In 2024, game stocks, which have experienced continuous adjustments, have a valuation advantage in industry comparisons. The market's focus is gradually once again on this sector, which has been mistaken and undervalued, and has high growth potential. Investors also urgently need to find high-quality targets with stable and far-reaching growth and certainty in the gradually recovering Internet industry.
At a time of intense publication of Hong Kong stock annual reports, in the past year, in the face of a challenging economic environment, Baiao Family Interactive (02100), an established game manufacturer with a major IP, still achieved impressive performance: achieving resilient growth throughout the year, maintaining stable core business, continuous improvement in R&D efficiency, etc., and withstanding cycle fluctuations with solid long-term operating skills, showing strong business resilience and growth potential under the industry's recovery trend.
Resilient growth in 2023, highlighting the long-term operational advantages of core products
On March 27, Baiao Family Interactive (02100) announced its 2023 annual results. During the year, Baiao achieved revenue of approximately RMB 783 million and adjusted net loss of approximately RMB 10 million. On the one hand, the company continues to increase investment in R&D, rapidly improving independent game development capabilities and user experience, and achieving considerable revenue growth; on the other hand, the company reduces costs and increases efficiency, facing market competition with lower costs, more efficient conversion rates, and continuous R&D processes on the basis of ensuring high-quality content.
In terms of operating data, the company's average quarterly active account QAA during the year was 7.3 million; the average quarterly paid account QPA was 1.1 million; due to the successful operation of existing games and increased user willingness to pay, the average quarterly ARQPA of paid accounts reached 176.1 yuan per quarter, an increase of 15.9% over the previous year.
During the period, the company continued to increase R&D investment to further enhance product innovation and R&D capabilities and consolidate core competitiveness. R&D expenses reached about RMB 231 million during the year. In order to enhance the product development pipeline and engineering capabilities for high-quality games, Baiao continues to increase its R&D efforts. The share of R&D expenses continues to rise to 29.5%, and the total number of R&D personnel accounts for 83.3%, demonstrating the company's confidence in the long-term product layout.
Behind “paper data,” what is even more rare is that Baiao's existing core products continue to operate steadily, continuously consolidating the company's brand influence in the market.
Take the “Obi Island: Dream Country” mobile game adapted from the classic page game IP “Obi Island” as an example. Since its launch, it is still very popular and has an excellent reputation. The TapTap rating has remained at 7.1 points, and the long-term operation potential is outstanding. “Obi Island” is Baiao Family Interactive's longest-running and most influential IP. Through more than 15 years of operation, it has attracted and accumulated a large number of fans and players. Since its launch in July 2022, the “Orbi Island: Land of Dreams” mobile game has been widely supported and recognized by players. After launch, it quickly climbed to the top of the iOS free game list, and reached 6th place in the iOS game bestseller list the next day. At the same time, “Obi Island: The Land of Dreams” maintains a high frequency of iterations and rich gameplay and content innovations, with major releases frequently at the top of the iOS game leisure list.
“Food Talk” uses unique anthropomorphic ideas of Chinese cuisine to cleverly incorporate the deep heritage of Chinese food culture and cultural feelings into the game. Since its launch in September 2019, it has launched as many as 50 versions and more than 150 souls. In 2023, “Food Talk” will continue to upgrade and iterate gameplay and content, collaborating with bookstores and the famous cooking education brand “New Oriental Cooking School” to launch fresh gameplay such as a new Eater of Souls infant skin and simulated management system, making the product that has been on the market for more than four years continue to flourish.
Also, “Aura Star Mobile Game”, which was adapted from the original IP “Aura Star”, which has been in operation for 13 years, has been on the market for more than 4 years. Since its launch, the game has been committed to meeting user demands, listening to players' voices, and accurately optimizing products and iterating versions in response to user pain points.
On the other hand, a series of high-quality operational content brought significant positive market feedback in 2023.
The “Legend of Augie” page game launched by the company in 2012 has been online for nearly 12 years. During this period, the game achieved contrarian growth in 2023 by continuously optimizing core gameplay, improving art quality, and providing players with rich version content. “The Legend of Auchi Mobile Game”, which was adapted from the “Legend of Augie” IP, has been online for nearly three years, and has maintained a refined operating model, focusing on improving the user experience, solving players' pain points, and achieving continuous growth in community fans. The game's newly launched “farm management system” and “pet breeding system” have been well received by players, increasing user stickiness and innovation through effective gameplay innovation and offline fission.
It is easy to see that in terms of future growth, Baiao's existing products will continue to release profits. With high-frequency version iteration and optimization, product flow has maintained a stable trend. For this reason, the market is also optimistic about the subsequent earnings of the company's games.
IP linkage strongly “breaks the circle”, and high-quality content boosts commercial value
If we talk about the biggest changes in the game industry in recent years, it is that manufacturers are constantly trying to break through “dimensional” barriers and integrate online and offline, and cross-border linkages have also become a bridge for mutual achievement between games and brands. For game manufacturers, linking well-known IPs can bring rich commercial value to games; for IPs, this is also a great opportunity to expand their audience, so the two sides will maintain closer cooperation to achieve a win-win situation.
In this context, Baiao has also seen the considerable traffic and commercial value that can be discovered by IP linkage, and the joint activities of its various mobile games have blossomed even more.
