Long video platforms have surged in the past year.

Starting with “Crazy Rush” and ending with “Blossoming Flowers,” all major platforms held high the flag of growth, explored their own way of survival, and competed for market share.

The new round of long video wars is no longer limited to simple traffic competition, but has deepened to multiple levels, such as refining the quality of content and promotion strategies. At the same time, membership fees for various video platforms have also collectively risen in the past two years, helping the Long Video Platform begin to get rid of the plight of losses and profit difficulties and gradually enter a profit path.

As the long video competition starts again, who can take the lead?

On February 28, iQiyi released its 2023 Q4 and full-year earnings report, releasing a key signal. It is picking up pace and moving in the direction of “high-quality growth, both revenue and operating profit growth.”

Continuing the growth trend in 2022, iQiyi, as the only independently listed company among the Big Three Long Video Companies, has achieved operating profits for two consecutive years.

According to financial reports, iQiyi's total annual revenue reached 31.9 billion yuan, up 10% year on year; non-GAAP (non-GAAP) operating profit was 3.6 billion yuan, up 68% year on year; and non-GAAP net profit was 2.8 billion yuan, up 121% year on year. Among them, Q4 revenue was 7.7 billion yuan, and non-GAAP operating profit was 928 million yuan.

As can be seen, iQiyi not only achieved double-digit growth in full-year revenue and non-GAAP operating profit in 2023, but the profit growth rate was much higher than the revenue growth rate. At the same time, its operating cash flow and free cash flow both exceeded 3.3 billion yuan, showing a healthy financial situation and high profit quality.

Data source: financial report

You might as well explore in depth how iQiyi does it through this report card. The reason behind this may also mean that the development of the long video industry is gradually becoming clear.

Memberships and advertising revenue are driven by both, and multi-core metrics set new records

By business category, iQiyi's revenue is mainly supported by the two core businesses of membership and advertising.

Source: Company Information

In terms of membership services, iQiyi's membership service achieved revenue of 20.3 billion yuan in 2023, an increase of 15% over the previous year. Among them, Q4 membership service revenue was 4.8 billion yuan.

Meanwhile, iQiyi Q's average single member revenue (ARM) in April reached a record high of 15.98 yuan, a year-on-year increase of 13%, and achieved month-on-month growth for 5 consecutive quarters. As a key indicator of a long video platform, the continued growth of ARM clearly reflects the profitability of its membership services and the economic value of members.

On the basis of the continuous increase in iQiyi platform membership prices, users' willingness to subscribe to annual membership cards is still increasing, and Quest mobile data indicates that iQiyi will maintain the highest MAU (number of monthly active users) in the industry in 2023.

Various data are sufficient to show iQiyi's strength in terms of both content quality and membership benefits, and users are willing to pay more for this. In addition, it has launched a campaign to redeem membership points for rewards, extras, and highlights, etc., which has also effectively boosted long-term member payments to a certain extent.

Source: Company Information

In terms of advertising business, iQiyi online advertising achieved revenue of 6.2 billion yuan in 2023, an increase of 17% over the previous year. Among them, revenue for the fourth quarter was 1.7 billion yuan, up 6% year on year, and both brand advertising and performance advertising achieved year-on-year growth.

The main reason is that, on the one hand, top dramas such as “A Dream of Ning An”, “A Dream of Guanshan” and “Unstoppable” are favored by advertisers. This high-quality content provides a good marketing platform for brand advertising, further boosting the growth of brand advertising revenue, and making content-targeted advertising revenue account for more than 50% of the company's brand advertising revenue.

On the other hand, iQiyi uses generative AI technology to create advertising materials, which not only improves the quality of advertising materials, but also improves the conversion efficiency of advertisements, thereby driving a year-on-year increase in effective advertising revenue.

Quality content is the biggest winning strategy for long video platforms

The rapid growth of various core business data is no accident; the reason behind it can be simply classified as two major supporting logics.

The first is the powerful driving force behind hit series.

The highly acclaimed series is undoubtedly the key to attracting C-end users to recharge members and motivating B-side brands to advertise.

Simply put, popular series not only brought rich traffic and revenue to the Long Video platform, but also invisibly shaped the platform's brand image and increased user stickiness. When viewers are willing to pay to become members for a series they like, and when advertisers see the influence of a popular series and decide to advertise, all of this highlights the central position of content in the field of long videos.

It all boils down to one sentence; all actions and strategies of long video platforms should focus on content.

