Ep. 57: Bilibili — the YouTube of China?

Here at TechBuzz, we have been busy preparing for our second Investor Trip for March 2–6, 2020. If you are a full-time investor with at least 10 years of experience, consider applying for the trip by writing to us at rui@pandaily.com. During our inaugural Investor Trip in October, Bilibili was one of the companies we visited, and it turned out to be one of our most highly rated meetings! We hope you enjoy what we’ve prepared today.

In episode 57 of TechBuzz China, co-hosts Rui Ma and Ying-Ying Lu talk about Bilibili, a Chinese company that has no easy Western comparable — even as it sells a narrative of being “the YouTube of China.” Bilibili was in the headlines last week for paying $113 million for the Chinese broadcast rights for the next three League of Legends championships. Today, its core businesses include mobile games, livestreaming, advertising, and ecommerce.

Listen to find out: How was Bilibili founded? In what ways is its founder, hardcore anime fan Xu Yi, distinctive? How does the site — which has one-in-three Gen Z-ers under the age of 30 in China active monthly on its platform, spending an average of 83 minutes a day on it — work? What characteristics have enabled it to be one of the few entities to receive investment from both Tencent and Alibaba? Do our co-hosts think the company will be able to scale to the next level, by reaching its own target of doubling revenue, while retaining the sense of authenticity and close connection with its fans that it has been able to build over the years?

You can find these stories and more at pandaily.com. If you enjoy our content, please do let us know by leaving us an iTunes review, liking our Facebook page, and tweeting at us! We do truly appreciate your feedback and support. Thank you also to our listeners over at our partner, dealstreetasia.com.

Of course, we are always grateful for our talented producers, Shaw Wan and Kaiser Kuo.

Transcript

(Y: Ying-Ying Lu; R: Rui Ma)

[00:00] Y: It’s been a slow news season the past month or so in China tech after the latest Single’s Day in early November. Ecommerce livestreaming continues to dominate the headlines, but we covered that just a few episodes ago so we figured we’d give it a rest until more substantial developments accrue in the space.

R: It hasn’t been slow for us here at Tech Buzz though, we’ve been really busy preparing for our Second Investor Trip for March 2-6 of next year.  If you are a full-time investor with at least 10 years experience, consider applying for the trip by writing us at rui@pandaily.com.  Last time, Bilibili was actually one of the companies we visited, and it turned out to be one of our most highly related meetings in terms of learning, so we hope you enjoy what we’ve prepared today.

Y: It’s one of those Chinese companies that’s got no easy Western comparable, with livestreaming, gaming, professional long-form video, user-generated content all under one roof… and a very unique, hyper-engaged user base. It’s also making some bigger moves. It was in the headlines this last week for paying $113mm for the Chinese broadcast rights for the next three League of Legends championships. Not global, just in China.

[1:21] R: Bold move, and somewhat unexpected, especially the final price tag.  I mean, the company does have a solid esports business, and owns two teams, but that’s quite different from the narrative it’s been selling, which is that it’s the YouTube of China.  Anyway, depending on what you think YouTube is, you may or may not agree, but either way, Bilibili is doing some interesting things, and is totally worth keeping tabs on.

Y: Especially if you want to know what China’s Gen Z are doing. Bilibili, Douyin — that’s Tik Tok China — and Kuaishou are the three big hundred-million-plus MAU companies who have at least three-quarters of its users below the age of 30.  And in China, there are 230mm people under the age of 30.

R: And just like in every other country, most of these people don’t really remember a time without the internet, and some of them have never been without a smartphone, which means that they live very different digital lives from those of us who do pre-date the world wide web, like myself.  Trust me, if there’s anything we learned while researching for this episode, it’s just how different we are — Gen-Z’ers and non-Gen-Zers.

<insert theme music>

[3:03] R: Hi everyone! We are TechBuzz China by Pandaily, powered by the Sinica Podcast Network by SupChina!

Y: We are a biweekly podcast focused on giving you a peek into what’s buzzing within the tech community in China.    

