Nasdsaq: BILI; HKEX: 9626) released financial results for the first quarter of 2024 ending March 31: total net revenue was 5.66 billion yuan, up 12% year on year. Net loss of 764.6 million yuan compared with net loss of 629.6 million yuan for the same period last year. Without US GAAP, the adjusted net loss was 455.9 million yuan, a decrease of 56% over the previous year.

After the financial report was released, Bilibili Chairman and CEO Chen Rui, Vice Chairman and Chief Operating Officer Li Ni, CFO Fan Xin and other company executives attended the subsequent earnings conference call to interpret the key points of the financial report and answer questions from analysts.

Here are the highlights of the analyst Q&A session of this conference call:

Jefferies Analyst Thomas Chong: The growth of the company's advertising business has exceeded expectations. Can you ask management to share where the main driving force comes from? What improvements has the company made in advertising products and algorithms? Can you share the advertising business growth trend during the 618 promotion in the second quarter? How do you view the growth rate of advertising throughout the year?

Li Ni: The overall advertising revenue of Station B exceeded 1.6 billion in the first quarter, reaching 1.67 billion yuan, and the year-on-year increase also reached 31%. At the level of performance advertising revenue, growth will be faster, reaching 50% year-on-year increase. We believe that there are mainly the following core drivers. The first level is mainly users. The B-station community is very concerned about the user experience. On the basis of optimizing the user experience, we have achieved an increase in advertising inventory.

In the first quarter, we expanded advertising scenarios such as news and search. Most importantly, we also used a mix of organic and commercial traffic, so that high-quality advertising content can get more traffic and increase inventory. Even if we increase our ad inventory, compared to the advertising volume of other platforms, our inventory level is still relatively low, and I believe there is still a lot of room for improvement in the future.

Second, we have opened up the fireworks system and advertising system, integrated and strengthened the overall delivery tools on the customer side, and realized intelligent delivery. Delivery in different scenarios only requires very flexible switching, so the penetration rate of our fireworks launch in the first quarter has increased to more than 50%. At the same time, we have also launched a creative center. In the future, customers can process materials in batches, and use artificial intelligence to generate content, which will be more efficient.

In addition to this, in fact, everyone is also concerned about the overall ecology of UP owners. In terms of the UP main launch and take-off function, we have also upgraded it to a product called B Fire. This product is already open to all UP owners. At Station B, we can achieve a complete path from how to create content, heat, increase powder, and achieve monetization, all of which can be achieved through this product. The number of users launching this product has increased 190% year over year, and repurchases and satisfaction have continued to increase.

Third, we have also improved the overall marketing data infrastructure, improved the efficiency of algorithms, and deepened various commercial labels. We can provide advertisers with full-link product promotion guidelines, including data measurement. We already launched this system for game, mobile phone manufacturers, and beauty customers in the first quarter. We named it B-Data, including the application of the Z Index. I believe we will roll out these metrics more comprehensively in the second and third quarters.

Fourth, our vertical industrialization solutions are actually still being further deepened. Our top three industries — games, digital appliances, and platform e-commerce — are growing at double digits. In terms of the game business, we have consolidated the advantages of boutique games and provided a full range of services. Recently, we have also seized the increase in mini-games, and daily consumption has increased by more than 50%. At the level of digital appliances, the consumer share of the B-station mobile phone industry has already exceeded 10%. I believe there will also be a lot of room for growth in the digital, large and small household appliances industry in the future.

Finally, in the e-commerce industry, which is also the platform that everyone is concerned about, we have also carried out some restructuring. In addition to JD, Taobao, Tmall, and Pinduoduo, we have also expanded cooperation with platforms such as Vipshop, Get, and Leisure Fish. We are still doing a good job in increasing the UP value of non-e-commerce nodes. Another is that we are actively introducing merchant budgets together with e-commerce platforms. This will be a major driving factor for achieving higher growth rates in the future.

I believe that some of the methodologies in these three industries can be replicated in industries such as automobiles, online services, medical care, education, etc. in the second quarter to achieve relatively rapid growth. The above four points were our core growth drivers in the first quarter.

Regarding the 618 you just mentioned, compared to last year's 618, the increase was more than 30%. Station B's share of advertisers' budgets has been increasing, and is currently in the top positions. We are still adhering to our previous big open loop strategy, and have established in-depth cooperation with Ali, JD, Pinduoduo, and Vipshop.

However, compared to before, we have also done two different things, or some deepening. First, we upgraded from the previous pure traffic cooperation to both traffic cooperation and content collaboration. For example, our brand hardware increased 40% year over year, which can prove the value of Station B's crowd. This year, Taobao and Tmall added a new way to play Fireworks+Streaming; JD is still actively participating in all of our venue events, and has formed a new model of gameplay that combines traffic and content value.

Second, we changed from a single platform to a cooperative model between platforms and merchants, so 618 our overall platform budget increased by more than 30%, but our merchant budget increased by more than 250% over the same period last year. In the future, we will strengthen cooperation in this vertical industry, promote the cultivation of plants on Station B, and at the same time realize the full link process of transforming transactions and consumption.

Referring to 618, I also mentioned the situation where overall trading on Station B is becoming more and more prosperous. I can use some data to make everyone feel the current state of the platform more clearly. The increase in users' consumer mentality is actually quite rapid. The number of users watching transactional content reached 37.2 million in the first quarter, with a year-on-year increase of more than 100%, which proves that users are becoming more and more aware of the transaction scenario.

The second data is that the number of UP owners receiving revenue through delivery also increased by more than 100% year over year. These data all prove that our transaction-related advertising revenue still has a lot of room to grow in the future. The four industries currently with the largest trading volume on Station B are 3C home appliances, home improvement, food and beverage, clothing, and beauty. This is some transaction data related to 618. In summary, we are very confident that the advertising business will continue to grow rapidly this year.

(Continuously updated...)