Reflections April 2021 - Baillie Gifford
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Long Term Global Growth
Reflections
April 2021
We recently invested in Bilibili, a niche anime, comics and than just video sharing. A better (though imperfect) description
gaming platform that has developed a hardcore following of may be the Nintendo/YouTube/Netflix of China. Short form video
young Chinese users. While the pandemic has no doubt helped is where users spend most of their time, but Bilibili is investing
its growth in the short term, it is the community effect of China’s heavily in originally licensed films and series. Half of Bilibili’s
one-child policy that has allowed Bilibili to build its competitive revenue comes from distributing mobile games, where players
advantage. purchase virtual items to advance to the next level.
Generation Z grew up without brothers and sisters, but they did The Bilibili userbase is multiplying, with premium subscriptions
have mobile phones. Bilibili provides a safe community for rising over 90 per cent year-on-year, now totalling 14.5m
discovering and sharing their expressive interests. To join this premium members and 50m daily active users. Despite this, the
community, you are required to sit a 100-question exam. Half of market is still heavily under-penetrated, with over 900m mobile
the questions are on online etiquette, with the other half video users in China.
dedicated to the user’s selected area of expertise. If you choose
Importantly, user engagement is exceptionally high and sticky
“pop culture”, you better be prepared to answer questions like:
relative to peers, with a 12-month retention rate of over 80 per
“What is the title of the third book in the Harry Potter series?”
cent. Part of the reason lies in its Danmaku or ‘bullet comments’,
The platform is often described as the ‘YouTube of China’, but which are overlayed on content in real-time. The screen is often
the more you learn about this company, the more you realise that completely obscured by these comments. In fact, many tune in
is a lazy western oversimplification. There is far more to Bilibili for the comments alone!
© Bloomberg/Getty Images
This update is solely for the use of professional investors and should not be relied upon by any other person.
It is not intended for use by retail clients. Past performance is not a guide to future returns.
Long Term Global Growth
© Imaginechina Limited/Alamy Stock Photo
If this seems odd to you, that’s understandable, but it’s not as In this scenario, high-quality content sees daily active users
different as it first seems. Imagine that you have grown up quintuple to 250 million (one quarter of Tencent’s DAUs today)
loving Star Wars, and you’ve just seen ‘Baby Yoda’ unveiled in in the next 10 years. Patient leverage of the sticky user base
Disney’s The Mandalorian. After the show, you can’t help but sees monetisation increase to five times what it is today, which
check social media to see what the reaction is, and before you would still be half that of TikTok (Douyin). This in turn sees the
know it, you’re laughing at ‘Baby Yoda’ memes into the night. video and ecommerce revenue grow from $1bn to $25bn.
With Bilibili, the fun doesn’t stop there; you can buy For context, this revenue grew 125 per cent in the last year
merchandise directly through the ecommerce platform using alone. The gaming segment benefits from the community
‘B Coins’, their own digital currency. In China, if you happen to advantage, and revenue continues its current growth trajectory
love a niche anime comic, no problem – you can share that love from $700m to reach $3.5bn over the same time period.
with thousands of other fans online in real-time on Bilibili. Content spend remains high but reduces as a percentage of
Experiences are always better when they can be shared. revenue, with margins pushing through 30 per cent. Bringing
this together implies revenues of 28.5bn and earnings in excess
Despite such strong flywheels for user engagement, the
of 8bn. The pace of change in China is rapid, so we would not
average revenue per user is two times less than Tencent Video
be surprised if this scenario happened sooner than expected.
and ten times less than TikTok. The monetisation opportunity
for this company is vast, and we think there are multiple Bilibili is currently capturing the attention of the next generation
scenarios where it could be worth five times what it is today. At of consumers, and with several growth opportunities, we’re
the time of writing, Bilibili’s market cap is $40bn, so here is one excited about what the future might hold for the company.
scenario where we believe it could reach $200bn.
22021
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CM15555 Monthly Reflection April IC 0521
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