BabyTree lost 2.1 billion in 6 months. Is listing the platform more difficult than raising a baby? | hk rabu predaktorevan, web games

The listing of BabyTree, a maternal and infant community platform in Hong Kong, has stirred up controversy again.

On the afternoon of November 20, according to IFR, BabyTree guided the IPO price to be set at the low end of the guidance price range (its price per share is US$6.80 to US$8.80), which is lower than the capital market expectations.

As early as November 13, BabyTree caused public concern by postponing its IPO press conference.

According to Bloomberg, the IPO press conference originally scheduled to be held in Hong Kong on the 13th was suddenly canceled at noon. BabyTree stated in the email that the cancellation was due to technical issues and it was not yet known when the conference would be re-opened.

But soon, Lieyun.com learned that just one day later, on the afternoon of the 14th, BabyTree held a new press conference in Hong Kong and announced that it would be listed in Hong Kong on November 27.

In addition, Babytree originally planned to raise US$1 billion through IPO, but in the end it only raised about US$200 million to US$300 million, a decrease of up to 80%.

This makes people question why BabyTree, as a leader in domestic maternal and infant comprehensive community platforms, postponed its IPO conference. Does this mean that it lacks confidence in going public? Does the sharp drop in the scale of IPO fundraising mean that the capital market is not optimistic?

In addition, BabyTree has been losing money for three consecutive years. What problems have arisen in its business model and liquidity? Can BabyTree, which is listed on the market with capital, break through the financial crisis and fight for a turnaround?

Crisis 1: Three consecutive years of losses

In June this year, BabyTree applied to be listed in Hong Kong. For any company that is about to be listed, the prospectus has always been the focus of everyone's attention.

On November 13, BabyTree submitted an updated prospectus to the Hong Kong Stock Exchange. However, the reported revenue was not ideal.

The prospectus shows that in the first half of 2018, BabyTree's total revenue was 410 million yuan, a year-on-year increase of 12.6%, and its book loss expanded to 2.1 billion yuan. However, due to different standards for calculating the fair value of preferred shares under international accounting standards, BabyTree actually turned a profit in 2016. In 2017, its adjusted net profit reached 138 million yuan, and in the first half of 2018, its adjusted profit exceeded 120 million yuan.

In the past three years, BabyTree's financial data has not been optimistic, with revenue of 200 million yuan, 509 million yuan, and 729 million yuan respectively. The annual losses were 286 million yuan, 934 million yuan, and 911 million yuan respectively, and the net profit margins were -143.2%, -183.3%, and -124.9% respectively.

BabyTree has fallen into a vicious cycle of "the more it grows, the more it loses". To make matters worse, BabyTree's total revenue growth fell sharply, from 154.9% in 2016 to 43.1% in 2017, and fell to 12.6% in the first half of this year. This is not good news for any business.

In addition to the main financial data, the prospectus also disclosed some key operational data of BabyTree, which can only be described as "a mixture of sadness and joy."

In the six months ended June 30, 2018, BabyTree's average number of monthly active users almost halved to 89.5 million, compared with 177 million in the same period last year. This is mainly due to the decline in the average number of monthly active users on PC and WAP, which dropped from 160 million in the first half of 2017 to 720 in the first half of 2018.00,000. BabyTree said that this is mainly due to algorithm changes adopted by popular search engines on the PC side that affect rankings. However, according to the latest prospectus, in the three months as of September 30, 2018, BabyTree’s average monthly active users increased to 175 million.

Crisis 2: The mobile terminal is weak and the ability to attract new users is insufficient

Currently, BabyTree’s mobile monthly active users account for only 20%. When the entire market is All-in mobile, BabyTree faces huge challenges.

Although BabyTree started on the PC side and has a large user base on PC and WAP, this also reflects that it is difficult for BabyTree to retain existing customers on the mobile side and cannot quickly attract new users.

When the number of interactive users on mobile devices decreases, it will inevitably affect BabyTree’s business, operating performance and financial status.

The prospectus shows that in the first half of 2018, BabyTree’s average monthly active users were 89.5 million, including 16 million mobile app users and 72.8 million PC and WAP users. In other words, in the first half of this year, BabyTree’s mobile monthly active users accounted for less than 20% of the total users.