R: We uncover and contextualize unique insights, perspectives and takeaways on headline tech news that don’t always make it into English language coverage. So you can be smarter about the world of China tech. TechBuzz China is a part of Pandaily.com, an English language site that tells you “everything about China’s innovation.” I’m one of your two co-hosts, Rui Ma.

Y: And I’m your other co-host, Ying-Ying Lu. We’d like to acknowledge our partners DealStreetAsia and SupChina, creator of the Sinica Podcast Network! In addition to TechBuzz, you can also find Sinica which covers current affairs, NuVoices and Ta for Ta on women, the business-oriented ChinaEconTalk, and the Caixin-Sinica Business Brief from China’s leading business magazine.

[4:02] R: If you ever wanted to visit China and explore the local tech world, but simply didn’t know where to begin, check out DecodeChina, a one week immersive trip into China’s tech scene organized by Pandaily from Jan. 13-19th next year. More information and applications are now available at decode.pandaily.com. 

Y: Finally, last piece of housekeeping. We received the best Thanksgiving present ever, which was to top 100 ratings on the Apple Podcasts US store! Thank you so much to the 42 individuals who took the time to write detailed reviews too! We read every single one and take your feedback very seriously.  As promised, we drew three names at random and are pleased to announce the winners of our holiday giveaway!

R: Popcorntrackz with a z and Emma Cai in NYC, please e-mail us at rui at pandaily dot com ASAP to claim your gift! As for our Android and non-US supporters, no worries, we will have additional promotions soon!

[5:11] Y: Oh, and one more thing before we start, we want to tell you about a brand new Master’s program nearby, at the University of San Francisco. USF’s Master’s in Applied Economics combines econ training with the practical skills in data analytics that you really need to understand today’s new digital economy. Their curriculum covers skills like R and Python, machine learning, and experimental design. To learn more and to get a fee waiver for the Fall 2020 class, please go to usfca.edu/techbuzz.

[5:50] R: So before we start trying to explain Bilibili’s business, let’s set you straight with some super basic facts.  The company was founded a decade ago, in 2009, and went public in March 2018. Its current market cap is about $5.5Bn, Last twelve month revenues are about $800mm, and topline growth is still over 40%, but it’s still heavily lossmaking, with operating margins of negative 20-plus percent.

Y: For perspective, that’s somewhat better than an iQiyi, the Chinese online video company, but not as good as the profitable Huya, leader in esports livestreaming, although neither, of course, make for great comparables.

R: And what does this loss-making but not too unprofitable company do, or at least purport to do? Well, according to its IPO prospectus, the company describes itself as the “iconic brand of online entertainment for young generations in China.”  In China, under 30 or those born after 1990, the 90后, are considered the young.  And at IPO, over 80% of Bilibili users were in this demographic.

Y: A small footnote here for our precision-loving listeners.  We sort of use the term 90后 or post-90s and Gen Z interchangeably because that’s how the company defines them in their investor presentations. However, it is true that most Western sources demarcate 1995, 6 or 7 as the beginning of the Gen Z cohort, so there’s a discrepancy of at least 5 years here.

[7:34] R: So Gen Z should really be post 95, or 95后, which is indeed a grouping that is used in China, but is not nearly as popular as the decade-wide designations, ie the post 80s, 90s, and 2000s. But in this case, I think the approximation is acceptable. There are some differences between the post 90s and post 95s, but they still share many similarities. As you’d expect, they make up the most socially responsible, least homophobic, most fitness-conscious, most affluent and also the generation most into self-expression and happiness in China.

Y: Those last two are especially important to Bilibili, whose core businesses are, in order of revenue share, mobile games at 50%, livestreaming at 24%, advertising at 13% and ecommerce and miscellaneous at 12%.  But I would encourage you not to fixate too much on these numbers because as you’ll see, this is a company that’s somewhat in a state of transition and is experimenting with quite a few things.

R: Indeed, if you looked at its statements from just two years ago, you’ll see that the company made more than 80% of its revenues from gaming, which might have led you to conclude it’s a gaming company.  A very fast growing gaming company, actually, since revenues grew by more than 20x from 2015 to 2017.  OK, so now you might be wondering, why would this company that derives so much of its revenues from gaming be trying to call itself China’s YouTube? To understand that, we have to go back to the beginning. The very beginning.

