Feitian Yundong's successful IPO, stepping on advertising to enter the meta universe?

Published on 9/28/2022   272 views   0 Comments  
Wen | Deep Eyes on Finance Qin Qin
Source:Blue Whale Finance

After Roblox, known as the "First Company of the Meta Universe", landed on the New York Stock Exchange and attracted strong attention from the capital market, the wind of the Meta Universe was blowing towards the flying clouds.

It is reported that Feitian Yundong, the Hong Kong stock "first unit of the universe", passed the hearing at the Hong Kong Stock Exchange on September 22. When Feitian Yundong submitted the prospectus for the first time, it also caused heated discussion because of the 256 times of mentioning the Yuan Universe, and it seems that he will show his skills in the Yuan Universe.

However, according to the prospectus, Feitian Yundong's main income comes from AR/VR marketing services, accounting for 72.3% of its 2022Q1 income. This income mainly comes from advertisers in different industries, such as games, entertainment, the Internet, e-commerce and other 12 industries. Therefore, Feitian Yundong's meta universe seems to be more about the concept of play.

Therefore, as one of the first companies to enter the AR/VR content and service market, Feitian Yundong is known as the "first share in the universe" of Hong Kong stocks. Can its business capabilities really attract the attention of the capital market as its name?


1. From games to the universe


The story of flying clouds and the meta universe is not long. 

Feitian Yundong, formerly known as Feitian Palm Technology, was established in 2008. Its main business is games and game related businesses. Until 2019, it will complete the retirement of games and game related businesses, and completely shift its focus to AR/VR content and service businesses. 

Previously, because the AR/VR technology was supported by a large amount of funds that were urgently needed, Feitian Technology, a cash strapped company, was listed on the NEEQ in 2017. However, two years after it landed in the capital market, it chose to delist on the NEEQ because of its future business. 

It was not until 2021 that Feitian Technology in the palm was renamed Feitian Yundong, and the Feitian Yuanuniverse Platform was launched in November. 

At present, Feitian Yundong has established in-depth cooperation with Baidu, JD, Alibaba, Tencent and other Internet giants in the layout of the meta universe. The content producer behind Baidu Xirang is Feitian Yundong. 

In general, the business of Feitian Yundong is divided into four parts: AR/VR marketing services, AR/VR content, AR/VRSaaS and IP. 

Among them, marketing service is the main service, which provides advertising customers with AR/VR marketing services based on AR/VR interactive content. To put it bluntly, it is an advertisement made in the form of VR/AR, and then I will help you find the distribution channel. 

This is also the main income source of Feitian Yundong. According to the prospectus, in 2019-2021 and the first quarter of 2022, Feitian Yundong's revenue from AR/VR marketing services was 137 million yuan, 142 million yuan, 376 million yuan and 166 million yuan, respectively, accounting for 54.6%, 41.9% and 63.2%, respectively, and 72.3% by the end of March 2022. 

The content of AR/VR is to provide customized content according to the needs of customers by using the professional AR/VR development engine developed by ourselves, covering entertainment, education, cultural tourism, technology, automobile and other fields, to bring the diversified and immersive experience of the virtual world to the end users. It is charged in the form of software technology development. 

The AR/VRSaaS, which has been launched in recent two years, is a low code platform that is open and self-developed. It mainly provides customized AR/VR SaaS solutions for customers and paid subscribers to the AR/VR SaaS platform. 

One of Feitian Yundong's previous leadership skills was IP, which mainly sold IP rights to customers, including but not limited to IP image, IP fonts, etc. 

To facilitate your understanding, the business of Feitian Yundong can be simply divided into three layers: 

On the first floor, I provide the SaaS platform for customers to do their own work. 

Second, I help customers do VR content, and customers can apply it to their own scenarios according to their needs. 

The third is its main business, which provides one-stop services for brand building and traffic construction. It makes AR content according to customer needs, such as AR model room, 3D sand table, VR live broadcast, etc., and then helps customers find marketing channels for sales, including publicity and traffic buying. 

At present, Feitian Yundong's VR/ARsaaS business revenue accounts for only one digit of the total revenue. In 2019, 2020, 2021 and 2022Q1, the revenue is 6.51 million, 9.23 million, 20.58 million and 9.52 million respectively, accounting for 2.6%, 2.7%, 3.5% and 4.2%. 

