Full text | iQiyi Q1 performance meeting record: Q2 and full-year performance advertising is expected to increase year-on-year

Special Topic: Focus on U.S. Stocks’ First Quarter 2024 Financial Report iQiyi (Nasdaq: IQ) yesterday released its financial report for the first quarter of 2024 as of March 31: total revenue was 7.9 billion yuan, down 5% year-on-year.
The net profit attributable to iQiyi was 655.3 million yuan, while the net profit in the same period in 2023 was 618.1 million yuan.
Not according to U.S. GAAP, the net profit attributable to iQiyi was 844.3 million yuan, while the net profit for the same period in 2023 was 939.5 million yuan.
For details, see: iQiyi’s first quarter revenue of 7.9 billion yuan and adjusted net profit of 840 million yuan after the financial report was released. iQiyi founder and CEO Gong Yu, CFO Wang Jun, chief content officer Wang Xiaohui, chief technology officer Liu Wenfeng, members Senior Vice President of Business Duan Youqiao, Senior Vice President of Brand Advertising Business Wu Gang and other company management held a conference call to interpret the key points of the financial report and answer questions from analysts.
The following analysis is the main content of the Q&A session: Xueqing Zhang, analyst at CICC Securities: I have a question about the company’s membership business. iQiyi did not disclose specific operating data such as the number of members in the first quarter. I would like to ask the management about its main What are the considerations? How does management view the long-term development of the membership business in the future? Gong Yu: To put it simply, the indicator of number of members can only partially show the development of member business. Overemphasis on this number interferes with our daily work.
For more specific information, please ask Duan Youqiao, who is responsible for the company’s membership business, to answer.
Duan Youqiao: Let me answer this question additionally.
In the past, we did not actually disclose the number of members and monthly average revenue per member (ARM) every quarter. But this year, we made this decision after careful consideration.
I believe you have also seen that there are overseas streaming media platforms that will also cancel the disclosure of membership numbers. Some of our reasons are actually very similar to these platforms. Because different members and levels correspond to different rights and prices. At the same time, it will also bring differences economic value.
Therefore, we believe that it is incomplete and unobjective to reflect the progress of member business and financial data only through the number of members at a specific time or within a certain period.
Starting from 2022, we will begin to emphasize the core goal of membership business. It is to maximize long-term membership income.
In the current development stage of membership business, indicators to measure the development and health of membership business are no longer limited to the number of members.
The troika that drives membership business includes ARM, member lifetime (LT) and number of members.
In fact, it will ultimately be reflected in membership income. Therefore, we believe that using membership income as the core indicator can best help investors understand the progress of our membership business.
In addition, in terms of content performance, in addition to revenue, there are also some external indicators that can help investors understand our business performance in real time, including the popularity of iQiyi, as well as some third-party data, etc.
We are confident in the long-term growth prospects of our membership business. In the future, we will continue to improve the quality and diversity of content, better membership products and service systems, and better penetrate the elderly, teenagers and other user groups that are currently not fully served. .
Continue to maintain the long-term and healthy growth of iQiyi’s membership business.
Finally, I would like to draw everyone\’s attention to the fact that there are actually differences in the statistical caliber of members on each platform.
CLSA analyst Maggie Ye: My question is about the new work \”My Altay\” by iQiyi Dust Theater. This 8-episode short film currently has a high score of 8.8 on Douban. I personally like it very much. But We noticed that this film is very literary and artistic. It is very different from traditional commercial films. We would like to ask the management for advice. It is a project similar to \”My Altay\”. What is the return on investment? Does it represent a new direction for iQiyi’s future content strategy? Wang Xiaohui: \”My Altay\” is indeed very successful. We also believe that it cannot be simply defined as a literary film or a commercial film. It still represents a direction of our innovation. It fully confirms our concept of equal emphasis on content quality and commercial income. .
This film indeed received the highest drama rating on Douban this year. It also represented a Chinese-language drama internationally for the first time at the Cannes TV Drama Festival. It was a good start for iQiyi\’s new Dust Theater.
In terms of content innovation, we used a collection of essays as a model for the first time, and tried to incorporate light comedy and other elements into the film and television adaptation, bringing new vitality and rhythm to these highly literary dramas.
What is particularly rare is that from a business perspective, this drama has also achieved profitability through diversified revenue methods, proving that high-quality content not only has strong social influence, but also has strong commercial potential.