Y: Let’s start with the name. Have you ever wondered what the name Bilibili even means? Because it’s not a Chinese word. It’s not a word in any language actually. It’s just a sound.  You see, Bilibili was originally named Mikufans.  Miku refers to Mikoto Misaka, a main character from this manga series called A Certain Scientific Railgun. Bilibili is the sound she makes when she shoots her weapon, and also the nickname given to her by fellow superheroes.  

[9:56] R: We aren’t telling this to you because it’s a cute side story. It’s actually central to Bilibili’s success. You see, if you understood the reference, and didn’t have to Wikipedia it like we did, then you would’ve been an early adopter of the platform, and maybe become its current CEO, because that’s what happened.

Y: So … let’s go back in time to 2007, when there was an explosion of online video sites in China, like Tudou and Youku, who all launched right on the heels of YouTube. Thanks to eager VCs, all of these companies raised a good amount of funding to cover bandwidth costs and grew quickly. 

R: Actually, the video craze was pretty global, but most of these sites in China were just platforms, and not very interactive.  They had animation content, but not an audience that was interacting with each other and actively growing the community and uploading content.  Bilibili was the opposite. They focused on building community, especially groups of uploaders, called Up主, versus acquiring, distributing, or making content themselves. 

Y: Community, you’re going to hear that a lot in Bilibili’s strategy, and I think it has everything to do with these first few years.  For quite a while, these other well-funded video websites allowed you to link to them directly, and so that’s what many Bilibili Up主 did, which presumably allowed them to save a lot of bandwidth costs. But if you were just going to go somewhere to view a video, why would you go to Bilibili versus some other place, or just go and find the pirated DVD somewhere, for that matter?

[11:39] R: The answer is, of course, community. And ACFun was one of the first to do it successfully via a method that everyone eventually copied. If the site sounds familiar, it’s because we’ve talked it before in our episode on gaming livestreaming, but Anime Comics (or AC) Fun was basically the impetus for the birth of Bilibili.  Known colloquially as A站 in Chinese, or Station A, it is still around, having bounced around a few owners and most recently landed in Kuaishou’s lap, but it ultimately lost to little brother Bilibili, B站, or Station B.

Y: The key innovation that ACFun brought to the table is 弹幕, or bullet screen. To be clear, they didn’t invent it.  In fact, they themselves copied it from a Japanese website called Niconico, which is now a top ten website in Japan.  Niconico was apparently first to build a tool that synced user comments to the video being played, then overlaying these comments directly onto the video, so that users can interact with the video as they watch it, creating “a shared viewing experience.”

R: It’s honestly a bit weird the first time you watch such a video, especially if it’s very popular, because the entire screen might be overlaid with user comments, making the actual video kind of hard to watch.  But it’s also true that as ugly as it is, you definitely do feel like you are watching it with other people. Kind of.

Y: Niconico was launched in December 2016 and ACFun’s bullet screen functionality went live in March 2008, just fifteen months later, so paying attention to international goings on in tech definitely pays off.   And it’s taken ten years, but bullet screens are all over Chinese video sites now.  I got forwarded a Peking University professor’s talk recently and it had 弹幕 on it, for example.

[13:43] R: But in the beginning, what it did was activate and engage in a really intense way this niche community of anime fans.  One of whom was a gentleman by the name of Xu Yi 徐逸, founder of Bilibili.  Xu Yi was born in 1989, making him just 30 years old this year.  He was born in Zhejiang, one of the wealthiest provinces in China.  Zhejiang borders Shanghai and its capital is Hangzhou, home of Alibaba.

Y: His family isn’t that wealthy, at least according to him, but seems to be sufficiently well to do that it doesn’t seem like they prevented him doing a startup straight out of school ten years ago, which would’ve been considered very risky and un-Chinese.  He also wasn’t a particularly good student, which is another anomaly about the Bilibili story, since so many founders we’ve talked about on Tech Buzz were some sort of child genius.  To be honest, it’s not clear that he had any talents except being a hardcore anime addict.

