How many odds are there after the listing of NetEase?

Thereisaway Netease

zidancaijing· 2019-10-31 09:26:22

Netease has a roadmap for not only in the future, but also as a part of promoting smart education.

The news of Netease's IPO has attracted wide attention from outside.

On October 1st, NetEase had submitted a prospectus to the US Securities Regulatory Commission and officially landed on the New York Stock Exchange on October 25, becoming the first company to be split and listed on Netease. As a business line that Netease has developed vigorously, the divestiture of online education means that the business has become one of Netease's four strategies together with games, e-commerce and music.

Netease's CEO Zhou Feng also regarded the successful login to the NYSE as a milestone in the company's development. After all, in 2019, when the listing became extremely difficult, it could be the first since this summer. The company that issued the CDR is already very good.

However, while achieving a staged "victory", there are also problems with breaks.

On the day of listing (October 25th), Netease's stock opened at $13.50, and closed at $12.50 on the first day, down 26.47% from the issue price.

In this regard, the industry believes that the reaction of the capital market is related to losses to a certain extent, and is also related to whether US investors understand the mode.

In terms of performance, in the first half of this year, the operating income increased by 67.7% to 548.5 million yuan, with a net loss of 168 million yuan, a net loss of 82.75 million yuan over the same period of the previous year. .

It is important to note that this is not a problem faced by a platform. The online education has a long period of realization, and the long profit path has become an industry consensus.

The industry giant New Oriental, who is learning, etc. are all looking for profitable paths after a long period of exploration. In this regard, NetEase is like the majority of online education companies, and is currently in the investment period.

Netease has a CEO, Zhou Feng said that now there is more to invest in the curriculum of junior high schools, primary schools and other quality courses to achieve faster business growth, resulting in a road that is still not profitable.

However, as Zhou Feng said: "In the long-term view of the education industry, profitability is not a problem after the scale." In the high school, university segment and logical English products, the platform has actually achieved profitability. .

On the other hand, the Taoist model is different from other platforms. The company uses the Taoist dictionary as the entry point, and builds the tool products that have been in operation for many years into a traffic pool. It provides teaching services through online education products such as quality courses, and finally completes online and offline closed loops through intelligent hardware products.

Today, the platform has established a business module called "Tools + Online Courses + Smart Hardware + AI Interactive Learning" to become an educational technology company. From the perspective of profitable revenue, 60% year-on-year data growth also confirms the feasibility of this model development.

But for Wall Street, this may take more time to understand and agree.

As we all know, the online education industry is highly competitive, and all platforms are striving to compete for market dividends. For NetEase, which is already listed, what is its current situation? How will the layout be carried out in the upcoming era of intelligent education?

Netease has a good past and present life

Netease has a path that was originally not based on education, but based on search, its dictionary It is the product of this period. However, due to poor development, the search business opened in 2007 was officially shut down in 2012, and the popular product dictionary was retained.

At the beginning of 2013, there were 300 million dictionary users, and the commercialization of products was put on the agenda. As for the specific ways to achieve commercialization, the team did not have much entanglement.

There was a CEO, Zhou Feng, who said in an interview that "the dictionary has been done, and I feel that I should be educated." In this way, the platform launched the “Tao Xuetang” in 2014 and officially entered the education field. In 2015, it confirmed the development of an online education platform based on the course explanation.

As the strategy continues to evolve, the platform has formed four product matrices: "Online Knowledge Tools + Online Courses + Smart Devices + Content Interaction Courses".

It turns out that NetEase has chosen the right market. According to iResearch, as of 2018, the market size of online education in China exceeded 250 billion yuan. From 2012 to 2018, the average annual growth rate exceeded 20%. There is also a real hope of seeing the development of the platform in this blue ocean.

According to the prospectus data, from 2017 to the first half of 2019, NetEase's revenue has been growing steadily at a rate of 60% year-on-year. The number of paid users and the single-user payment amount have also risen all the way, especially the single-user payment amount has increased significantly.

In addition, compared with other platforms in the same industry, the low cost of obtaining customers has become a major advantage.

Get online education users at low cost

The prospectus shows that in 2017, 2018 and the first half of 2019, NetEase’s marketing expenses were separately It is 136 million yuan, 213 million yuan and 186 million yuan. Its marketing expense ratios were 29.9%, 29.2% and 33.9%, respectively, which remained at a low level.

While other platforms compete for market dividends, the funds invested in marketing are far more than justified. The average marketing expense rate in the industry is 40%.

According to the information of, this summer alone, the market of Xuesisi School is about 1 billion yuan, and the counseling and homework help is about 400-500 million yuan.

The total investment cost of nearly 10 online education companies has reached 4 to 5 billion yuan. Its advertising has been distributed throughout the airport, train stations, bus stations, TV series, WeChat friends circle, self-media short video.

In contrast, the marketing costs are only at the downstream level. So is the influence of too low market launching a good result? not at all.

Take the excellent course as an example. In the context of the increase in the unit price of this course by nearly 250 yuan (currently 751 yuan), many users still pay for it, especially during the period from June to August 2019.

According to the prospectus data, compared with the same period, the number of registered students of the course increased by 51.5% to 16.73 million in the past two months. The increase in the number of K12 payers is as high as 206.47% to 76,000.

