STORM listing does not burn money to transform from player to video site

This company's "Storm Video" player was once one of the domestic installed software. However, just a few years later, the way users watch videos has seen two major changes from “local” to “online” and from the PC to the mobile. Storm Video has to constantly change itself and adapt to the market.

STORM's market share has exceeded 70%, but now it has evolved into a video site and is plunged into the "Red Sea" competing with Youku Potato and Iqiyi. In the last 3 years, the advertising revenue of Storm Technology only accounted for about 3% of the entire industry.

With this visit to A-shares, StormTech will receive at least RMB 510 million in funds to “transmit blood”. This amount is not large for video sites. However, compared to its competitors of the year: KMPlayer, PPS, PPTV, the “Suspension Stone” general storm video not only survived the rapid market iterations, but also independently listed on the A-shares. It is undoubtedly a winner in the capital market.

The "Three Syllogisms" of Storm Video

For a video playback software, storm video has had brilliant.

In the era of watching video and video resources mostly downloaded, Windows' own player is difficult to meet the playback requirements of multiple formats of video, and Storm's "artifact" can play 680 kinds of video formats, in one stroke to solve the user's video playback " Pain points".

For an Internet company, an important core competence is to obtain the user's capabilities. As a Windows installation software, Storm Media has accumulated more than 1.5 billion cumulative installations, and the cost of acquiring users is extremely low.

After circling a large number of users, Storm Media obtained advertising revenue through “text links” and “pop-up windows” to quickly realize the value of users.

This is the first stage in the development of Storm Media, and Storm Media quickly gained over 70% of the domestic player market.

Subsequently, the arrival of the online video era quickly weakened the competitive advantage of Storm Media. When more and more users prefer to play online instead of downloading, Storm Video must also be adjusted accordingly.

Starting from “STORM 3”, this software adds P2P network video playback capabilities. In this era of storm video, competitors suddenly changed from Windows Media Player and KMPlayer to PPS and PPTV.

Before long, the mobile internet came again. With the migration of a large number of users from the PC to the mobile phone and the PAD, in 2012, Storm Media released the "Storm Wireless" application product based on iOS and Android to deploy wireless services.

At the end of 2014, the average daily use duration and average daily coverage of Storm PC technology products ranked first and third in the industry, and mobile products ranked fourth and ninth respectively.

More terrible than the user's migration from the PC to the mobile is the dramatic changes in the market landscape.

When BAT (Baidu, Alibaba, Tencent) Big Three entered the video field with huge sums of money, Youku Tudou, iQiyi, and Tencent became the top players in the video game. The internet giant’s competition in the video industry has directly raised the costs of the entire industry. On the one hand, the copyright price of movies and TV dramas and other content has been “fired up”. On the other hand, the bandwidth cost has also skyrocketed. Under BAT's "blood transfusion," several major video industry leaders are not profitable.

Storm technology in the era of mobile Internet was caught in the "Red Sea" competing with these giants.

"Do not burn money" to keep profit

From the perspective of business models, there is no big difference between Storm Technologies and YouTube giants such as Youku Tudou, which acquires users through free video content and realizes it through advertisements. However, from the perspective of data, storm technology faces the danger of “marginalization” in terms of advertising revenue and content purchase.

The prospectus shows that from 2011 to 2013, the proportion of storm technology advertising revenue in the industry was 3.3%, 3.4%, and 3.2%, respectively, and the company did not gain dominance in the industry.

In terms of content procurement, video websites have created a competition for content on the air in recent years, and Storm Technology has not participated.

Since 2013, all major video sites have invested all costs in order to compete for solo broadcast resources. With a single file, “China Good Voice” network broadcasting rights in the third quarter, the price has risen to 250 million yuan.

Wang Gang, vice president of storm technology, once said that the storm "does not burn money" in content procurement. The company's strategy in content procurement is to buy less or not buy exclusive, buy less or not buy first-run broadcast rights. Such a strategy makes the company's content procurement maintain a stable cost, and the company has been in the past three years. All achieved profitability.

Another video game giant's gameplay is self-control. From online dramas to movies to variety shows, major video sites have already entered the content production industry in an all-round way, but Storm Media has hardly participated in this piece.