R: Very hardcore.  So when ACFun was launched, he became a top user and collected a lot of fans. In 2009, frustrated that his beloved community was poorly run and its website constantly crashing, he left to create his own, calling it, as we’ve said before, first Mikufans, then Bilibili.

Y: At first, he didn’t intend for it to take over his life, nor meant it as serious competition to ACFun.  In fact, he and others called Bilibili “ACFun’s backyard garden,” content to play a supporting role to big brother A站.  But it was rumored that ACFun’s management team wasn’t getting along and before he knew it, B站 was getting more and more traffic, and so not only did he end up quitting his job to work on it full time but he had an unsolicited offer for investment from an angel investor he really liked, a guy named 陈睿 Chen Rui.

[15:49] R: Same Rui as me!  It’s pretty safe to say that if there is no Rui, there is no way Bilibili would be what it is today.  Rui is somewhat of an anomaly too, at least for this industry.  He was born in 1978, a lucky year, as he’s acknowledged, because it meant that he graduated in 2000 and was a participant in the first dotcom boom, during which he met and worked alongside many of the other major players in China tech. But that also makes him part of Gen X, he’s not even a millennial, and very far away from Gen Z.  How did he even discover Bilibili and Xu Yi?

Y: Well, just because you’re Gen X doesn’t mean you can’t love anime, and love anime Chen Rui did.  Remember when we said if you knew the origins of the name Bilibili you might become the CEO one day? That’s exactly what happened.  That was the question Chen Rui asked Xu Yi when they met in person for the first time — is the site named after Miku? — and from then on, Xu Yi had no doubt that Chen Rui was the right person to come and help him with Bilibili.

R: Before Bilibili, Rui had your typical China big-tech career track.  As we’ve already said, he was born at the right time, because his first tech job was at Kingsoft, one of the earliest software companies in China.  He got to know Lei Jun there when he was CEO, and Lei Jun, by the way, is still Chairman.  There is definitely a sort of Kingsoft Mafia in the China tech ecosystem, and Rui Chen one of its most successful members.

Y: Yeah, Rui was a sub-100 employee at Kingsoft, and employee #3 at Cheetah Mobile, a spinoff.  Both of these companies IPO’ed while he was there, which meant that he was living comfortably and didn’t have to worry about money. And actually he was never poor anyway. Even in high school, apparently he had his own PC and used a properly licensed version of Windows, not pirated like everyone else. Funny example, but it also shows that he was ahead of his time in many ways, more Gen Z than X, even all those years ago.

[18:06] R: It wasn’t like he didn’t think the investment was risky.  He did.  He’s been pretty open about the fact that he had no idea how big Bilibili could get when he invested. But he just loved anime too much.  So much that originally, he actually wanted to build a competitor.  But when he asked his friend, the founder of Sogou, for advice, his friend said, why not just invest in it? And that’s what got him to send that first cold email to Xu Yi, starting the conversation that would eventually have him joining as CEO, and becoming its largest shareholder.

Y: At over 21% ownership, Chen Rui, who joined the business purely because it gave him joy, is now a legit billionaire.  Again, Gen Z decision-making at work.  But don’t think that Chen Rui just thinks of his job as a passion project.  Clearly, we are talking about a public company here, with almost a billion dollars in annual revenue.  So how did it get from an anime interest site to the scale it is today?

R: Well, at least part of the answer is that it got lucky.  It was always good about taking the pulse of its Gen Z users, and it found a franchise that synced very, very well with its fans.  That franchise was Fate/Grand order, a mobile role-playing game that is itself based on a Japanese visual novel and game. Haven’t heard of it? That’s OK. All you need to know that since its launch 4 years ago, it’s estimated to have grossed over $3Bn worldwide across Apple and Android devices.