At this point, iQiyi's number and proportion of S and A+ projects among self-made and exclusively purchased projects has been rising steadily, and the quality of content has been steadily improving. It has dominated the drama list for two consecutive years, fully demonstrating iQiyi's outstanding performance in terms of content quality, audience reputation, and market influence, and has won high recognition from the market.

Source: Company Information

According to the “2023 Series and Variety Webcast Report” published by Yunhe Data, iQiyi has a total of 8 works on the list of the top 10 effective broadcast series on the Internet, covering a wide range of fields such as criminal investigation, martial arts, cities, and costume love. There is no doubt about quality control. Among them, “Crazy Rush” steadily ranked first in the list with the number of effective broadcasts of the original film breaking 10 billion, directly breaking Yunhe Data's record for peak market share in a single day in history.

Data source: Yunhe Data

Overall, iQiyi has successfully attracted a large number of users to pay as members for a long time by providing more high-quality exclusive content, increasing membership privileges, and innovative services, and user stickiness continues to increase. At the same time, the continuous production of popular and high-quality content has also become more attractive to advertisers, boosting the growth of the advertising business.

Based on this, paid members have a higher demand for high-quality and exclusive content. Coupled with the participation of advertisers, iQiyi has provided iQiyi with the resources and motivation to produce more high-quality and in-depth content, thus forming a virtuous cycle of wheel effect and ensuring that it continues to achieve high growth.

In the earnings conference call, Chief Content Officer Wang Xiaohui revealed, “The number of leading projects is expected to account for more than 50% of the content of the homemade and exclusively purchased series that iQiyi plans to launch in 2024.”

Insight into needs, innovate operating strategies, and explore new growth points

The second is innovation in operating strategies to find a driving force for growth.

As the era of traditional long video content structures using self-made dramas as a protective barrier gradually came to an end, iQiyi also began exploring new fields and methods to seek continuous growth.

For example, iQiyi launched the “Mist Theater” in 2020, which mainly focuses on short series content with suspense themes to enhance the user experience with quality content and a new theater operation model. With the two dramas “The Hidden Corner” and “The Silent Truth,” the Mist Theater quickly became famous.

Building on this successful experience, iQiyi launched a new “Action Master Season” movie label in January 2024, focusing on action movies. Four action movies, “Stop the Horse and Catch the Sword,” “No One in Your Eyes 2,” “Fight for Evil,” and “Stranger Terror,” have been brought, which include elements such as martial arts, modernity, crime, and opera.

Source: Company Information

Regarding this brand new “Master of Action Season” movie brand, iQiyi's senior vice president Yang Haitao said that this was based on in-depth insight into the consumption behavior of platform users. By creating a unique brand concept, strengthening users' perception of action movies, and combining branded operation methods, it leaves a deep impression on the audience, thereby promoting the further development of iQiyi in the field of action movies.

In addition to this, under the AI wave, iQiyi is also actively using AI technology to promote the industrialization process of the film and television industry.

In the past year, through the establishment of close partnerships with top generative AI companies at home and abroad, iQiyi introduced the latest generative AI technology, combined its huge film and television data with large models, carried out in-depth training and fine-tuning, and developed more professional and vertical generative AI applications for the film and television industry.

Specifically, iQiyi widely uses generative AI in various core aspects of content creation, development, and promotion. For example, the virtual footage for “Big Dream Returns” was over 3,000 minutes long. At the same time, the poster map generated by AI has also successfully achieved a significant increase in click rate and playback time, which is more advantageous than traditional artificial mapping methods.

At present, iQiyi's artificial intelligence technology has the ability to understand video content at the minute level. This means that the system can accurately extract detailed storylines for each series. Currently, the technology has covered more than 3,000 series, providing viewers with a more convenient and efficient viewing experience.

epilogue

In 2023, iQiyi's performance surpassed market expectations, and the sustainability and growth of its business model has been verified.

Looking at 2024, Gong Yu, founder and CEO of iQiyi, said, “iQiyi will continue to adhere to the long-term principle, commit to it, continue high-quality growth, and further achieve revenue and profit growth.”

Similarly, brokerage agencies all gave positive expectations. For example, Orient Securities maintained iQiyi's “buy” rating; Bank of China Securities pointed out that the ecosystem of the long video industry is stable and improving, and iQiyi will continue to concentrate resources to produce top quality content and maintain its “buy” rating.

It can be seen that the market already has its own judgment on iQiyi or the long video industry.