Bilibili (BILI 10.97%) recently partnered with Alibaba's (BABA 2.92%) Taobao to co-develop a "dynamic ecosystem that will better connect content creators, merchandise and users on both platforms." The deal will enable content creators on Bilibili to register accounts on Taobao to promote their own products.
The two companies will also work together to promote and commercialize Bilibili's other IP assets, which include games, online videos, and comics, and use Alibaba's analytics capabilities to gain clearer insights into those businesses. Taobao will provide Bilibili with tech support for that shared ecosystem.
Image source: Bilibili.
How this deal helps Bilibili
Bilibili calls itself a "leading online entertainment for young generations" (specially Gen Z users) in China. 69% of its revenue came from its online gaming business, which publishes mobile games like Fate/Grand Order and Azur Lane, last quarter.
Bilibili is trying to diversify away from the gaming business, which faces an ongoing freeze in gaming approvals in China, by investing more heavily in streaming videos, online ads, and e-commerce services. It believes that its gaming revenue will only account for only 50% of its top line within the next two to three years.
Live broadcasting revenues accounted for 16% of Bilibili's top line last quarter, online revenues accounted for 13%, and the rest came from its "other" businesses, which include a small e-commerce platform which sells licensed and tie-in products for its other digital content. Here's how those businesses fared last quarter:
|
YOY revenue growth |
QOQ revenue growth |
|
|---|---|---|
|
Mobile games |
24% |
(6%) |
|
Live broadcasting |
292% |
43% |
|
Online advertising |
179% |
43% |
|
Other |
(20%) |
33% |
|
Total |
48% |
5% |
Bilibili Q3 growth metrics. Source: Bilibili.
Bilibili made several deals over the past few months to support the growth of its core businesses. It acquired a stake in Japanese animation studio Fun-Media to gain more anime series, partnered with Tencent to launch additional anime series and gain access to new mobile games, partnered with Japanese game maker Gree to develop more games for the Japanese market, and acquired a large portion of NetEase's online comic books.
Bilibili's deal with Alibaba clearly complements those moves; it should expand its fledgling e-commerce unit, and boost the growth of its "other" revenues in future quarters. Meanwhile, Bilibili's integration with Taobao could draw more content creators to its platform, which could strengthen its live broadcasting and advertising businesses.
How this deal helps Alibaba
Alibaba owns the top e-commerce platform in China, but it still faces disruptive challenges from smaller companies, which blur the lines between social media and e-commerce with "social shopping" apps.
For example, Pinduoduo encourages users to combine their purchases with those of their family, friends, and co-workers across social media channels to get better prices for bulk orders. Mogu lets merchants sell products from live videos, which merges the high-growth video and e-commerce markets in a single package.
Unlike Alibaba's Tmall, which is a business-to-consumer platform like Amazon, Taobao is a consumer-to-consumer platform like eBay. Therefore, integrating Bilibili's social media and live video platform into Taobao naturally complements its peer-to-peer business model.
Three years ago, Taobao launched its own blogging platform for bloggers, writers, and experts to post content, but that platform only has about 1.6 million content creators. Bilibili had about 600,000 active content creators uploading 1.7 million videos monthly last quarter, so the partnership would significantly increase Taobao's social reach.
Image source: Getty Images.
The integration could also tether Bilibili's users to the Alibaba-affiliated Alipay, which competes against Tencent's WeChat Pay in the rapidly growing market of online payments. Lastly, it could help Taobao, which recently updated its mobile app for its 666 million monthly active users, penetrate the lucrative Gen Z market, which accounts for over 80% of Bilibili's MAUs.
The key takeaways
This partnership is a win-win deal for Bilibili and Alibaba, but it should help the former more than the latter. Bilibili's platform will gain much more exposure beyond its 93 million MAUs, and give it new ways to expand its fledgling e-commerce business, while Alibaba will slightly widen its moat against its challengers across the niche market of "social shopping" experiences.
