan, an increase of 473.8 percent over 6.5 million yuan in the same period last year. The R & D expenditure was 8.7 million yuan, up 20.1% from 7.2 million yuan in the same period last year.

In terms of gross profit, in the third quarter, the gross profit was 55.1 million yuan, an increase of 23.3% compared with 44.7 million yuan in the same period last year, with a gross profit margin of 42%.

In addition, during the 12-month period ending September 30, 2019, the average monthly visits to proprietary platforms and major third-party platforms reached 389.5 million, an increase of 167.5 per cent year-on-year.

To sum up, 36Kr Holdings's financial report for this quarter is generally OK. Although the loss is still there, there is still hope for the rapid growth of revenue under the broad space of the enterprise service market in the future. For 36Kr Holdings, who is constantly expanding the market, the loss to a certain extent may be a strategic loss. However, as a science and technology media, 36Kr Holdings still has corresponding challenges under the situation of fierce competition in the media business.

In the context of brilliant revenue growth

The challenge can not be ignored.

At the earlier IPO meeting, the relevant person in charge said that 36Kr Holdings was in the first position in the industry in terms of traffic and revenue, and the data of 2, 3, 4 and 5 were not as big as 36Kr Holdings. No matter how specific it is, we can at least see that the competition between science and technology media is inevitable and even more intense.

1. The revenue growth rate is 59.1% and the loss needs further improvement.

Judging from 36Kr Holdings's revenue, its growth rate is still gratifying. Q3 reported revenue growth of 59.1 per cent during the period; revenue of 299 million yuan in 2018, up 148 per cent from a year earlier; and operating revenue of 200m yuan in the first half of this year, up 179 per cent from a year earlier.

However, with the rapid growth of revenue, profitability needs to be further improved. According to public data, the company is still in a state of loss in the first half of this year, while the new financial report for this quarter shows a net loss of 12.36 million yuan during the period, while its cost has also increased significantly. The data show that the cost in the third quarter was 77.9 million yuan, an increase of 139% over the same period last year, which is not a small increase, which is not a good thing for 36Kr Holdings.

Of course, the net loss of 12.36 million yuan was generated under the requirements of US GAAP accounting standards, and the net profit under non-US GAAP has reached 13.4 million yuan, an increase of 22% over the same period last year, which shows that 36Kr Holdings has been developing in a more optimistic direction. And through the results of this quarter and last quarter, it is found that its previous main advertising business has been gradually surpassed by the enterprise service business, which is a larger market. After all, it is already a traditional mode in the industry for the media to increase revenue through advertising, and the ceiling is not high, while the rapid growth of 36Kr Holdings's revenue and enterprise service business show that it has found a new revenue growth point, which in the long run may have an important impact on revenue and net profit.

2. How does 36Kr Holdings stand out when the competition among science and technology media intensifies?

Although 36Kr Holdings's new financial report for this quarter recorded 59.1% revenue growth, but judging from the first two results, the revenue growth rate actually showed a slowing trend. In the first half of this year, revenue was 200 million yuan, an increase of 179% over the same period last year, while revenue growth in 2018 also reached 148%. Although there will be loopholes in the quarter-on-quarter and half-year comparison, the difference between 59.1% and 179% is still a little big. And its revenue growth is inseparable from the fierce competition in the industry, the current 36Kr Holdings track is not a loose track.

It is difficult for any industry to escape the challenges of competitors, and the Internet technology media is no exception, especially in the context of the disappearance of Internet dividends, the competition in the industry will become more fierce. At present, from a domestic point of view, 36Kr Holdings's competitors are mainly titanium media and tiger smell.

Take titanium media, for example, titanium media has completed a new round of financing of nearly 100 million yuan in July this year, as early as 2016, it has received 30 million yuan of financing. Its founder Zhao Hejuan said that titanium media has been profitable for two years and plans to go public within three years. It can be seen that its confidence and ambition for future development, which will certainly form an impact on the flow of 36Kr Holdings, titanium media and 36Kr Holdings also have great similarities in business.

In addition, it is worth mentioning that according to a previous report by the US Stock Research Agency, 36Kr Holdings has a high degree of overlap with titanium media and Tiger's content, which at the same time lacks its own unique eye attraction. From this point of view, 36Kr Holdings still needs to work hard on the content and make more high-quality content in order to have the sufficient conditions to maintain the status of the industry.