Today, the PC Internet has almost no dividends, and the dividends of the mobile Internet are also disappearing. As a vertical e-commerce company, BabyTree has already entered the mobile Internet portal, but it has not grasped the trends of the mobile Internet era.

As early as early 2012, BabyTree executives revealed that they put 80% to 90% of their human and material resources on the mobile terminal and migrated to the mobile terminal in mid-2012. It can be said that BabyTree has not missed the entrance to the mobile Internet and has even made plans in advance.

However, even after entering the market early, BabyTree has not fully migrated its huge number of mothers to the mobile terminal. Nowadays, for major e-commerce companies, mobile consumption accounts for more than half, and many even reach as high as 89%. One of the problems BabyTree faces now is that it has not allowed mothers and fathers to get used to consuming on the mobile terminal in advance, and it will be difficult to break out of the mobile e-commerce jungle later.

However, BabyTree has taken corresponding measures, such as operating its WeChat public account, regularly publishing relevant articles and blog content, attracting WeChat traffic, and redirecting the traffic to WAP and mobile terminals.

However, when WeChat subscription account dividends are facing a ceiling, can BabyTree make a breakthrough on WeChat? Whether such a new model can divert traffic to its mobile terminal is still a question mark.

Crisis 3: Unstable cash flow and profit model

In terms of revenue structure, BabyTree mainly relies on advertising, e-commerce (direct sales and platforms), and knowledge payment. Among them, the vast majority of revenue comes from a few major advertising customers, which makes BabyTree's cash flow and profitability unstable.

The prospectus shows that in the first half of 2018, BabyTree's advertising and knowledge payment accounted for 77.8% of total revenue, of which advertising revenue was 298 million, accounting for 73.2% of total revenue.

E-commerce revenue shrank to half in the first half of 2018, taking a back seat to last year’s main revenue stream. In the first half of 2018, BabyTree's e-commerce revenue was 90 million, accounting for 22.2% of total revenue. In the same period last year, it was 184 million, accounting for 50.8% of total revenue.

Although the BabyTree platform has gathered a large number of mothers and fathers, the platform’s monetization capabilities are insufficient.

BabyTree gives new parents a function similar to a baby care encyclopedia, from pregnancy, childbirth to childcare, parents can find various problems they may encounter on the road to childcare, as well as knowledge tips on how to solve them. It can be said that BabyTree has formed a communication platform for the baby care community.

In the view of Li Wei, President of the Beijing Maternal and Infant Services Association, BabyTree is a data company that plays in the fan economy. "BabyTree is not so much a maternal and infant company, but more of a data platform. The pain point it solves is the experience sharing of mothers in community forums, thereby forming a fan economy. The maternal and infant community platform plays a certain role in promoting the maternal and infant industry."

However, BabyTree's business model of monetizing through e-commerce, which plays a fan economy, is also facing challenges in various aspects. Vertical maternal and infant e-commerce companies such as Miya and Beibei.com have already laid out their plans. E-commerce giants such as JD.com and Alibaba have also relied on their comprehensive e-commerce reputation and strength to make it difficult for vertical e-commerce companies like BabyTree to surpass them.

However, on the eve of its listing, BabyTree accepted the olive branch offered by Alibaba. In June this year, BabyTree received strategic financing from Alibaba, with a post-investment valuation of approximately 14 billion yuan. It is reported that the two parties will carry out large-scale and in-depth cooperation at multiple levels such as e-commerce, C2M (Customer to Maker), advertising and marketing, knowledge payment, new retail, and online and offline mother and baby scenarios.

In this way, BabyTree's huge maternal and infant database can not only be used by Alibaba to fill its gaps in maternal and infant communities, education, knowledge payment and other fields; BabyTree can also reduce operating costs and increase its business capabilities by integrating with Alibaba's e-commerce business.

In addition to Alibaba, BabyTree’s star investors include Fosun Group. Fosun Group Chairman Guo Guangchang once said bluntly that there are two things that stimulate consumption the most: buying a house and having children. BabyTree has undoubtedly captured the latter's huge consumer group.

BabyTree founder and CEO Wang Huainan said that driven by a series of strategic partners such as Fosun and TAL, BabyTree has achieved rapid development, and the introduction of Alibaba Group will better unleash BabyTree's business capabilities.

