Author | Liu BaodanEditor | Zhou ZhiyuThree years ago, &#34;the first stock of short videos&#34; Kuaishou's market value exceeded HKD 1.3 trillion, becoming the fifth largest internet listed company in China. However, due to the inability to make a profit, Kuaishou's capital glory was short-lived.Now, Kuaishou has finally broken through the profit barrier. After more than a decade of development, Kuaishou has finally shed the hat of losses, proving the potential of the business model of short video platforms through actions.On March 20, Kuaishou released its 2023 financial report, with annual revenue reaching RMB 113.47 billion, a year-on-year increase of 20.5%; adjusted net profit reached RMB 10.3 billion, with a net profit for the year of RMB 6.4 billion, compared to negative RMB 5.8 billion and negative RMB 13.7 billion respectively last year.The main reason behind Kuaishou's significant turnaround is the strong growth of core businesses including e-commerce and advertising. In addition, Kuaishou's continuous cost reduction and efficiency improvement efforts have also played a role.The online marketing business that supports a significant portion of Kuaishou's revenue achieved a 23% growth, with its performance ratio further increasing to 53.1%. While live streaming and e-commerce commission income have shown steady growth, their contribution has decreased.Specifically, Kuaishou's online marketing includes internal circulation marketing services for e-commerce inflow, external circulation effect marketing services, and brand marketing. These businesses are the cornerstone of Kuaishou's performance growth.In 2023, Kuaishou's e-commerce GMV exceeded RMB 10 trillion for the first time, reaching RMB 1.18 trillion, making Kuaishou the fifth trillion-scale e-commerce platform after Alibaba, Pinduoduo, JD.com, and ByteDance.The rapid growth of e-commerce has driven merchant inflows. Kuaishou stated in its financial report that due to refined industry operation strategies and continuous improvement of product capabilities, the increase in marketing customer numbers and marketing customer spending has been driven, especially from e-commerce merchants.In terms of external circulation effect marketing business, the continued growth of industries such as media information, education and training, and gaming has driven the continuous growth of this business. Taking the example of paid short dramas in the media information industry, in the fourth quarter of 2023, marketing spending on paid short dramas on Kuaishou increased by over 300% year-on-year.Brand marketing, including the automotive industry, has also contributed to the growth of Kuaishou's performance, with more and more automotive brands using Kuaishou as a marketing platform.In addition to revenue growth, Kuaishou has emphasized cost reduction and efficiency improvement in recent years, which has also accelerated Kuaishou's turnaround.Compared to the 20.5% revenue growth, Kuaishou's sales costs only increased by 7.7%. Furthermore, Kuaishou's expenses in sales and marketing, administration, and research and development have all declined, decreasing by 1.7%, 10.4%, and 10.5% respectively year-on-year.Kuaishou's significant cost reduction measures will inevitably drive an increase in gross profit margin. In 2023, Kuaishou's gross profit increased by a high 36.2%, far exceeding revenue growth, and the gross profit margin also increased by 5.9 percentage points to 50.6%.However, profitability is just the most basic starting point, and for Kuaishou to sustain profit growth, it still faces many challenges.Against the backdrop of the peak growth in the internet industry, Kuaishou's main monetization methods are advertising and e-commerce, both of which face fierce market competitionIn the example of e-commerce, in the past few years, the live streaming e-commerce model represented by Douyin and Kuaishou has quickly risen, becoming a new growth engine for the e-commerce industry. Coupled with Pinduoduo's low-price model, they have completely overturned the original e-commerce market landscape. Kuaishou has carved out its own growth curve in the fiercely competitive e-commerce market dominated by giants.As traditional e-commerce players like Alibaba and JD.com launch counterattacks, and competitors such as Video Number, Xiaohongshu, and Baidu continue to join, the battle for the e-commerce market is gradually escalating. For Kuaishou, which has just entered the trillion-dollar scale, achieving sustained growth on a high base is no small feat.For future development, Kuaishou will continue to adhere to its current development tone, emphasizing the continuous improvement of the platform's commercial efficiency.For example, in terms of e-commerce, Kuaishou's focus remains on continuously improving the efficiency of purchase conversion through the synergistic linkage of content scenes and general merchandise scenes. Especially in the construction of merchandise scenes, Kuaishou still has a lot of basic infrastructure work to continuously optimize.Kuaishou emphasizes continuous investment in large models, hoping to solidify the advantages of the content platform through this.During the performance conference call that evening, Cheng Yixiao stated that the company has been advancing the research and training of self-developed large models since 2023, and accelerating the scenario-based implementation of large models. &#34;We are confident that within the next six months, the comprehensive performance of large models will reach the level of GPT4.0.&#34;Regarding Wensheng Video, Cheng Yixiao stated that this is a huge opportunity for short video ecology. Kuaishou has been promoting special research and development since the end of last year. In the future, Kuaishou will combine generative models with producer tools to continuously help creators reduce the threshold for creation, and improve the quality and efficiency of short video production.In addition, Kuaishou is constantly expanding new growth space, such as doubling down on local life.On March 21st, Xiao Gu, Senior Vice President of Kuaishou and head of the Local Life Business Unit, stated at the Kuaishou Local Life Focus Ecological Conference that as an incremental platform with 700 million users, all group buying activities are worth redoing on Kuaishou. To this end, Kuaishou plans to invest billions in platform subsidies and hundreds of billions in traffic for group buying marketing in 2024.It is worth mentioning that amidst the trend of going global, Kuaishou is actively exploring its overseas model. Currently, Kuaishou mainly focuses on core regions such as Brazil and Indonesia. In 2023, Kuaishou's overseas market revenue nearly tripled year-on-year.For Kuaishou, continuously expanding the depth and boundaries of its business on the basis of existing traffic is the main path to achieving performance growth.Three years ago, the reason why Kuaishou elevated profitability to a core development goal was largely due to the profit pressure the company faced when going public, especially as the slowdown in the internet industry exacerbated investors' concerns about Kuaishou's business model.This also means that Kuaishou's development pace needs to shift from aggressive expansion to cost reduction and efficiency improvement. Kuaishou needs to tell new stories externally and consistently demonstrate them in financial reports to regain favor in the capital market

81024

Kuaishou needs a new story