So, how does Feitian Yundong, which focuses on marketing services, do the meta universe? 


2. Telling stories is a real skill


The story of the universe is easy to tell, but the skill is difficult to learn. 

When Feitian Yundong mentions the future vision of the meta universe in the prospectus, it will create a virtual world with immersive experience, social channels and user self-development, including multi player open world, user and social system, developer interface and other functions. 

The plan is divided into three phases. In the first phase, the full version of Feitian Yuanuniverse will be launched in 2023, with the main functions of social networking, entertainment and office work. 

The second stage will be applied to life scenes, and on the basis of the first stage, the application scope will be provided, such as education, cultural tourism, sports and live broadcast. 

Three stages, mainly assisting users to conduct business activities on the platform. 

After seeing if the DNA is moving, it is almost the same as the development of Roblox, except that the "future" of flying clouds is the present of Roblox. 

At present, Roblox has preliminarily realized the business transformation within the platform. At present, several well-known brands have created "Metauniverse Games", including GUCCI, Nike, VANS and other brands. 

In addition, commercial activities in the meta universe have been practiced for a long time. Roblox held a virtual concert in its meta world, including famous singers like Lil Nas X and Zara Larsson. 

The platform is more than that. Justin Bieber held his first virtual concert on the virtual performance platform WAVE, and domestic famous singer Lin Junjie held an online concert of "Holy Place FINALE" in TME live. 

However, as a "meta universe" company, Feitian Yundong's R&D investment is unlikely to survive in the meta universe. Its R&D investment is not only small, but its proportion is still decreasing year by year. 

The prospectus shows that the revenue of Feitian Yundong in 2019, 2020, 2021 and 2022Q1 will be 250 million yuan, 339 million yuan, 595 million yuan and 229 million yuan respectively. 

The R&D expenditure in 2019, 2020 and 2021 will be RMB 11.425 million, RMB 15.046 million and RMB 21.703 million respectively, accounting for 4.6%, 4.4% and 3.6% respectively. 

Compared with Roblox, the R&D cost of Feitian Yundong is almost a fraction. From 2019 to 2021, the R&D expenses of Roblox will be US $107 million, US $201 million and US $533 million, respectively. In the first quarter of this year, the R&D expenses will be US $178 million. 

Feitian Yundong accounts for less than 5% of the R&D expenditure, which seems to be stretched to support the dream of the meta universe. 

From the core patents, we can also see Feitian Yundong's attitude towards research and development. According to the prospectus, the company said that it has registered 6 patents that are relatively important to its business, and is applying for 3 patents that are relatively important, which is a drop in the bucket for the entire industry. 

Moreover, the cost of Feitian Yundong also continues to grow. From 2019 to the first quarter of 2022, the traffic acquisition cost of Feitian Yundong's advertising spending is 115 million yuan, 138 million yuan, 311 million yuan and 127 million yuan, accounting for 65.6%, 59.2%, 74.2% and 81.5% of the total cost respectively. 

In addition to the criticism of research and development, we can also see from the prospectus that Feitian Yundong does not seem to care about the meta universe. Another important way to "build" the Feitian Yuanuniverse platform came from acquisitions, such as strategic investment and mergers and acquisitions such as acquisition of digital assets. 

It is hard not to make people daydream about the fact that there are no convincing actual actions when mentioning the universe more than 300 times. Whether Feitian Yundong is hyped by this. 

The former senior, Zhongqingbao, the leader of the "meta universe concept", used to rely on a meta universe game, Master Winemaker, to make its share price soar to the sky, rising as much as 362% in two months. For this reason, it received many letters of concern from Shenzhen Stock Exchange. 

How important is R&D in the AR/VR field? 

We can draw a conclusion from moving from games to UnitySoftware in the AR/VR field. 

In terms of the mode, both Saas are mainly subscription services, and both are oriented to the ToB end. In addition, UnitySaaS is easier to use because of its short development cycle, and is more suitable for mobile end businesses. However, Unity is more targeted at game developers, while Feitian Yundong currently has a large number of Internet customers, and its development path is much the same, which can be used for reference. 

The current number of Unity developers has exceeded 1.5 million (the prospectus discloses data, and there is no update in subsequent quarters). According to the prospectus, as of March 31, 2022, the number of registered users of Feitian Cloud's AR/VRSaaS platform is about 14600, the number of paying users is 2234, 77 customized AR/VR SaaS projects, the average daily active users is 1991, and the average monthly active users is 7420. 

