Amidst the overall market weakness, the video platform Bilibili is driving strong growth in its advertising business through AI technology and an increasingly mature user base, but its more aggressive commercialization strategy is also testing its iconic community culture.
<h4>Key Points:</h4>
<ul>
<li>Bilibili's advertising revenue grew by 30% in the first quarter, far exceeding the overall revenue growth, while game and IP-related revenue saw a decline.</li>
<li>The strong growth in advertising reflects the company's improved monetization ability of loyal users, the application of AI-assisted advertising tools, and the increased commercial value of its user base.</li>
</ul>
Hu Minghe
Chinese video platforms have never lacked the attention of loyal users; the real challenge is how to convert this traffic into sustainable profit growth. This challenge is becoming more apparent as advertisers remain cautious, content costs remain high, and AI becomes another significant expense.
This is why Bilibili Inc. (9626.HK; BILI.US) latest quarterly performance is particularly noteworthy. The company only recently crossed the annual profit threshold and is expected to record its first annual profit in 2025. Now, the company needs to prove that this profitability is not merely achieved through cost control but has sustainable growth potential. The company's revenue grew by 7% to CNY 7.47 billion (USD 1.08 billion) in the first quarter, with advertising revenue surging by 30% to CNY 2.59 billion, becoming the main growth driver. Daily active users increased by 8% to 115.2 million, with an average daily usage time of 119 minutes.
In contrast, other business performances were relatively lackluster. As Bilibili's largest business segment, value-added services saw revenue growth of only 4% to CNY 2.91 billion. Mobile game revenue fell by 12% to CNY 1.52 billion, primarily due to a high base from the same period last year driven by a popular game, which has now entered a more mature lifecycle. Revenue from intellectual property (IP) derivatives and other sources also declined by 4% to CNY 448 million. In simple terms, the advertising business became the biggest highlight of this quarter, while other businesses clearly lagged behind.
<h4>A More Discerning Advertising Market</h4>
Bilibili's advertising growth is particularly notable because other large internet companies are generally facing pressure from advertisers to cut marketing budgets amid the slowdown in the Chinese economy. Baidu (BIDU.US; 9888.HK) saw its online marketing revenue drop by 22% in the first quarter due to its heavy reliance on search advertising. The online advertising revenue of video platform iQIYI (IQ.US) also fell by 7% during the same period.
While many platforms are experiencing a decline in advertising revenue, Bilibili has managed to maintain strong growth in this core business, indicating that the market is beginning to differentiate. Advertisers are still willing to allocate budgets to platforms with clearer user characteristics, stronger community stickiness, and more complete conversion tools, while platforms lacking these traits are gradually being marginalized.
Part of Bilibili's advertising growth comes from the increasing time users spend on the platform, but its real advantage may lie in the &#34;quality of attention&#34; that these users bring
Bilibili users often watch long video content related to games, technology, animation, product reviews, knowledge content, and creator discussions. This makes the platform more suitable for advertising types that require in-depth explanations and building trust, rather than just pursuing quick exposure. Additionally, the age of its user base is gradually increasing. Management stated that the average age of platform users is currently about 26.5 years, entering a stage where personal consumption capacity and family decision-making influence are rising simultaneously.
This places Bilibili in a rather ideal demographic structure: its users are young enough to lead trends while gradually maturing to have the ability to consume high-priced goods such as electronics, cars, home appliances, AI tools, and home renovations.
<h4>AI Drives Both Supply and Demand</h4>
AI is also one of the important factors driving Bilibili's growth. In the first quarter, the advertising budgets of AI-related advertisers grew by over 170% year-on-year. AI is also enhancing Bilibili's advertising sales efficiency. The company stated that deeper AI applications have improved ad matching capabilities, driving the click-through conversion rate (CTCVR) up by 25% year-on-year. CTCVR is an important metric for measuring advertising effectiveness. Bilibili also mentioned that AI-generated content (AIGC) creative tools are assisting advertisers in producing materials that better align with the platform's community style, further enhancing click rates.
Bilibili is not the only platform with loyal young users; ByteDance's Douyin has a larger scale and a content recommendation system that has accustomed users to advertisements, live-streaming sales, e-commerce, and local life services. Xiaohongshu has strong appeal to advertisers, as many users seek lifestyle advice, product recommendations, travel inspiration, and shopping information on the platform.
Bilibili's advantages are different; users are less likely to view it as a shopping guide or entertainment machine, but rather as a video community built around creators, fan culture, games, technology, and a shared cultural language. Its &#34;bullet chat&#34; feature allows viewers' comments to scroll across the screen during video playback, making the overall viewing experience more participatory. This is also one of the reasons the platform has high user stickiness, but it also makes commercialization more nuanced, requiring a balance between community experience and monetization.
This sensitivity is not new. In 2016, the addition of opening ads to some licensed animation content triggered a strong backlash from users, prompting Chairman Chen Rui to publicly apologize and promise that some licensed anime (legally authorized Japanese animation) would no longer include such ads. In April of this year, Bilibili tested user limits again by introducing &#34;pause ads&#34; in its mobile application. This format is more restrained than opening or mid-roll ads, only appearing when users manually pause the video, and creators can choose not to participate. However, this still indicates that the company is looking for more new placements for ads to enhance the platform's monetization capabilities.
<h4>Cost Pressures Persist</h4>
Bilibili also needs to continue driving advertising growth to maintain profit margins, especially as other sources of income slow down or even begin to shrink. At the same time, the company is working to control costs. Operating expenses in the first quarter grew by only 3%, partly due to a 1% decline in sales and marketing expenses
R&amp;D expenditure grew by 9%, mainly driven by AI investments. Management also stated that AI-related capital expenditures for the year may increase by approximately 1 billion yuan.
Earlier this year, Chinese media cited online rumors reporting that Bilibili would undergo large-scale layoffs, including widely circulated claims of &#34;60% layoffs&#34; and impacts on R&amp;D operations. Although the figure of 60% is almost certainly exaggerated, this incident is still worth noting, as its background reflects the overall industry atmosphere, where internet and entertainment companies must invest in AI while maintaining profit margins and cutting underperforming businesses.
This also explains why Bilibili's current investment narrative appears more attractive than that of traditional video platforms like iQIYI. Bilibili has a clearer advertising monetization logic, a younger but gradually maturing user base with increasing purchasing power, and a certain differentiation from peers due to its gaming revenue structure. In addition to a 7% revenue growth, the company's latest quarterly adjusted net profit also surged by 62% to 585 million yuan. In contrast, iQIYI's revenue fell by 13% during the same period and fell back into losses.
However, Bilibili's biggest advantage is also its greatest limitation. Its advertising growth largely depends on users still believing that this platform is different from other peers. First-quarter results showed that Bilibili could indeed sell more ads, especially those types that resonate with the platform's content culture. However, the more challenging question is how many ads it can accommodate before the platform stops resembling the &#34;Bilibili&#34; that many loyal users are familiar with and love