At the same time as the contents, the advertising sales of video websites is also a business with low cost. Some domestic video websites have already formed hundreds of advertising sales teams. Behind huge advertising revenues, there are a lot of sales costs.

In 2013, Storm Tech tried to do something similar to those of video giants—bigger purchases of copyrights, while allowing a large increase in sales expenses.

This year, the company's revenue increased by 29.11%, but operating costs (mainly content procurement and broadband rental costs) increased by 46.61%, sales costs increased by 92.24%, which directly led to the company's net profit fell.

In 2013, the net profit of Storm Technology was reduced from RMB 55.84 million in 2012 to RMB 38.53 million.

In the prospectus, StormTech analyzed two key factors affecting future changes in the company’s net profit – content procurement and broadband rental costs, and advertising sales costs. Any increase in either of these two factors will result in a loss of the company’s performance. .
However, the price for a company to maintain profitability is that it is difficult to achieve large-scale growth in revenue.

From January to September 2014, Stormwind's operating revenue was 270 million yuan. In contrast, Youku Tudou’s revenue in the first three quarters of 2014 has reached RMB 2.6 billion.

Winners under capital competition

As an internet company, stormstorm technology once targeted overseas listing.

After 2006, Storm's operating platform at the time experienced a round of investment. The investor was IDG with a total investment of 3 million US dollars. In 2007, it accepted IDG's B round of financing of 5 million US dollars. In 2008, it accepted IDG and Matrix's B+. Round investment of 6 million US dollars.

In 2011, IDG and Matrix withdrew from Storm Technology. In 2012, the VIE structure was completely lifted. Storm Technology announced that it would change its listing to A shares.

In 2012, Storm Technology announced that it will change its listing to A shares.

This may be related to the high valuation of A shares on Internet companies. At present, the valuation of LeTV, which is listed on the A-share market, has reached 73.9 billion yuan, while the market value of Youku Tudou listed in the US is 3.1 billion US dollars, equivalent to less than 20 billion yuan. yuan.

In 2014, the perfect film and television, which was split from the perfect world of US stocks, was listed on the Backdoor of A shares. The total market value has reached 13.7 billion yuan, and the market value of Perfect World is only US$900 million. Recently, Focus Media, which was listed on the US stock market, expressed the idea of ​​returning to A shares.
According to a prospectus disclosed by Storm Technology, Huawei has become a shareholder of Storm Technologies. Prior to this, mobile hardware companies had precedents for investing in video sites. Xiaomi had invested in Thunder and took it to the United States for listing, and later invested in iQiyi and Youku Tudou.

Compared with its competitors, Storm Technology is undoubtedly a winner in the capital market.

With the advent of the Internet era, KMPlayer has lost market share. QQ, Baidu, and AV have also been marginalized. In the client software, PPS was acquired by IGI and PPTV was acquired by Suning.

One company that can be compared with it is Thunder. After the successful listing in the United States, the current market value of Thunder is US$437 million, equivalent to approximately RMB2.6 billion.

According to the forecast of Changjiang Securities, after the listing of the A-share market, the price-earnings ratio of storm technology is expected to reach 40 to 60 times. The company’s net profit in 2014 was RMB 4194.15 million. This way, the future market value of Storm Technology is expected to reach RMB 1.68 billion to 25.2. 100 million yuan.
This time landing A shares, Storm Science and Technology will receive at least 510 million yuan of funds for blood transfusion.

This money will be mainly invested in technology development, of which 490 million yuan will be used for the upgrade and expansion of the Internet's high-definition video service platform, and 19.6 million yuan will be used for the development of mobile terminal video service systems.

The company repeatedly emphasized the company’s technology and product orientation in the prospectus and insisted that it was precisely because of its technical advantages that the company’s cost pressure on content procurement was greatly reduced.

Storm Technology is now trying to expand the hardware business.

In September 2014, Storm Media introduced its first smart hardware device, the Storm Mirror, which was priced at RMB 99. According to the official introduction, Storm mirror is a virtual reality glasses, with the magic mirror APP developed by Storm Video, can achieve IMAX viewing effect on the phone.

Prior to an interview, Wang Gang, vice president of storm science and technology has said that the current number of users of Storm mirror has 150,000 people, the highest number of active users on the APP day is 13,000. Wang Gang has admitted that the current product is not mature enough to establish independent operations of subsidiaries and increase investment in technology and content.