BabyBus, which produces content for children in China and beyond, applied for an initial public offering on Hong Kong’s Growth Enterprise Market board with a fundraising target of RMB 1.85 billion (USD 285.8 million). The company offers an array of content for children up to eight years old in 12 languages, reaching users in 160 countries.
Founded in 2009, BabyBus had more than 136 million followers on its YouTube channel at the end of May 2021. The company also posts content on Ximalaya, Youku, iQiyi, and Tencent Video. It generated RMB 649 million (USD 100.2 million) in revenue in 2020, up 23.4% year-on-year, as parents sought out new content for their children during the pandemic. The value of this segment within the content industry in China grew by nearly 40% in 2020, exceeding RMB 380 billion, according to a report from Analysys.
BabyBus offers its content to users for free, relying on advertisements for the bulk of its revenue. Its business model is easily replicable, so the company has been investing heavily in R&D, allocating RMB 334 million (USD 51.6 million) in the last three years, amounting to around 23.4% of total revenue during that period. This investment has endowed the company with a wide range of content verticals spread across more than 200 apps which together boast more than 99 million monthly active users
The company’s aggressive spending on R&D has eroded its profit margins. R&D expenses jumped 46.3% YoY in 2020, while net profit was just RMB 261 million (USD 40.3 million), down 2.2% YoY, despite the boost in total revenue.
Aside from advertising, which made up 96.8% of the firm’s revenue in 2020, BabyBus earns money by charging membership fees and via royalties derived from its intellectual property. BabyBus’ sources of advertising revenue are also highly concentrated, with Baidu accounting for over half of ad sales in 2020, while Google contributed another 25%. To diversify its business going forward, the firm aims to enhance its IP production capabilities and create sustainable franchised content like industry leaders such as Nintendo, Disney, Pokémon, and Hello Kitty.
36Kr Connection features translated and adapted content published by 36Kr. This article was originally written by Liu Kuang for 36Kr.