The second-quarter Chinese securities earnings season is here. Many large companies that were not favored by the market before have turned over one after another.

Kuaishou in particular.

In the past two years, many people have doubted whether Kuaishou has any profit value.

I believe that the latest financial report will leave these questions unanswered.

1. Three fast horses, driving hand in hand

As a Hong Kong-listed company, Kuaishou's business model and profitability have been questioned since it went public.

However, this time, at a time when the general environment was not so good, Kuaishou finally entered the “profit era,” proving the viability of its business logic to the market.

Financial reports show that Kuaishou's total revenue for the second quarter was 27.744 billion yuan, an increase of 27.9% over the previous year, higher than market expectations of 27.2 billion yuan.

IFRS net profit of 1.48 billion yuan (adjusted profit of 2.69 billion yuan) is a full seven times higher than market expectations of 180 million yuan. Compared with 3.18 billion yuan in the same period last year, it is a huge difference.

To understand Kuaishou's report card, which exceeds expectations, it is necessary to observe the scores for each subject separately.

1. E-commerce business.

According to financial reports, Kuaishou's e-commerce business GMV in the second quarter increased 38.9% year on year to 265.5 billion yuan.

This is mainly due to the fact that after infrastructure capacity was strengthened, the platform e-commerce ecosystem continued to improve, driving increased investors' ROI and willingness to invest.

At the same time, with the increase in commissions from Talent's distribution business, other revenue also soared 61.5% year-on-year, reaching 3.43 billion yuan, far exceeding market expectations.

2. advertising business.

In the second quarter, Kuaishou's advertising revenue was 14.347 billion yuan, accounting for 51.7%, an increase of 30.4% over the previous year.

CICC believes that the e-commerce business is driving strong growth in internal circulation advertising, while at the same time, the year-on-year growth rate of advertising with external circulation effects has also improved.

This is known as “internal loop advertising”In other words, in order to sell more products during the live broadcast, merchants and anchors will advertise on the platform to attract more people to follow their accounts and watch the live broadcast.

In terms of external circulation, the company also stated at the performance conference that sales in e-commerce, information services, education and training industries have all increased month-on-month, and the capabilities of advertising products such as native advertising have continued to improve.

3. Live streaming revenue.

Live streaming revenue for the second quarter was 9.97 billion yuan, accounting for 35.9%, an increase of 16.4% over the previous year. Other services, including e-commerce, accounted for 12.4%.

Obviously, after several quarters of transformation, advertising has become the number one pillar of Kuaishou's revenue.

In terms of gross margin, Kuaishou's gross margin increased 0.38% to 50.2% month-on-month in the second quarter, exceeding market expectations.

Being able to achieve such results shows that the company's revenue structure is continuously being optimized.

In terms of costs, thanks to the continuous implementation of fine management, Q2 Kuaishou's sales/management/R&D expenses also decreased by 1.4%/1.1%/3.9%, respectively.

Coupled with improvements in server and bandwidth usage efficiency, gross margin levels are expected to continue to rise in the second half of the year.

In short, Kuaishou achieved a positive quarterly net profit for the first time since listing. The improvement in the quality of the company's commercialization exceeded expectations, and the visible increase in profit is driving the return of the company's value.

It can be said that Kuaishou has embarked on a path of healthy development, and everything is moving in a positive direction.

whereasThe reason we have been able to do this is that Kuaishou has always firmly grasped the core fundamental board — the content itself.

On Kuaishou, the veterans of the live broadcast room have established a unique “relationship of trust” with the anchor and platform throughout the network. This is not only due to Kuaishou's natural community atmosphere, but also inseparable from the trust ecosystem promoted by the platform.

2. Unique competitiveness - real

As we all know, Kuaishou grew from a sinking market.

However, users in the sinking market are almost covered by Kuaishou for a long time, so user growth is facing huge challenges.

However, contrary to what most people think, Kuaishou's users are actually continuing to grow steadily.

According to the “Statistical Report on China's Internet Development” published by the China Internet Network Information Center, by the end of 2022, the number of short video users had exceeded 1 billion, and the user usage rate had reached 94.8%.

Specifically, in terms of Kuaishou, the number of Kuaishou users broke through a new high in the fourth quarter, with an average MAU increase of 10.7% year-on-year to 640 million.The average DAU increased 13.3% year over year to 376 million.