Y: And in 2016, Bilibili signed the exclusive rights to distribute it in China.  Now most of the revenues for the game are still from Japanese players, but China is the second largest market, and it’s turned out to be a home run for Bilibili.  In 2017, more than half of its gaming revenue, which effectively meant more than half of its total revenues, came from Fate/Grand Order. You could argue, as some have, that the Bilibili IPO was less an IPO of Bilibili than it was of its FGO contract.

[20:27] R: Ouch. But not untrue. And it’s not like the company is unaware of this, it’s since then signed numerous other games and actively grown its other businesses, including its fastest growing segment — ecommerce.  That was probably the successful result of selling an 8% stake to Alibaba at the end of 2018 and entering into an partnership with its Alibaba’s Taobao plattform.  The official announcement said something to the effect of, Taobao will connect Bilibili influencers with merchants who can help design and make stuff that young people will want to buy. 

Y: Not just any stuff, though. 二次元 stuff. Another key concept that is central to Bilibili’s success.  二次元 could kind of literally be translated as “2-dimension,” or 2-D, but really just means “fantasy.” It came from the fact that Japanese animations were all 2-dimensional, in contrast to the 3-D world that we live in.  I know, no duh.  But it’s not really referring to the art style, but to the concept of an “idealized, fantasy world” that exists in these animations, where everything is beautiful, neat, cute and perfect.

R: And it appeals to the idealistic, dare I say, escapist, mentality in Gen-Zers especially. In terms of products though, if you did a search on Taobao, it would look like what you would expect. Anime-inspired cutesy items, from T-shirts to portable batteries.  Alibaba insists that the number of 泛二次元 users on Taobao, which I’m just going to translate as anime-fantasy and related, is already over 100mm.  Not insignificant when you consider that Taobao has 600mm users. So that’s like  one-sixth? Certainly something to pay attention to.

Y: And Alibaba isn’t the only one paying attention, of course.  Tencent has also put in serious money into Bilibili, also playing the “we love 二次元” card.  In fact, the Alibaba announcement was somewhat of a surprise because Tencent put in its investment first, owning now about 12% of the company.  The Tencent angle is easy to explain too — Bilibili now licenses and co-produces much more content than it used to.  Tencent does this on a much bigger scale.  They could share licensing arrangements and make stuff together. 

[23:06] R: I think however you slice it, whether it be 弹幕 or 二次元, what Bilibili has, really, is just its young users.  And they just built the community really slowly before they went about monetizing it, probably partly because they saw how quickly it can all fall apart if you don’t take care of your users, like ACFun.  And at least so far, the 12-month user retention rate of Bilibili supports their story. It’s stayed remarkably stable at above 80%.  That’s pretty high.  Just for comparison, iQiyi, a Netflix-like service in China, or, as Bilibili would say, not a community, is only at 30% or so.

Y: Let us explain to you how seriously Bilibili takes its sense of community. While you can indeed register a handle with just a valid phone number, your membership is of the basic or restricted variety until you are either gifted a “full, official membership” from another official member, or get at least 60% on a 100-question quiz. Until then, you can’t upload anything. 

R: Apparently, in its early days, the quiz would be pretty much impossible to pass unless you were a hardcore anime fan.  They’ve dumbed it down significantly since then and let me tell you, it was still no trivial matter. The first few dozen questions were pretty easy, mostly around the site’s own features and policies, such as understanding which comments are appropriate, which are flag-worthy, and how to report questionable behavior. But then you had to choose subjects you were knowledgeable in and were tested on these.

Y: We picked tech, entertainment, and literature, mainly because the other ones looked impossible.  The questions we were asked ranged from when the first router was created to filling in missing lines of famous Chinese poems, to the song that was playing during the dramatic death sequence in Breaking Bad’s series finale.

[25:09] R: That was the question that put us over the 60% mark, by the way, and the correct answer is “Baby Blue.” Obviously, we had to Google it.  This is interesting, right? Whereas most consumer internet companies are focused on trying to make their user registration process as easy and frictionless as possible, the consensus is that Bilibili simply cannot do so, or else it would violate the unspoken social contract that it has with its users. 