Back to our content strategy. We will continue to balance the win-win situation of content quality and commercial benefits. We will continue to steadily output high-quality, diversified and high commercial value content. We will consolidate the track advantage of core dramas and expand our presence in other content categories. Seek more breakthroughs.
In terms of drama content strategy, we will continue to consolidate our advantages in the realism track and strengthen our content reserves of high-quality costume themes.
We will continue to develop high-quality and diversified content to seek recognition from the widest range of users.
Gong Yu: Let me add one more point. No matter what kind of content, cost control is very important.
The cost of \”My Altay\” is controlled within a very reasonable range, so its economic benefits are very good.
Jefferies analyst Thomas Chong: I have a question about the company\’s advertising business. Can the management look forward to the trend of advertising revenue in 2024, especially the growth of performance advertising.
In addition, what impact does artificial intelligence technology have on the company’s advertising business? Liu Wenfeng: Performance advertising has indeed achieved quite good performance growth. In the first quarter of this year, performance advertising revenue hit a record high. It also contributed more than 40% to the overall advertising revenue. It is expected that it will maintain a good year-on-year growth in the second quarter and the whole year. Revenue growth.
We found that the use of generative artificial intelligence technology can effectively drive the growth of sales advertising business. Moreover, compared with brand advertising, the role of generative artificial intelligence in sales advertising will be more obvious. It also has a huge impact on driving iQiyi’s future advertising growth. potential.
The first point is in terms of material production efficiency. Advertisers use the artificial intelligence tools we provide to self-service and automatically generate very rich image and video advertising materials. This improves production efficiency and reduces advertisers\’ costs.
Second, in terms of material production quality, even artificial intelligence helps various industries create high-quality materials, making advertising more integrated and coordinated with iQiyi\’s high-quality content. Advertising is more native and brings better delivery effects.
Third, in terms of advertising delivery, relying on model architecture upgrades and delivery strategy iterations to deeply optimize the generated effects makes advertising more accurate and personalized. While helping advertisers obtain delivery effects, it also improves the monetization efficiency of traffic.
In the future, we will continue to use the power of generative artificial intelligence to help advertisers attract high-quality users, achieve multi-terminal delivery linkage, strengthen the value of exposure and improve the effectiveness of advertising.
From an industry perspective, in the second quarter we continue to be optimistic that the development of the e-commerce industry including platform e-commerce, vertical e-commerce, network service industry, gaming industry, and fast-growing short dramas will bring more benefits to performance advertising. Chance.
Wu Gang: The second quarter is the peak season for the brand advertising industry. At the same time, iQiyi’s content supply has also been strengthened. It is expected that the brand advertising business will see some recovery in the second quarter on a year-on-year basis.
For the whole year, we remain cautiously optimistic about our brand advertising business this year.
From an industry perspective, we are still optimistic about the food and beverage industry, medical service industry and communication service industry. The future growth point of brand advertising will still be the development of local brand customers.
At the same time, the rapid growth of smart TV penetration will also bring more opportunities to the advertising business, helping advertisers to penetrate into home scenes with huge commercial value.
iQIYI currently leads the industry in user coverage on large screens.
Goldman Sachs analyst Lincoln Kong: I would like to ask about the management, the company\’s future strategies, and some of the development directions that the management is particularly concerned about, whether it is this year or a longer period of time.
Gong Yu: In the short term, the management\’s main focus is to improve business efficiency, production efficiency, operational efficiency, etc. Improve efficiency. Improve the team\’s capabilities. Do the basic work of the business well. Then improve profit levels and cash flow capabilities.
From a mid- to long-term perspective, there are several key points in the next three to five years. The first is to continue to improve the continuous supply capability of high-quality content; the second is to apply generative artificial intelligence in a deeper and larger scale in terms of content creation and daily operations. Intelligence; the third point is to use all available means to combat piracy; the fourth point is to develop overseas markets with appropriate investment while doing a good job in domestic business; the fifth point is to go beyond the existing mature business model. For example, membership, advertising, using new technologies, such as generative artificial intelligence and virtual reality, to expand derivative businesses, including offline derivative businesses, etc.
According to China\’s aging trend, we will invest more in product design, business processes, content management, etc. to meet the needs of the elderly.
At the same time, it also provides healthy and safe products and content for children.
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