This means that there are two more ways to get more paid users at a lower cost of acquisition. There are two reasons for this. First, there is a channel of its own traffic; second, the platform guarantees the quality of the course.

Netease CEO Ding Lei once said that online education is a very important field and direction of Netease. Netease will make full use of existing resources to promote it. And this existing resource includes a good online learning tool, such as a dictionary.

The current dictionary has accumulated 800 million users, plus the offline entry of intelligent hardware (with smart pens, translation eggs) to form a user traffic pool with high viscosity and high quality. And effectively convert to online education users, greatly reducing the cost of getting customers.

Today, the average number of monthly active users has increased from 73.7 million in 2017 to 105 million in the first half of 2019.

But Zhou Feng also said that the current flow is no longer the achievement of this business, from the teacher's teaching and research, teaching and technology to talk about online education is the end of the game.

" We insist that products are kings to maximize user value." Zhou Feng said so, this is also done. There is a very strict choice for teachers, and less than 1% of the teachers who can leave classes on the platform through screening.

" Among the less than 1% of quality teachers, there are ways to get money, people and resources to educate teachers and polish products every year. We launched the "common plan" in 2016. Use 500 million to incubate 20 studios - to do high-quality content." It is obvious that there is a lot of thought on the quality of the course.

This is not all. As a company that started as a search business, the team's emphasis on technology is self-evident, and it also knows how to use technology to improve the user experience. This is also an advantage that some traditional educational institutions do not have.

Powerful intelligent learning

Because of the broad market development prospects, not only 51talk, fluent and other emerging companies enter the online education, New Oriental, learning and thinking A number of established educational institutions have also begun to lay online.

Because of their early efforts in education, these companies have a very high brand effect. In addition, its offline traffic may be back-feeding on the line and is also favored by the industry.

But as Zhou Feng said, the real threshold for Internet education is "content + service + technology."

Today, smart education has become a trend. According to Frost & Sullivan data, the overall size of China's intelligent learning industry in 2018 is about RMB 103.4 billion. It is expected to grow to RMB 719.8 billion by 2023, with a compound annual growth rate of 47.4%.

The Ministry of Education also said in May this year that China is organizing the development of China's Intelligent Education Development Program to promote the transfer of artificial intelligence innovations in education.

This means that having the technical ability to build smart education has become the key to the development of the platform. This is also a problem that has been paid attention to since the beginning.

As early as 2014, the platform continued to use technology to enhance the user learning experience, and gradually built the ecological chain of "tool products + online courses + intelligent hardware + AI interactive learning." And position yourself as an educational technology company.

The era of smart education is coming, and competitors are stepping up their efforts in this field. In contrast, due to the earlier layout, NetEase has developed relatively mature in this respect.

Taking smart devices as an example, in the first half of 2019, Netease had a smart device revenue of 43.1 million yuan, a year-on-year increase of 264.7%. These learning tools with large users (including software products such as a dictionary) bring effective traffic to online courses. The synergy between the full chain products can achieve significant scale effects.

In the future, NetEase will continue to increase its investment in technology and build higher business barriers. It stated in the prospectus that the funds raised will be used to further invest in technology and product development, to promote the brand, to expand the user base, and to operate the general company.

Netease bets online education

The NetEase has a platform, even in the entire NetEase system, the status of online education is very important.

Ding Lei has publicly stated that he wants to focus on building this business more than once, and it will be listed as the future profit growth point of Netease. At the recent 6th World Internet Conference, Ding Lei said that companies that dare to invest in hardcore areas such as education, health care, manufacturing and agriculture will have better opportunities in the future.

Ding Lei’s investment in education begins with industry development opportunities, but it is not limited to this. In his view, if an entrepreneur can be respected like a scientist and can influence and change society, it is really valuable and really successful.

" I am concerned about food and education issues. These two areas are small and have a bearing on the quality of personal life. Towards a big say is about national economy and people's livelihood." This has also become one of the reasons why Ding Lei's bet on education. .

Because of the imbalance of educational resources in China, Ding Lei wants to realize education and benefits through online courses and contribute 100 million yuan to support education public welfare. In September this year, this project was held in Yanbian Middle School, Panzhihua City, Sichuan Province. More than a hundred schools landed. Can be seen Ding Lei's love for education.

It is also this love and attention that makes Netease more positive and rigorous to the online education business, and promote its growth.

According to Netease's latest Q2 quarterly financial report, games and e-commerce have maintained a relatively stable development trend. The net game revenue was 11.43 billion yuan, a year-on-year increase of 13.6%, and continued to maintain revenues of 10 billion yuan; net income of e-commerce was 5.246 billion yuan, up 20.2% year-on-year; and the performance of innovation and other business sectors including education became the quarter. A highlight of the earnings report: net income was 1.51 billion yuan, an increase of 23.2% year-on-year, and the gross profit margin turned positive to 1.4%.

With the continuous development of technology in NetEase, the user experience of online courses will be further enhanced to enhance user stickiness. The Taoist Dictionary, as the largest traffic gathering place in Netease, can encourage more users to access intelligent learning and change the traditional way of learning.

This means that NetEase has a vision of not only drawing a career blueprint for itself, but also promoting smart education.

As for when this period will come, it is necessary to look at the development pace after Netease has a good track.

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