On the golden track of global social entertainment, after completing a start from 0 to 1, Akazi City has entered the “replication” stage from 1 to 100.
On March 21, Chizicheng Technology (09911) handed over a report card that exceeded expectations for 2023.
According to the results announcement, the company's revenue during the reporting period was about RMB 3.31 billion, up 18% year on year; net profit was about 760 million yuan, up 165% year on year; and net profit to mother was about RMB 513 million, up about 294% year on year.
Regarding this announcement, there are two key points to note: first, the excessive doubling of the company's net profit in 2023 is based on the high base in 2022, which shows the potential for continued high growth; second, the profit growth rate was significantly higher than revenue growth, which indicates that the company's operating efficiency improved and commercialization capacity increased during the period.
At the beginning of this month, the day after the release of the profit forecast, Chizi City once rose by nearly 50% in the intraday market, and the volume increased to HK$106 million, receiving market capital.
Analyzing Chizicheng's 2023 performance report, it was found that one of the keywords for the sharp increase in its performance was “latecomer products.” During the reporting period, in addition to products familiar to everyone such as MICO and YoHo, the company's latest-generation products TopTop and SUGO also rose strongly. Furthermore, its LGBTQ business segment also contributed considerable revenue and profit.
The “splash” of latecomer products is of great significance to Akazi City. This means that the company's model of replicating popular products has worked. On the golden track of global social entertainment, after completing a start from 0 to 1, Akazi City has entered the “replication” stage from 1 to 100. Under this “ability to replicate,” Chizicheng is expected to create more exploits and drive the company's continued growth in the future.
From a single product to multiple parallel processes
Akazicheng Technology has been deeply involved overseas for more than ten years. As early as 2013, the company focused on developing tool applications for overseas markets. After accumulating huge traffic through the application of tools, Chizicheng experienced the trend of live streaming. The company seized industrial opportunities, transformed into a social product field with more user stickiness and commercial value, and launched the live streaming social platform, MICO, in 2014. This product was also one of the earliest live streaming social platforms in China. By 2018, this product had become a leading platform in the Middle East, North Africa and Southeast Asia markets with its expansion strength and first-mover advantage.
MICO gave Chizicheng a “good start” on the live streaming social networking circuit, but since the market is highly dependent on the live streaming business, such as Yinguniverse and Huafang Group, the revenue category is relatively single, and there is insufficient room for subsequent growth. Since Chizicheng takes into account the different user needs and diversified product matrices, which play a significant role in reducing market risk and improving monetization efficiency, the company has begun a growth path of diversification of social business products and creating a new growth curve.
In terms of diversification of social business products, Chizicheng promotes a “multi-product, multi-market” strategic approach, and continuously improves its global social entertainment ecosystem through “product replication” and “national replication.” Following MICO, Akazicheng launched the voice social networking platform YoHo in 2018, and launched the companion dating platform SuGo and the multiplayer social networking platform TopTop in the past two years, continuing to enrich the company's pan-crowd social networking product matrix.
Although MICO and YoHo were launched earlier, these two products showed strong vitality during the reporting period, thanks to the refined operation of social services under the localized operation capabilities of Chizicheng. Up to now, two products, Mico and YoHo, have been ranked in Data.ai's “China Non-Gaming App Overseas Revenue List” TOP30 for a long time, and the level of commercialization has been at the top of the industry.
The rise of the latecomer SUGO and TopTop is even more impressive. As a dating platform that focuses on social networking, SUGO's revenue growth rate is at the highest among overseas products of the same type. In the second half of 2023, it entered the top 30 of data.ai's “China Non-Gaming Overseas App Revenue List” for 5 consecutive months, and the ranking continued to rise. In 2023, revenue increased more than 3 times year on year, and profit increased more than 6 times year on year, and the growth rate was remarkable.
Since its launch, TopTop has remained stable at the top of the “Gulf Six Nations” Google Play social networking app bestseller list, and has become the leading gaming social networking product in the Middle East and North Africa. According to data, active users of this product spend an average of 60 minutes of daily use, and user loyalty is strong, showing good growth prospects.
As the “fresh blood” of Chizicheng's social networking business, social networking for diverse groups also made a qualitative breakthrough in 2023. After completing the merger with the Blue City Brothers, Akazicheng leveraged its operational advantages to help it continue to profit, and launched a new LGBTQ+ community platform brand for overseas markets, HeeSay, based on Blued's international user and brand potential. This marks the acceleration of Chizicheng's global LGBTQ+ market layout.
