Hey folks! Playing around with Commonstock's memo maker, and decided I'd port over my Bilibili piece. I've noticed that the original piece in all it's glory is a tad long for most people to read in one sitting, so I'm going to be breaking it up into a "series" of memos on here.

I'll be posting these over the next few days, but if you want to read the whole thing right now, please visit my website here. And if you like our work, please consider subscribing. This is part of a sample research report we did. We will be publishing one more before putting it behind the paywall. Members Plus subscribers will also have access to a downloadable copy of our detailed financial model.

Bilibili is an online video platform that hosts various user generated content, fostering a dedicated community initially built around ACG (anime, comics, and games). Since then, the platform has broadened its user base to cover a diverse set of interests and added live streaming, gaming, and e-commerce. Below we give a brief overview of Bilibili and dive into how we think about analyzing and valuing each of its businesses.

Before we jump into the analysis, check out this slideshow to get a feel for what it’s like to browse Bili’s home page on a desktop. You can see advertisements, promoted videos, weekly schedules, and leaderboards (what’s trending).

Founded in 2009 by then college student, Yi Xu, out of frustration because ACG niche websites (namely ACFun and Nico Nico Douga) were low quality and unreliable. The Bilibili site was officially launched in 2010, but still suffered from the same low operational expertise and inadequate resources that plagued other ACG websites. Nevertheless, it garnered enough traction to popularize the novel Bullet Chat feature that allowed users’ comments to flow over the video. Rui Chen, then an accomplished entrepreneur with a fondness for anime, appreciated what Bilibili was trying to achieve, but nevertheless was prepared to set up a competitor that could better execute. However, Chen was reticent to go all in as he was managing another successful business that would invariably split his time. After meeting with Yi Xu, he instead opted to invest and lend his business expertise to Bilibili as an advisor until he took over as CEO in 2014 with Yi Xu focusing on platform development as President. Shortly after taking the reins, Chen secured the rights to license Fate/ Grand Order for a mobile game in China, which would grow to be their first (and only) material revenue stream for years. It was on the success of Fate that it could continue to reinvest and grow the platform, setting themselves up for the next stage of their expansion.

**Service:**

While until last year mobile gaming comprised a majority of their revenues (~80% at the beginning of 2018), Bilibili’s mobile gaming success is mostly owed to a fortuitous licensing agreement with already popular IP (Fate/Grand Order) that fit well with its preexisting user base, and thus shouldn’t be over emphasized as we think about the fundamental value of its service. At its core, Bilibili is a video aggregation platform allowing creators to upload video content and users to easily find something of interest. It has matured meaningfully from the ACG community it was born to serve, as content has broadened to offer something appealing for virtually everyone. Nevertheless, the aura of the close-knit ACG community continues to permeate the platform, with more thoughtful and less offensive commentary than other open social communities. The quality of the community is in no small part thanks to the 100 question test users must pass to gain commentary privileges, which covers various interest-topics and acceptable etiquette, cultivating the desired user behavior best for the community. Sending a bullet chat essentially incorporates the user in the content, making it a more engaging experience and providing an opportunity to monetize as users can pay for special bullet chats like color. This friction to comment, not only selects for higher quality users and lowers the need for moderation, but also creates “buy-in”, which reduces churn without limiting their funnel of users. MAUs just reached 202mn, +55% YoY and “official members” who passed the exam reached 103mn, +51% YoY. Today, Bilibili also offers live streaming, subscriptions for premium content, and e-commerce in addition to its initial video hosting and mobile game distribution services.

Part 2 will be a deep dive into Bilibili's monetization.

Reminder that I'll be posting these over the next few days, but if you want to read the whole thing right now, please visit my website here. And if you like our work, please consider subscribing. This is part of a sample research report we did. We will be publishing one more before putting it behind the paywall. Members Plus subscribers will also have access to a downloadable copy of our detailed financial model.

And if you've gotten this far, thanks so much for reading! Would love any feedback anyone has - on content or on structure. Do you like this shorter version? Or would you prefer to read the entire thing at once? Are the photos stacked vertically okay, or do you prefer the slideshows?