Deep into the field of short video, Kuaishou Technology has become a domestic high-quality content platform. Kuaishou Technology was founded in March 2011, positioned in GIF production, and transformed from a tool-based community to a short video community in November 2012. As of September 2021, Kuaishou Technology's DAU reached 320 million, a year-on-year increase of 17.9%, and a year-on-year increase of 19.5%. The number of daily active users of 3Q21 increased to 119.1 minutes, an increase of 30.9% over the same period last year. According to the scale of users and the duration of use, Kuaishou Technology platform has become one of the top content platforms in the country.
After reviewing the short video industry, we conclude that the prosperous content ecology requires 1) production tools to reduce the cost of content production, such as filters, special effects props, magic expressions, etc. 2) the sustainability of content needs a platform to help lower the threshold of creativity, for example, the counterpart game will subcontract the idea, the user only needs to perform the action, the audio and lines are produced by a professional team, and the audio track reuse brings in a professional music production team. The team produces music, and the user is also responsible for performing the action. 3) the above two points promote the rapid expansion of the supply side, but one of the main reasons for the decline of Meipai is that the content is highly homogenized. "Beauty" is indeed attractive, but it is difficult for users to retain it. Therefore, the second shot introduces operational activities, such as the "Ice Bucket Challenge", and Douyin and Kuaishou Technology introduce algorithm recommendation. The former injects live water from the platform, but the latter really solves the demand-side matching problem from the mechanism. Therefore, after the introduction of the algorithm recommendation, the cycle of short video mode really runs smoothly.
The optimization of Kuaishou Technology's commercial structure will improve the atmosphere of the community. Reviewing the course of Kuaishou Technology, we noticed that the founder set the tone of the product, chose the commercialization path, and the commercialization path affected the main types of early high-quality content and the community atmosphere. At present, Kuaishou Technology has combed the governance structure, and there is marginal room for improvement in corporate governance. We suggest that we should pay close attention to Kuaishou Technology's adjustment, optimization and upgrading at the level of governance structure, organizational structure and company strategy. At the business level, the company still adheres to core values, so product design and orientation determine the rich UGC ecology (supply side). In addition, the company accelerates commercialization, introduces MCN institutions and service providers, and strengthens infrastructure construction to speed up the construction of PGC/PUGC ecology. at present, Kuaishou Technology's commercial products have been basically built and perfected, in the process of introducing service providers and accumulating vertical solutions. It is expected that further commercialization will usher in a comprehensive improvement in business, content and users, but the pressure on short-term performance may remain.
Kuaishou Technology is currently in the early stage of commercialization, and there are broad prospects for online marketing and e-commerce business. 1) live broadcast business: we believe that live broadcast business is expected to maintain steady development; 2) online marketing business: the company's advertising loading rate is relatively low at present, and there is much room for improvement in the future. Revenue is expected to achieve 421.39, 574.78, 74.878 billion yuan in 2021-23; 3) other businesses: e-commerce business is expected to achieve steady growth, and the revenue share in the medium-and long-term dimension is expected to continue to increase. It is estimated that the operating income of other businesses will be 73.10, 100.28 and 13.469 billion yuan in 2021-23. Combined with SoTP, we first gave Kuaishou Technology a reasonable value of 117.44 yuan per share and a "buy" rating.
Risk hint: user growth is not as expected, business development is not as expected, regulatory risk, copyright protection risk.