Strategic adjustment: reduce the proportion of vertical e-commerce and focus on content

Faced with the sluggish e-commerce business, BabyTree seems to have realized that in the field of maternal and infant e-commerce, it may be a dead end if it competes head-on with comprehensive e-commerce.

The discussion about the "life and death" of vertical e-commerce continued from 2012 to 2015, and then to 2017. Vertical e-commerce companies such as Weimian.com, Pinju.com, and Chuke have long faded out of sight, and successful IPOs such as Jumei Youpin and Vipshop have also become the focus of discussion.

As early as around 2011, the case of platform e-commerce overtaking vertical B2C occurred in the maternal and infant market.

In 2010, JD.com, Dangdang, Yihaodian, etc. launched maternal and infant channels, and successively announced that they surpassed Redbaby that year (JD.com and Dangdang’s monthly sales exceeded 100 million yuan); in contrast, Redbaby’s sales in 2009 were 2 billion yuan, and in 2010 and 2011 they were 1.5 billion yuan (maternal and infant products accounted for about 55%). There was a decline in 2010, and it was barely flat in 2011.

This also makes the outside world question, in the trillion-level blue ocean market of mother and baby, why is such a mother and baby giant with hundreds of millions in revenue and hundreds of millions of users still losing money until now? What are the problems behind the seemingly prosperous maternal and infant e-commerce?

With the opening up of the country’s second-child policy and the upgrading of consumption, more and moreParents are willing to spend money on their children, which has also brought the maternal and infant market to a new peak of development.

Data show that in 2017, the total online retail sales of maternal and infant products in China was approximately 387.75 billion yuan, a month-on-month increase of 32.3%, accounting for approximately 5.4% of the total online retail sales for the year. At the same time, as users’ consumption concepts upgrade and their spending power increases, the development of the maternal and infant industry becomes more and more segmented. The total online retail sales of maternal and infant products will continue to expand. By 2020, it is predicted that the total online retail sales of maternal and infant products will reach 663.72 billion yuan, with a growth rate of 15.2%. The maternal and infant penetration rate of the Internet exceeded the growth rate of all netizens and grew steadily, reaching 5.8%.

However, even though the market potential is huge, in the battlefield of highly standardized maternal and infant products, facing comprehensive e-commerce companies with traffic, brand, user and financial advantages, vertical e-commerce companies are almost unable to resist and are losing ground.

BabyTree also faces the problems of a small user base and low sales volume, which means that it is difficult for it to significantly reduce costs. It can only "open source" to increase gross profits and save itself.

The updated version of the prospectus on November 13 also confirms BabyTree’s strategic change—streamlining e-commerce business revenue.

As of September 30, 2018, BabyTree's e-commerce revenue accounted for 28% less than the same period in 2017, and inventory costs shrank from 68.2% in the first half of 2017 to 43.3% in the first half of 2018.

In this regard, BabyTree said that this was due to adjustments to its monetization strategy. BabyTree is currently focusing on new monetization strategies in terms of data and data analysis capabilities - by further expanding its advertising business, it will achieve larger economic effects and stronger new monetization models, such as C2M and knowledge payment, while streamlining its overall e-commerce business to reduce back-end operating costs and improve efficiency.

In terms of e-commerce, the cooperation between BabyTree and the Tmall platform has been officially launched on October 12, 2018, and users’ BabyTree accounts and Tmall accounts have also been connected. Through background data analysis, the user's conversion rate has been significantly improved.

In terms of content, BabyTree began experimenting with knowledge payment in 2015. Although the current revenue share is low, it is growing at a rate of 138%, which is in line with the current knowledge payment craze. The prospectus shows that in the first half of 2018, knowledge payment revenue was 18.81 million, accounting for 4.6% of total revenue, compared with 7.9 million in the same period last year, accounting for 2.2% of total revenue.

It can be seen that Babytree is trying to make a breakthrough in the experience of comprehensive e-commerce, maternal and infant vertical e-commerce giants, and even the experience of "experienced people" such as my cousin's family. BabyTree has tried many new models and has indeed made some progress, but it still needs time to test how long this effect can last.

On November 27, the much-anticipated Baby Tree will be listed in Hong Kong. What kind of answer will be handed over after 11 years of entrepreneurship will not only be a test of the baby tree, but also a test of the entire mother and baby market.

Via Lieyun.com