Thanks to the rise of latecomer products SUGO and TopTop and the merger of social networking businesses for diverse groups, Chizicheng recorded a total revenue of 3.308 billion yuan in 2023, an increase of 18.0% over the previous year. At the same time, the rapid growth of these products is also driving the company's commercialization efficiency to continue to rise, leading to a 165% year-on-year increase in the company's net profit in 2023 and a 294% year-on-year increase in net profit to mother.
In addition to social services, innovative businesses such as boutique games also maintained rapid growth during the reporting period as a new growth curve for Chizicheng. The total revenue of the innovation business is expected to be about 336 million yuan, an increase of about 40% over the previous year, accounting for more than 10% of the company's total revenue.
“Alice's Dream: Merge Island” was officially launched in June 2022. This self-developed casual synthetic mobile game was recommended by Google Play for new global games just two months after launch. Up to now, it has entered the top 10 best-selling puzzle games on Google Play in 140 countries and regions, and its monthly turnover has surpassed 8 million US dollars. In 2023, Akazi City also incubated boutique games such as “Taylor's Secret” and “Sudoku.”
From this perspective, Chizicheng, which entered the social networking circuit with live streaming social products, chose the right growth path with a forward-looking strategic vision. It was not limited to existing fields, but instead created a second growth curve through product diversification and the layout of new tracks, forming a multi-pronged growth pattern.
Open the growth ceiling with “copy”
Looking back at history, Chizicheng's strong growth momentum is rare even in the Hong Kong stock market as a whole. According to data, from 2017 to 2022, Chizicheng Technology's revenue was 182 million, 277 million, 390 million, 1.82 billion, and 2.36 billion yuan, respectively, and recorded annual revenue of 3.308 billion yuan in 2023, achieving 5 consecutive years of rapid growth, with a compound annual growth rate of 62.41%.
Being able to achieve such impressive growth results is also directly related to the continuous growth of the industry. The global open social industry in which Chizicheng is located is a typical “long slope and heavy snow” golden track.
According to Frost & Sullivan's forecast, the compound annual growth rate of social media from 2021 to 2024 is expected to reach 15.1%. It is a huge market worth more than 2 trillion yuan, and there are many opportunities for racetrack segmentation. Among them, the types of open social networking applications include but are not limited to dating, audio social networking, video social networking, live streaming social networking, game social networking, etc. According to Frost & Sullivan's predictions, the growth rate of voice and video social networking is higher than the overall growth rate of the social networking market, and these are the two most widespread social models in open social networking.
And social networking for diverse groups is also a huge market. Frost & Sullivan predicts that by 2023, the total number of diverse people in the world will grow to 591 million, and the global diverse population market will reach 5.4 trillion US dollars, with a compound annual growth rate of 7%. Furthermore, social networking for diverse groups of people has remarkable high user stickiness and monetization efficiency, showing extremely impressive spending power. Judging from the penetration rate, at present, the penetration rate of social products for diverse groups of people around the world is still not high, and there is still plenty of room for growth in regional markets such as Southeast Asia, Japan, South Korea, Europe, and the US.
In terms of the game business, according to the “2023 Game Industry Trend Report” released by Unity, the global game market is expected to be US$184 billion in 2023, an increase of 0.6% over the previous year. By 2026, this scale will grow to $205.7 billion, which means that the global gaming market will continue to grow steadily. Looking at segmented tracks, according to Sensor Tower data, synthetic mobile games are one of the puzzle-solving mobile game sub-categories with the most prominent growth in global revenue and downloads in recent years, and there is plenty of room for growth.
If you look at the situation in the industry, the layout of Chizicheng Technology is extremely intelligent. In order to explore and expand the global open social market to the greatest extent, Chizicheng's diverse product matrix covers almost all application scenarios in the open social networking market, and boutique games, which are one of the second growth curves, also target the fastest growing synthetic mobile game circuit in the game market, and continue to benefit from the growth of the industry.
More importantly, with the company's moat — the ability to replicate, Chizicheng has the “magic” of digging deeper into the growth potential of existing products and continuously launching new products to open up the company's growth space.
On the one hand, Chizicheng Technology replicates existing products to more overseas markets through “national replication” capabilities, so that a new product with growth potential can quickly “fully blossom” overseas. MICO has accumulated 100 million users worldwide, which is a good proof; on the other hand, the company's “product replication ability” not only allows products to be rapidly iterated, but also develops new products with strong growth potential in a short period of time based on long-term accumulated experience, and continues to increase the penetration rate of products and accumulate user energy for growth. This ability has also been verified.
In addition, the company has also accumulated a large number of mature localization operation methodologies and rich local resources. By replicating localized operation capabilities, the company can complete refined operation of products, which can effectively improve the operational efficiency and monetization efficiency of products. The company's profit data, which has continued to increase dramatically in recent years, proves that Akazi City has the ability to continuously improve commercialization efficiency through in-depth localized operations.