Y: Yeah, the Bilibili community is not exactly elitist, but it requires showing dedication and subscription to a certain culture.  Without enforcing that shared understanding, existing users might revolt.  They may no longer contribute entertaining 弹幕 bullet screen comments, or take hours to make hilarious 鬼畜 videos, which are, by the way, an entire category on the site, and is translated in their prospectus as autotune remixes.

R: OK, I like legit did not know this was a big thing before doing this episode, but I was familiar with a lot of the memes and Chinese GIF culture, and this category is probably one of the best examples of Bilibili’s unique content and outsized influence on Chinese internet meme culture. It does indeed have a very talented crop of UP主 creators, but is it going to be able to keep all of them?

Y: Every other platform, like Douyin and Kuaishou, are giving their creators an opportunity to make good money, many through outright subsidies. Is Bilibili going to be able to keep all this talent when it’s been much more focused on the user experience than monetization?  I mean, it doesn’t even do pre-roll or any kind of in-video advertising, the advertising is on the webpage as a banner ad or in the app as sponsored content itself, so you can’t just sit there and collect ad revenue on your videos as a creator. 

[27:12] R: Nope, you have to work at it. You can make sponsored videos, get tipped, or use your videos to drive offline sales, like if you’re a musician and you want to sell concert tickets.  But Bilibili really doesn’t make it easy.  So that’s one way where it’s definitely not like YouTube. 

Y: Keeping it ad-free and having all these hoops you have to jump through to become a full member though, hasn’t saved Bilibili entirely from the problems that plague the rest of the internet. The abusive behavior that you see on other websites — well, basically, everywhere on the internet? — as the rules became more relaxed, more and more of the riff raff got in… the community became more and more like just any other online. That is, there’s trolling, insults, bullying, spam, you name it.

R: Now, it’s probably still magnitudes better than some of the other stuff out there, but some fans are concerned that Bilibili is trending in the wrong direction.  The question is whether or not they are frustrated enough to consider leaving, and even if they leave, whether or not that will even matter.  The super-hardcore long-term Bilibili user, the anime and comics superfan, is not a very large audience. Maybe Bilbili can just replace them with less civilized, but equal revenue-generating users. 

Y: Now that the biggest pieces of its site are gaming and lifestyle content, does it make sense to keep the traditions that were made for its original anime fan base?  The answer seems to be “probably not.”   According to a recent speech by Rui Chen on the company’s tenth anniversary, there are some changes on the horizon.

[29:00] R: Rui doesn’t give that many interviews, but the conclusion of this one was that Bilibili is at a do-or-die juncture in its life cycle. He said that the company must get to at least 10Bn RMB in revenues, that’s about $1.4Bn USD, in order to survive.  If it seems arbitrary to you, explanation is that he has not seen any Chinese content platform under $10Bn USD in market cap live.  I’m guessing then he applied a revenue multiple to arrive at $1.4Bn in revenues.

Y: He doesn’t provide any basis for these numbers so we’re not sure where he’s getting his conviction from, but it’s not rare for Chinese CEOs to get very dogmatic like this about their view of their industry, and stuck on specific numbers. Or maybe it’s all that pressure from the public markets getting to them, as they see one downsized Chinese tech IPO after another and lackluster performance from their peers.

R: Yeah, we saw another “slow-growth” company take this route of publicly declaring a Big Hairy Audacious Goal recently, and that was Kuaishou with its 300mm MAU target, which we covered in Episode 55. Just like Kuaishou, by the way, Bilibili had also been accused of being a 佛系 or Buddhist company, which is just a nice way of saying that they’re too relaxed and complacent and not aggressive enough.

[30:30]Y: By announcing this near-doubling of both revenue and market cap, Bilibili is trying to discard its Zen image and get itself into the ranks of Bytedance. Will it work? Hard to say. But I think it does mean that he’s readying existing users for some potentially drastic changes to the product.  Some users are speculating that pre-roll ads are coming. 