In the track, in addition to the above two head enterprises, there are Pingwest and other central enterprises, although the current strength is not enough to shake 36Kr Holdings's industry status, but its user traffic will also form a corresponding impact. Of course, 36Kr Holdings's current position in the industry is inseparable from his own diversified ecological chain, and what is more important in the future is to build a stronger moat on the core media business. 36Kr Holdings how to use the core media business to expand more imagination?

Taking content as the center to build a diversified ecological chain

Enterprise service market may become its new waterway

We know that 36Kr Holdings's listed business is not only the media business, but also its core business, and the importance of high-quality content is self-evident. On the other hand, Krypton Space and Whale are indispensable components in the industrial closed loop that 36Kr Holdings wants to build, which extends the industrial chain and enhances its overall competitiveness. The listed media business, from the development of relevant foreign media, still has the potential to be explored.

1. As a technology media, maintaining content quality is still the key.

Since ancient times, the media industry has relied on content for a living, and "content is king" could not be better used in this industry. For 36Kr Holdings, this is from the media, although also derived from different areas of business, but the most influential is still the media business. In the future, if you want to maintain the influence of the platform, it is particularly important to maintain the content.

Of course, today's media industry is facing a more demanding environment. Not only to act as a user-neutral disseminator of information, but also to act as a guide of public opinion at the national and social levels, and investors also hope that the media can do big business, the particularity of identity is that its development is subject to many restrictions. What's more, the competition in today's media industry is extremely fierce, and the media that really do a good job of content are mostly in front of the heavy load, desperately fighting for media resources. Even if 36Kr Holdings has a good influence in the science and technology media, it is difficult to avoid the industry challenges in the future.

2. The enterprise service market of high-quality content aggregation traffic is worth exploring.

Content is undoubtedly the core competitiveness of 36Kr Holdings. When it improves the quality of content, it is a typical mode for most media to realize traffic through advertising and value-added services. In this context, the ceiling of this model is not high. If Krypton wants to open up more room for growth, it naturally needs to explore a bigger market.

36Kr Holdings's revenue comes from three parts: online advertising, corporate value-added services and user subscriptions. Judging from 36Kr Holdings's latest financial report, the company's corporate service revenue is still growing rapidly. In the first half of 2019, the revenue of value-added services exceeded that of online advertising for the first time, becoming the company's main source of revenue. This is also confirmed by the new results for this quarter, which show that revenue from corporate value-added services grew by 202.8% and accounted for 48.9% of total revenue.

With the continuous development of the new economy, the prospect of 36Kr Holdings's enterprise service market is also becoming more considerable. According to the CIC report, the size of China's new economy-focused business services market has increased significantly from $7 billion in 2014 to $20.2 billion in 2018, with a compound annual growth rate of about 30.3%. It is expected to grow at a compound annual growth rate of about 22.5% by 2018 and reach $55.6 billion by 2023.

This development space will provide more imagination for 36Kr Holdings. At the same time, although 36Kr Holdings's krypton space and whale are not listed on the market, they can also make corresponding contributions. First of all, contact entrepreneurs and investment institutions through 36Kr Holdings's media business, and then provide krypton space services for entrepreneurs after completing investment and financing above, to help 36Kr Holdings create an ecological closed loop and promote the development of listed business.

In addition, 36Kr Holdings has already imitated the New York Times to launch relevant content payment, such as 36Kr Holdings's daily business selection. When the rise of the payment model will bring more possibilities for 36Kr Holdings's revenue. From the perspective of the development of foreign media of the same nature, it is worth learning from the development of 36Kr Holdings. Bloomberg, for example, has made a lot of money using the annual fee payer, with a record revenue of $10 billion in 2018, according to foreign media reports. Although the current market influence and volume of the two are quite different, there are similarities in content operation. The development experience of Bloomberg using client-side content payment should be used for reference by 36Kr Holdings. Once the mode of operation is recognized, it will bring considerable growth to 36Kr Holdings's revenue.

To sum up, 36Kr Holdings's overall performance of the new financial report this quarter is not bad. Revenue still recorded a good growth rate, although the loss is still there, but the adjusted net profit under non-GAAP reached 13.4 million yuan, an increase of 22% over the same period last year. Under the relatively broad development space of enterprise service and the interaction of 36Kr Holdings's own business, the road of future exploration is still worth looking forward to.