In 2023, the company's star mobile game “Obi Island: The Land of Dreams” includes CCTV animation, snack brand Lai Yifen, “Happy Goat and the Grey Wolf”, Sanrio, SUSUMI Chaowan, tea drink brand Chabaidao, and “Please Eat Red Adzuki Beans!” Up to 11 well-known IPs have cooperated to seek cross-dimensional breakthroughs. We are committed to bringing brands loved by young people to games, bringing fresh and fun content and rich and diverse gaming experiences to players, and sparking the popularity of social media topics many times. #奥比岛联动三丽鸥 #的微博话题阅读量高达近6亿， #奥比岛手游 #的微博超话阅读量已近60亿。
Furthermore, based on Obi Island's huge player ecosystem, players spontaneously participated and disseminated when linked, thus creating a “self-disseminating content ecosystem”, increasing activity, and cleverly using various touchpoints such as social media to create external volume, open up new ways of interactive drainage, and resonate with high-quality content and brand value advantages, and continue to attract high-quality IP partnerships.
In addition, cultural linkage is a new type of linkage that has become popular in recent years. Most game manufacturers cooperate with local museums or inheritors of intangible heritage culture. In terms of cross-dimensional cooperation in traditional intangible heritage culture, such as “Food Language” and Guangcai Intangible Heritage Cultural Linkage, “Aura Star Mobile Game” and Yangjiang Kite Intangible Heritage Linkage, “Legend of Auqi Mobile Game” and Guangdong Lion Dance Linkage, Baiaoyi's interesting cultural linkage content, and carefully designed linked theme activities, while leading players to experience the unique charm of traditional culture, also combine elements of traditional Chinese culture with game content, which has an excellent promotion effect on cultural export.
Furthermore, in terms of adhering to a positive orientation, Baiao actively participates in public welfare undertakings and practices social responsibility. The “Obi Island: Dream Country” mobile game and the Capital Animal Care Association have joined forces to use all revenue obtained from online activities, excluding channel profits, to rescue stray animals, help caring for public welfare and deliver positive brand value.
The reason why IP “broke the circle” is also because many games under Baiao are strong enough, have a large user base, and have a good reputation, so “content is king” can attract the joint support of many linked IPs. Derived from premium content, the collaborative ecosystem built by Baiao is also more conducive to speeding up version iteration, creating unique and rich game experiences, enhancing players' participation and stickiness, and continuously injecting vitality into the long-term operation of the game.
From this perspective, based on quality content and a continuously expanding player base, Baiao achieved not only commercial success, but also achieved two-way empowerment of the brands and products of the partners with its strong linkage appeal and ability to break the circle. As the linked IP matrix continues to grow, the future will enable Baiao's games to maximize their platform effects, open up channels of interaction with players and fans, help users retain and operate in the long term, and further expand their IP influence and commercialization capabilities. The huge and sticky consumer base will undoubtedly provide stable and sufficient momentum for subsequent performance growth.
R&D and innovation build core barriers, and new travel reserves lay the foundation for growth
If the long-term operation of a stock of mobile games provides a certain guarantee for the company's future performance, then the rich and diverse product reserves will bring more room for growth for Baiao family interaction.
In 2023, the company continued to focus on the competitive segmentation circuit and made every effort to build a rich product development pipeline portfolio, showing strong self-research capabilities.
Among them, the highly anticipated mobile game “Aura Star 2” was officially unveiled and pre-orders began in the first half of 2023, and received strong recommendations from various platforms such as Bilibili Game Reservation Center and Xiaomi Game Center. This dual-end pet racetrack mobile game received the version number in December of last year, and a test was carried out during the same period to delete files without billing.
As a multiplayer pet turn-based RPG mobile game, “Aura Star 2” not only preserves the original Abi turn-based battles, but also has a new design for the entire Abi ecosystem, incorporating various gameplay methods such as world exploration, collection, cultivation, and battles. It is expected to fill the gap in this category of themes in the domestic game market, and has great potential to become a “hit” in the pet RPG circuit in 2024.
In terms of going overseas, within 2023, “Food Talk” launched in multiple languages, Korean, English, and traditional Chinese, and entered the top ten iOS card game free lists in five countries and the top ten in 10 countries, respectively.
More importantly, Baiao Family Interactive focuses on exploring the latest breakthroughs and potential applications of AIGC technology in game development. Up to now, the company has set up an in-house AI laboratory, introduced high-end experts and built an AI team; at present, the company has used AIGC technology to assist product development and distribution, and upgrade products in multiple dimensions, improving R&D efficiency and reducing production costs, while continuously bringing more imaginative quality content to players.
From an industry perspective, the game industry's regulatory policy will remain stable in 2024, and game versions will be distributed normally; in the short term, the overall demand in the game industry is expected to continue to rise, driven by new products and categories (applet games, etc.); in the long run, the introduction of new technologies such as AIGC and VR/AR/XR is expected to bring about the possibility of content and business model restructuring while reducing costs and increasing efficiency and innovating interaction methods.
Therefore, with the continuous launch and launch of new games in 2024, adding the incremental space brought by the smooth launch of flagship games, it is extremely likely to bring significant breakthroughs in revenue and long-term positive growth prospects to Baiao, which will form strong support in terms of commercial value and company performance.
In the future, Baiao Family Interactive will also use core high-quality content and boutique games as a starting point to break through the casual game circuit with diverse and popular IPs, and adopt rich linkage and innovation strategies to target the core of user consumption and continue to explore interesting consumption space, laying the foundation for the steady expansion of game-side users, and deepening its competitive barrier advantage. Now it has the ability to develop “super hits”. The growth prospects are worth looking forward to.