Gong Yu: First, they believe the industry has great potential. The capital market has never doubted this. Second, they think this market lacks integration to an extreme degree. Third, they think this industry is not very rational and is doing some unconventional things. But this mainly refers to last year's second and third quarters when kindergartens required parents to sign exemption agreements for school bus accidents. This kind of doubt will gradually decrease.
iQIYI expects a 300% increase in revenue this year.
The ability to monetize includes two stages. The first stage is to do market research, whether or not the brand value can be fully displayed to users. The second point is the ability of advertising sales and subsequent service capabilities, whether or not they are strong enough to make advertisers and advertising agencies recognize your value and convert that value into the return advertisers need.
Sina Tech: Video has a very promising future in mobile internet. Our current strategy is to prioritize user experience and increase market share acquisition. However, we will not engage in user-generated content business.
Sina Tech: All video websites are using every trick in the book to attract advertisers. What does iQIYI have to offer to achieve a strong monetization capability?
Sina Tech: iQIYI's revenue model mainly comes from advertisements. What level of advertising revenue can currently be achieved? Can it reach a break-even point?
Gong Yu: The entire industry expects a 100% increase in advertising revenue for 2012, but iQIYI will grow faster and enter a period of explosive growth. I ensure that the revenue increase will exceed 300%. Of course, iQIYI is still in a loss-making state, with relatively large losses. The third year of iQIYI continues to be an investment phase. Gong Yu, CEO of iQIYI
Sina Tech: In the past year, iQIYI has been quite high-profile in its business operations, but you have been rather low-key. What issues have you mainly been thinking about in the past year?
Sina Tech: Mobile internet is also very popular now. How do you view the development of video in this field? Will iQIYI therefore enter the user-generated content field due to the strong interactivity of mobile internet?
Gong Yu: Video websites overly rely on purchasing hot broadcast dramas, unable to establish their own values. Because buying hot broadcast dramas essentially means buying traffic. Media ultimately needs its own value, so it needs its own content, from planning to production all self-directed. So everyone will definitely be enthusiastic about doing this, but self-produced dramas have significant differences, so they will not constitute serious conflicts. However, according to the annual volume of self-produced dramas broadcast, the limit will not exceed 15% of the total volume.
Gong Yu: There are no permanent enemies, nor are there permanent friends. The situation of grabbing exclusive broadcast dramas last year will lead to huge challenges for the video industry this year, which is a reduction in the number of dramas each website broadcasts. Therefore, under these circumstances, everyone exchanges dramas. There were precedents between Tudou and Youku before, which can be called distribution or drama exchange.
Gong Yu: Whether it is the industry or the development of iQIYI, both are larger than expected in terms of market scale. We originally imagined that the main source was the PC market advertising model, but first, the market within this range is larger than expected, and secondly, other terminals and other business models give us even more imagination space. (Cui Xi)
Not doing user-generated content business
Baidu brings 40% of traffic to iQIYI
Sina Tech: As leaders, Zhang Chaoyang of Sina puts all his efforts into pulling resources for video, but you are relatively low-key. Do you feel any pressure?
Gong Yu: Currently, about 40% of iQIYI's traffic comes from Baidu. Baidu is a commercial company, prioritizing profit maximization rather than a charity organization. Its fairness is returning to shareholders. Under the condition of maximizing returns to shareholders, the core value is recommending iQIYI only if it satisfies users. If iQIYI's user experience is poor, Baidu would immediately remove iQIYI. Therefore, the claim of unfairness is unfounded.
Sina Tech: You mentioned that technology improvement requires substantial funds. Are you undergoing a new round of financing?
Another point is ability. The video industry has developed for so many years, one could say the first five years were all investment phases. Leading companies across the industry can suffer losses, and even massive losses, but they cannot continue to be in the video cultivation phase forever; this does not conform to the rules. Thus, this year, monetization, meaning income levels, has become the core competitiveness.
Gong Yu: To answer this question, we must look at the big picture of the industry. Since the second half of 2009, I started paying attention to this industry. Last year, during the second and third quarters, it was the most awkward stage for the entire industry. The awkwardness was mainly caused by irrationally focusing too much attention on purchasing hot TV dramas. From the perspective of a market-driven industry, this stage was painful. However, because of overemphasizing a single point, the most valuable points were overlooked. Now, looking at the whole process, it is nearing its end. I believe that this year, rationality will dominate when various video websites purchase hot TV dramas.
The awkward period of the video industry is coming to an end.
Sina Tech: When you talk about emphasizing copyright as a single point and ignoring other points, what other value points do you refer to?
Gong Yu: Copyright is certainly one of the most core values, followed by user experience. This sentence sounds simple, but it requires technical and product support. For example, maintaining the national flow in China's environment requires enormous financial resources and technical proficiency, possibly taking 2-3 years or even longer to resolve. For instance, clarity, high bit rate is the ultimate guarantee of clarity, but a high bit rate increases costs. For example, increasing the bit rate by 10% might increase costs by tens of millions per year.
Gong Yu: iQIYI's first batch of funds has long been spent. However, for the video industry, financing is not a phased event but a regular, continuous necessity. It can be seen from Baidu's financial report that they have continuously invested in iQIYI. Regarding other aspects of financing, there is currently no way to disclose them.
Sina Tech: iQIYI is a company under Baidu and will surely help iQIYI with traffic, making other video websites feel it's unfair.
Gong Yu: For iQIYI, entering this industry relatively late, the biggest problem is the lack of brand recognition and low recognition from advertising companies. However, after two years of establishment, this recognition has gradually strengthened, compensating for the difference in revenue. Additionally, our sales team size and maturity are improving, enhancing our monetization capabilities.
Sina Tech: The biggest news in the video industry over the past year has been successful IPOs. Regardless of how stock prices move, from the perspective of the capital parties you've interacted with, what is their attitude towards China's video industry?
Sina Tech: The competitive landscape of the video industry seems more intense now. Some alliances have formed while others have broken. How do you see the actual relationship among the players?
Sina Tech: Does the development of iQIYI today match your expectations when you first started it?
Sina Tech: Over the past year, apart from competing for copyrights, video websites have also been enthusiastically producing original series. Why is that?
Gong Yu: I consider myself an entrepreneur, not a journalist or someone who makes entertainment content. At heart, I am not part of the entertainment industry; I am still a business manager. Therefore, I plan and select excellent people to do different tasks in the background. Everyone is different. For me, I prefer or am more suited to management work.
Sina Tech News, February 16th early morning message, even listing cannot stop the fierce competition in the video industry. After being low-key for nearly a year, Gong Yu (Weibo), CEO of iQIYI, began to reappear in the media. He sees more good news in this industry: the embarrassing phase where video websites compete to purchase high-priced hot dramas is coming to an end, and iQIYI's advertisements will see a 300% increase.
Gong Yu: The model of copyright distribution and drama exchange will become popular.