For Feitian Yundong, which has a small user pool, we should increase the research and development of engines and SaaS, and create an exclusive advantage, so that the number of users can grow with each passing day and maintain high daily life. 

Moreover, the level of SaaS is directly related to the customer retention rate. Almost every SaaS that charges by subscription will disclose the net customer retention rate. A customer retention rate higher than 100% means that even if the company does not expand new customers, existing customers can still bring additional income every year. 

In addition to the research and development problem, Feitian Yundong is also faced with the unavoidable problem of competition. 


3. Can we break the game among giants?


In addition to "old friends", Feitian Yundong is facing new competitors in the process of "transformation". 

According to the prospectus, there are more than 5000 competitors in the market at present. According to the revenue in 2021, Feitian Yundong, as the largest AR/VR content and service provider in the market share, has a market share of only 2.6%. 

From the perspective of the existing AR/VR marketing services, in addition to competing with the companies that share the content and services of AR/VR, Feitian Yundong also has to compete with advertising companies, including online marketing, offline advertising and traditional media. Moreover, Feitian Yundong is relatively backward in customer base, brand awareness, finance, technology and other resources, which will also lead to a disadvantage in pricing. 

Opportunities in the Chinese market have attracted many foreign investors to dig for gold. Unity China, which was founded on August 9, will also become one of the largest competitors of Feitian Yundong, and the illusory engine developed by Epic and Unity together occupy almost the majority of the market share. 

Moreover, the meta universe content service providers "Love Avatar", "Zeyu Technology" and "Dayou" have all received tens of millions of angel rounds of financing. 

The future of Feitian Yundong is even worse. According to the vision in the prospectus, there are many big companies exploring the old path of Roblox, including former owners Baidu Xiyan, Tianxiaxiu Hongtian, Tencent, NetEase and other companies with the advantage of first mover games. 

Byte has also been acquired all the way. It not only acquired Pico, a domestic VR giant, for 9 billion yuan, but also invested 100 million yuan in Code Qiankun. The product Restart the World under Code Qiankun is known as the "Chinese version of Roblox", which is currently China's first all physical development tool and UGC platform. 

Feitian Yundong, which has no user base, will face up to the big factory and compete with it. It is hard to fight against it as a dark horse. 

Unstable policy temperament is accompanied by unknown risks. The meta universe is in the initial construction stage, mainly focusing on experience. There is no large-scale meta universe platform in China, and its ecology is also uneven. The future of Feitian Yundong is challenged by growth planning, modeling ability and even relevant laws and regulations. 

Including intellectual property rights, game regulation and data privacy are issues that need to be focused on. As the first VR/AR content service provider listed in Hong Kong stocks, Feitian Yundong has the opportunity to ride the wind and waves here. However, Feitian Yundong, who has different opinions, is still doing "old business" and new business still needs time. 

The concept of the meta universe has made many enterprises rise sharply before, which ushered in a wave of meta universe "concept" boom. In the US, Nvidia rose 12%, Microsoft's market value in the meta universe has surpassed Apple's, and Qingbao's share price in A-share has risen more than 300% in two months. 

But will Hong Kong stocks leave time for Feitian Yundong to transform? Do Hong Kong investors like to listen to the story of the universe? 

Unlike the radical American stocks and the repeatedly tested A-shares, Hong Kong stocks have poured cold water on the concept stocks of the meta universe. Tencent Holdings, once considered to be the leader of the meta universe game, will fall by more than 16% in 2021. 

Hong Kong shares, unlike A-shares, have always been distrustful of stories, and have to be hammered before they start to react. 

The difference between Hong Kong and mainland investors has a lot to do with their structural composition. Hong Kong's investor composition is not only for local investors, but also for international investors. Because Hong Kong has a small local population and institutional investors account for the majority, it is more likely to invest in the long term. Therefore, when the blockchain concept was hot in those years, Xunlei and Renren continued to soar, while Hong Kong stocks responded unevenly. 

If you just tell stories or use your mouth, you can't get money in Hong Kong stock market. You don't have enough R&D strength. Instead, you cut into the track where the giant is located. If you want to get money from Hong Kong stock market smoothly, Feitian Yundong has to learn some "real kung fu". 


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