Technology Stocks

Bilibili Inc – ADR (NASDAQ:BILI) Signs a Business Collaboration Agreement with Alibaba Group Holding Ltd (NYSE:BABA)’s Taobao Marketplace

Bilibili Inc – ADR (NASDAQ:BILI) is in a seemingly unquenchable partnership craze. The company has recently teamed up with Alibaba Group’s Taobao Marketplace to jointly develop an ecosystem focused on connecting content creators, merchandise and users from both divides on a single platform.

Through the strategic partnership, Bilibili’s content creators will be able to register and operate accounts on Taobao to market their content. According to the terms of the agreement, the two parties will also work in collaboration to promote and commercialize Bilibili’s Intellectual Property (IP) assets including games, online videos, and comics. Taobao will lend Bilibili its e-commerce technical expertise to further enhance its user experience.

Bilibili’s Financials

Bilibili draws a majority of its revenue from online gaming. The company has leveraged on the commercial capabilities of the so-called “Gen Z” defined as individuals born between the mid-1990s to early 2000s.

For the last quarter, the company reported about $157.1 million in revenue and a net loss of approximately $35.8 million. The company’s paying users also surged during the quarter and with the latest partnership moves, the fourth quarter is expected to be even better.

Taobao currently reaches a considerable chunk of this demography through its platform, and Bilibili stands to leverage on that.

Bilibili’s stock

The news on Taotao’s partnership raised the shares price during Thursday’s trading session by 0.6%. As of Monday Dec 24, the stock witnessed a 3.08% gain closing at $ 13.71 having traded at a high of $ 13.83 and a low of $ 12.66. The company currently holds a market cap of $3.82 billion.

Source: stockchart

The Importance of the Partnership

With the looming regulatory uncertainty in China’s online gaming industry, Bilibili desperately needs to boost its video streaming service, online ads, and e-commerce now more than ever.

Bilibili’s Chairman of the Board and Chief Executive Officer, Mr. Rui Chen said that,

“Through this collaboration, we will better incentivize the creativity of our young people and will utilize each other’s strengths and resources to generate more premium content. We look forward to working with Taobao to fulfill the tremendous entertainment and consumption needs of the young generations in China, and importantly, in turn, we look forward to increasing the value we bring to all of our stakeholders.”

Diversification in Play

So far, Bilibili has done an exemplary job stimulating revenue growths from its other businesses aside from online gaming. The company’s live broadcasting service notably generated 16% of its total revenue in the last quarter representing a year over year growth of 292%. Online advertising revenue surged 179% year after year.

As aforementioned, Bilibili is in a strategic partnership craze. The company is going for partners that can influence its growth. Recently, Bilibili pioneered its entry into the Japanese market by acquiring a stake in Fun-Media- a Japanese based animation studio.

A few months ago, Tencent purchased about 12.3% of Bilibili’s shares for approximately $316 million. The Tencent acquisition created euphoria on Bilibili’s stock making it surge to $13.31 per share from the previous $11.50 set during the company’s IPO.

In a further show of interest in the Japanese gaming market, Bilibili partnered with Gree in a deal that will see the parties share content and collaborate in developing more games for the Japanese market.

Taobao began a program in 2015 encouraging digital content creators including bloggers, writers, and online experts to upload their content on its channels. The program has received overwhelming support since its inception. Bilibili boasts over 600,000 active content creators uploading up to a tune of 1.7 million videos monthly. Taobao will leverage on Bilibili’s rich following to further enhance its coverage.

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