This directly shows that the platform creator ecosystem is becoming more and more prosperous and is effectively driving user growth.

According to the Kuaishou Photosynthesis Conference, in the past year, the number of works published by creators on the platform increased by 14.8%, the number of active contributors increased by 11.0%, and the number of active creators with 10,000 followers increased by 31%.

What is particularly noteworthy is that the increase in the number of users in 2022 was achieved on the premise of controlling marketing expenses.

It doesn't rely on marketing to buy volume, but it can eventually attract and retain users, and users are becoming more and more sticky. This shows that Kuaishou's content is getting more and more recognition.

In addition, Kuaishou will continue to increase monetization and services for creators:In terms of monetization, the “Full Author” basic monetization service, “Guanghe Plan Plus”, and “Juguang Plan” have been introduced to improve creators' monetization efficiency; in terms of services, creative tools and growth rights systems have been comprehensively upgraded to help creators grow.

CICC believes that with multiple empowers, Kuaishou is expected to achieve the quarterly DAU target of 400 million by the second half of 2024.

Over the years, Kuaishou's slogan has gone from “see every kind of life” to “embrace every kind of life,” and has never changed its initial attitude.

Some people live a bright and beautiful life, but of course there are people who live a simple and dull life.

Every life deserves to be seen and embraced.

If the short video thing has appeared, it has broken the technical barriers that people have in recording their lives.

Well, Kuaishou's insistence on real life over the past ten years has broken down the barriers to people's inner vanity.

Some people say that the internet is an island between people, and we all have to wear a mask to prevent any information about ourselves from being leaked, but on Kuaishou, you can remove the mask with confidence.

Here, you won't be looked ugly by people, and you won't have to worry about being spooked about and pretended to be cliché.

You just have to be who you really are.

Many creators like you probably initially just wanted to document their lives on Kuaishou. But as the platform continued to grow and move forward, their life trajectory was completely changed.

It's not just the luck of a few lucky people, it's everyone's fortune.

It was only through them that many people realized that in the past, life could not have been so elaborate or so voluminous.

Every state of life has followers, and is likely to be accepted by the entire internet. And this content has been changing the Kuaishou community and enriching its content ecosystem.

According to the data, the number of daily active users of Kuaishou skits has now exceeded 260 million, the total number of broadcasts of Starlight skits has reached 60 billion+, and there are more than 100 Starlight skits that have been played over 100 million times during the year.

So today's Kuaishou is actually undefinable.

Every Kuaishou user has their own unique reasons for needing Kuaishou.

Maybe it was a difficult stage where I relied on its happy content; maybe it was because of a few old iron buddies I met on the platform; or maybe it was because I kept a few life records in it.

When hundreds of millions of different lives, and hundreds of millions of different reasons, are intertwined on the mobile internet, creating an unprecedented chemical reaction, any descriptive concept seems pale and powerless.

In fact, no investor or user can clearly explain what Kuaishou really is.

You just know what Kuaishou has.

It has the most authentic and vivid lifestyle of this era, and a unique community atmosphere that allows users to accept themselves and break down barriers.

These are all the emotional foundations of Kuaishou's main focus on “trusting e-commerce.”

Only by establishing strong emotional management between anchors and fans can we truly promote the healthy development of e-commerce.

According to the data, by the end of June, the number of mutually following users on Kuaishou reached 31.1 billion pairs, an increase of 50% over the previous year. Q2 Kuaishou had an average of 8 billion daily interactions and an average of more than 440 million daily searches, which is astonishing.

You won't see this on any other platform.

3. Finale

In short, after so many years of operation, Kuaishou's revenue methods have finally been diversified. Even in such a difficult economic situation, the advertising business can achieve growth.

However, the impact brought about by the growth of advertising and e-commerce businesses will also drive the development of other fields.

For example, Kuaishou's blue-collar recruitment and real estate business.

Currently, the number of monthly users of the Kuaishou live recruitment platform “Quick Hire” has reached 250 million, and the total number of companies providing jobs has reached 240,000.

In this area of real estate, Kuaishou Ideal Real Estate has in-depth cooperation with more than 70 cities, more than 60 contracted agencies, and the coverage rate of contracted real estate is over 50%.

In an environment where the employment situation is tense and housing prices are likely to be liberalized, Kuaishou certainly has great potential in these two fields.

As an investor in Kuaishou, I'm looking forward to more surprises from it.