R: Or further membership tiers.  When they pushed that out three years ago, by the way, people weren’t that happy.  I mean, I’m not sure how I feel after learning that we didn’t actually have to pass that exam to have a lot of the “VIP benefits” like having emoticons in our comments.  We could have just paid $20 for an annual membership.  It’s on sale right now, by the way. But what was I thinking? That we live in a 二次元 fantasy world?  Nope, let’s get back to reality. Time to wrap this up and summarize what we learned today.

[31:38] Y: Yeah, so today’s episode was on Bilibili, which was founded a little over ten years ago, and IPOed last year on the NASDAQ. It’s about $5.5Bn in market cap, almost a billion dollars in revenues, and is not yet profitable, like many Chinese tech companies. Also like many other Chinese tech companies, it’s still growing quickly, both in terms of topline — 72% this past quarter year-on-year — and number of users — about 40% or so.

R: But … we aren’t here to do financial analysis on Bilibili.  If you want that, you should look up the reports of one of the over twenty equity research analysts covering them.  What we did instead was take you through the founding story, of how founder Xu Yi, a hardcore anime fan, launched the community after he got frustrated with ACFun, one of the first dedicated anime and comic video sites in China.

Y: ACFun, if you’ll remember, copied 弹幕 or bullet screens from a Japanese site.  Bullet screens are a way of allowing users to put comments on the videos they’re watching to create a “shared viewing experience,” and Bilibili copied it as well.  But because it focused on community so much and deemed participant quality as so important, Bilibili had new users pass a test before they could have full functionality within the site.

[33:03] R: So as you would expect, user growth didn’t happen at the rates that you see today with some of the newer consumer services.  It was also relatively slow to monetize, and as late as four years ago, it barely did $20mm in revenue per year.  All of this we can blame on the fact that their two main executives, Xu Yi and angel-investor-turned-CEO Chen Rui, were hardcore users themselves and didn’t seem in a hurry to build the biggest business.

Y: It’s also just confusing how to monetize from young Gen-Z anime fans, especially when these fans contributed so much of the content themselves.  That, by the way, is one of the main reasons Bilibili compares itself to YouTube, because over 85% of Bilibili’s views are from its professional user generated content, meaning that it has a really high quality base of creators.

R: But then in 2016, it signed an exclusive agreement to publish an anime-based game called Fate/Grand Order, and that’s when its fate changed. It went from a $20mm revenue company to $300mm in two years on the strength of this game.  And since then, it’s been trying to diversify away from its two hit games by growing other businesses, with some pretty good success actually.  Livestreaming, advertising, and ecommerce now make up half the business, instead of one-sixth.

Y: But that’s what makes it hard to answer the question, what is Bilibili really? The CEO thinks it is both a video platform and an interest community.  Whatever it is, it’s got one-in-three Gen Z-ers under the age of 30 in China active monthly on its platform, spending an average of 83 minutes per day.  And that’s why it’s been one of the few companies who have received investment from both Tencent and Alibaba, collaborating with the former on content licensing and production, and the latter on ecommerce and merchandising.

[35:09] R: If you want to understand the Chinese Gen Zer, it is probably important to take a deep look at Bilibili along with Douyin and Kuaishou. It’s why we included it on our Techbuzz Investor Trip this past quarter.  And let us just say, it really feels like a different company from the others we visited.  Employees seemed way more relaxed and a few were also dressed up anime cosplay 二次元 style. So it’s good to know that even though it’s ten years old, Bilibili is still being made for fans, by fans.

Y: But as their CEO recently announced, the company must double its revenue or risk becoming obsolete.  Will it be able to retain the sense of authenticity and close connection with their fans that they’ve been able to build up over the years?  Or will it have to push monetization hard on its users and become profitable at all costs, because we do live in a 3-D and not fantasy world, right? What do you think, let us know!

[36:21] R: OK, that’s all for this week folks! Thanks for listening. We really enjoyed putting this together, and we are always open to any comments or suggestions. You can find us on twitter at thepandaily, at techbuzzchina, and my personal Twitter account is RUIMA.Y: And my Twitter is spelled GINYGINY. Techbuzz China by Pandaily is powered by the Sinica Podcast Network on SupChina. Pandaily.com is an English language site that tells you “everything about China’s innovation.” Our producers