Tiger Securities: tiger teeth and Betta will merge soon, and the era of paid live broadcasting is coming?

 Tiger Securities: tiger teeth and Betta will merge soon, and the era of paid live broadcasting is coming?

Natural transition to a stable growth period, profitability significantly improved

In this quarter, the income of Betta and Huya maintained a growth rate of more than 30%, both exceeding market expectations. Compared with previous quarters, core live revenue continued to slow. We can understand that during the whole epidemic period in the first half of the year, the external positive (housing economy) and negative (consumer demand) factors offset each other, and the two head platforms mainly rely on internal structural adjustment and naturally transition to a stable and reasonable growth period.

As Betta and Huya gradually reduce marketing costs from 2019 and sacrifice users for profit growth, their profitability has been significantly improved. In this quarter, under non GAAP, the net profit of Betta was 323 million yuan, with a year-on-year increase of 513.7%; the net profit of Huya was 351 million yuan, with a year-on-year increase of 106%. We can see that after the improvement of operational efficiency, the profit of Betta increases at a faster speed, which shows that Betta has done better in cost control.

In terms of operation data, douyu and Huya also showed obvious differences in this quarter. The douyu Mau has been flat or slightly increased for several consecutive quarters, while the tiger tooth Mau increased from 143.9 million in the same period of last year to 168.5 million in this quarter, with a relatively obvious increase. We believe that the live broadcast platform is generally faced with the problem of high cost of customer acquisition. With its advantages in user scale, Betta gains profits by sacrificing users. Tiger tooths strategy is to harvest users as much as possible and keep up with Betta in terms of volume.

Analysis on the benefits of merger to all parties

1) For the live broadcast platform, Matthew effect is prominent

2) To the anchor: the threshold is raised, the competition is intensified, and the anchors discourse power is weakened

3) For users: it is necessary to adapt to the new form of advertising and paid live broadcasting in the live broadcasting room

From the perspective of monthly living scale and market share, the merger of Betta and tiger teeth will inevitably form a monopoly on live game broadcasting. It is likely to introduce the forms of watching 60 second ads in the live broadcast room and creating paid live broadcasting room (large-scale events, famous teachers classes, etc.) to promote income diversification. But for users, the combination of the two does not need to choose the platform, but these new live broadcast forms will affect the viewing experience.

For example, twitch has to watch 5-6 seconds of advertising, which we think will greatly boost advertising revenue. Because for the user groups who watch the live broadcast, their consumption demand and consumption ability are very potential and need to be tapped. Advertisers will be more interested in this intuitive and most efficient delivery form, such as mobile game companies.

4) Kwai tiktok, B station, and compete for user time.

According to Aurora data, in the second quarter of 2020, the short video industry accounted for 23.8% of the total user time, with an increase of 2.7% month on month, surpassing the instant messaging industry for the first time and becoming the industry with the largest proportion of user hours.

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