09626

BILI

516620

Against the backdrop of a weak overall market, Bilibili's advertising revenue grew by 30% in the first quarter, reaching 2.59 billion yuan, becoming the main growth driver. Although daily active users increased by 8% to 115.2 million, other business performances were lackluster, with value-added service revenue growing only by 4% and mobile game revenue declining by 12%. The company needs to demonstrate the sustainability of its profit growth, especially in the context of intensified competition in the advertising market

- Bilibili has achieved a notable 30% growth in advertising revenue amid a generally weak market, surpassing its overall income increase of 7%.  
- This rise is attributed to improved monetization from loyal users, the application of AI advertising tools, and a more mature user base.  
- However, the platform faces challenges in maintaining its community culture while adopting aggressive commercialization strategies, indicating a need for balance as competition intensifies.

BambooWorks

BILIBILI-W

Bilibili

Guotai CSI Movies Theme ETF

GF Fund CSI Media ETF

Penghua CSI Media ETF

AXA SPDB CSI Hugangshen Game and Culture Media ETF

VanEck Video Gaming and eSport ETF

Comm Servcies Select Sector SPDR

Global X Video Games & Esports ETF

ChinaAMC CSI Cultural Entertainment Media ETF

Yinhua CSI Movies Theme ETF

Baidu

BIDU-SW

iQIYI

BIDU-SWR

Bilibili's advertising revenue surges as the video platform enters a new monetization cycle