It is worth noting that 2024 will also be a key year for Chizicheng Technology's diverse social networking business to expand overseas. For Chizicheng, HeeSay, which focuses on overseas markets, will be the focus of its social networking business strategy for diverse groups, and there will be plenty of room for growth in the future.
From the initial live streaming social networking platform, to having more and more rapidly growing pan-crowd social networking products, to setting up a boutique game business, to expanding social networking services for diverse groups, today Chizi City has established a vibrant social entertainment “bush” ecosystem on the Golden Track, and the barriers to competition on the global social entertainment circuit are getting higher and higher as its “bush” ecosystem becomes more and more rich.
Through continuous “copying,” the company is gradually opening the ceiling for growth.
Betting on the gold market in the Middle East and North Africa
Back to the current results announcement, one of the main reasons for the increase in the company's net profit and net profit attributable to mother is the strong expansion of the Middle East and North Africa market.
In addition to the “seaside veteran” label, Akazicheng is also a market leader in the Middle East when it comes to going overseas. Continued cultivation in the Middle East and North Africa, a market where demand continues to be strong, is also one of the key factors for the continued growth of Chizi City.
The Middle East is a fertile ground for social pan-entertainment prosperity, with plenty of market dividends. According to relevant data, the overall population structure of the Middle East is younger, the median age is less than 29, and the local Internet penetration rate is among the highest in the world. Among them, the Internet penetration rate in the six Gulf countries is as high as 96%. At the same time, the Middle East economy is growing at a relatively high rate. The per capita GDP of the six Gulf countries has reached or even surpassed the level of developed countries. Local residents have plenty of time and money to spend on entertainment, which can be called “rich and idle.”
According to data, from 2020 to 2021, the growth rate of Pan-Entertainment apps in the Middle East reached 387%, ranking first in the world. According to research by data analysis company Global Web Index, internet users in the Middle East each have 8.4 social media accounts. Also, according to the “2022 White Paper on Social Pan-Entertainment Going Overseas”, Pan-Entertainment accounts for nearly 80% of the top 50 revenue for non-gaming apps in Saudi Arabia.
In 2023, app downloads and payment data for users in the Middle East continued to rise. The two important racing tracks of Pan-Entertainment and Gaming became the first choice for overseas companies to tap into the Middle East, and the Middle East ushered in a frenzy of domestic pan-entertainment trips.
Chizicheng has been deeply involved in the Middle East market for nearly eight years and is one of the pioneers of this boom. The company has formed a mature set of localized operating methodologies suitable for the Middle East market based on various dimensions such as religious sensitivity, social and family values, localization and cultural sensitivity in the Middle East region. This is one of the core competencies of Chizicheng in the Middle East market, and it is difficult for new players to establish mature localized operation capabilities in the Middle East market.
At the performance conference on March 22, Chizicheng revealed that the revenue of the company's core products in the MENA market reached 1,353 billion yuan in 2023. In the past few years, thanks to its localization capabilities, the company achieved rapid development in this market. Between 2020 and 2023, the compound annual growth rate of revenue was about 33%, and the compound annual growth rate of profit reached 36%.
This also means that in the midst of the boom in Pan Entertainment going overseas in the Middle East, Chizicheng is expected to continue to benefit from its existing first-mover advantage and the core competitiveness of localized operations, which will lay the foundation for the company's continued growth.
summed
From the first live streaming social networking product, MICO successfully moved from one country to many countries, and since then, many products have continued to follow MICO's footsteps and efficient implementation. Akazi City's forward-looking strategic vision and strong execution in implementing localized operations, product replication, and national replication strategies have been clearly reflected in the historical process. This is also the best proof that Chizi City has the ability to continue to evolve and grow.
With the three core competencies of product replication, national replication, and localized operation replication, Chizicheng can iteratively incubate more products and expand to various countries and regions around the world in the future, and these three capabilities can be used universally in the three major business lines of pan-crowd networking, multi-person social networking, and boutique gaming. Theoretically, there is no upper limit on the growth space of Akizi City, which has strong replication capabilities. This is probably the real value of Akizi City in the long term.
Currently, the largest open social networking business in the world is Match Group, which has dozens of dating, social, and entertainment products such as Tinder and Hinge, and its market value has exceeded 9 billion US dollars. Based on the social entertainment ecosystem built up in Chizicheng above and the gradually formed core competitiveness, Chizicheng is expected to become the Chinese version of Match Group, perhaps more than Match.