Behind the listing of Feitian Yundong: the structural innovation of the consumer Internet in the Metaverse

As a term that is not new, why has the metaverse attracted so much attention in recent years?

On the one hand, starting from 2019, it has become an industry consensus that the consumer Internet has encountered development bottlenecks, and the number of users and the growth of user usage time are approaching the ceiling, and the industry needs a new direction.

On the other hand, 5G, cloud computing, virtual-real interface technology, VR content ecology, artificial intelligence, digital twins, blockchain and other technologies have made great progress, allowing the Internet industry to see the possibility of breaking through the ceiling.

In other words, the Metaverse gives the consumer internet a long way to go.

In the Internet industry, commercialization must be implemented in applications. Therefore, it is crucial to measure the potential of metaverse technology at the application layer.

On September 29, Feitian Yundong, the Hong Kong stock "the first stock in the Metaverse", launched its IPO and is expected to be listed on October 18. Cornerstone investors include Zhejiang Anji State-owned Assets, SenseTime and Jieli Trading Bao, etc., covering leading artificial intelligence companies, established investment platforms with local state-owned assets, and well-known securities trading platform service providers.

It is reported that Feitian Yundong is a supplier of the application layer of the metaverse scene, and its business mainly covers AR/VR marketing services, AR/VR content, AR/VR SaaS, etc.

Through Feitian Yundong's prospectus, let's take a look at the market potential of China's AR/VR content and services, Metaverse Scene Application 1.

How to make money on the Metaverse Raceway?

As an early market player, Feitian Yundong has completed the transformation from game business to AR/VR content and service business since May 2019.

According to iResearch, Feitian Yundong ranks first in China's AR/VR content and service market in terms of revenue, accounting for 2.6% of the market share in 2021.

Futu Niu Niu

In Feitian Yundong's IPO documents, net profit is a very prominent figure. From 2019 to 2021, Feitian Yundong recorded adjusted net profit of 41.879 million yuan, 61.609 million yuan and 105 million yuan respectively, with a compound annual growth rate of 35.9%.

Feitian Yundong is one of the few players who have made a profit in the Metaverse track where the fire is cooking oil. How does it do it?

The commercialization of Feitian Yundong in China's AR/VR content and service market consists of three parts: AR/VR marketing services, AR/VR content, and AR/VR SaaS.

Feitian Yundong's AR/VR marketing service is based on its own low-code development platform, which produces AR/VR advertising materials for customers, and captures the traffic pool and advertising space with AR/VR as the carrier.

AR/VR content business refers to Feitian Yundong's use of its AR/VR content development experience to empower customers in various industries and provide industry customers and end users with a diversified and immersive experience in the virtual world.

The AR/VR SaaS business is based on the standardized AR/VR SaaS platform developed by Feitian Yundong, allowing customers to produce and publish AR/VR-based content by themselves.

Specifically, Feitian Yundong's current largest source of revenue is AR/VR marketing services provided to advertisers, which is also an important foundation for Feitian Yundong to build the commercialization of the Metaverse. In the first three months of 2022, AR/VR marketing services achieved revenue of 38.055 million yuan, a year-on-year increase of 127.5%.

The emerging formats of digital advertising help the industry break through the growth ceiling. The average annual compound growth rate of the network marketing market in the next five years is only 15%, while the average annual compound growth rate of the AR/VR service market is 45.9%.

AR/VR marketing services are an important foundation for Feitian Yundong to build its own product barriers. However, the performance of Feitian Yundong is enough to find that the market demand for AR/VR content and AR/VR SaaS is also growing rapidly. According to iResearch, the market size of the AR/VR service market is estimated to increase from RMB 5.3 billion in 2022 to RMB 24 billion in 2026.

Obviously, the key to Feitian Yundong's profitability is that the rapid growth of emerging business formats has accelerated its revenue growth, covering the increase in costs.

Not only that, but behind Feitian Yundong's high growth is the strong alliance between this company and Tencent, Alibaba, JD.com, Baidu and other leading consumer Internet players to build a metaverse business ecosystem.

For example, relying on the SaaS platform Wanmu cloud platform, Feitian Yundong and Kuaishou have reached a cooperation to provide Kuaishou panoramic video creators with editing tools, which are suitable for panoramic pictures, panoramic videos, and interactive functions such as adding 3D models and special effects.

There is also cooperation with Baidu. Feitian Yundong provided technical content support during the construction of the first city Creator City in Greece and the implementation of the brand project, and jointly designed and jointly built the "Feitian Building" of the Xiyang platform with Baidu.

In a word, in the AR/VR content and service market, Feitian Yundong uses AR/VR engine, AI behavior algorithm, cloud computing and other technical capabilities to deeply cultivate ToB business in various vertical industries such as e-commerce and advertising, and draw a line of increasing revenue and profit. healthy growth curve.

This time, the successful listing of Feitian Yundong will help the capital market to discover the potential of the AR/VR content and service market.

The next step after listing

The only way for the consumer Internet to achieve sustainable growth in users and duration is to provide structured innovation.

Metaverse track participants intend to build a digital society, bringing users a digital life with a sense of the world, and will inevitably bring about supply-side structured innovation.

For example, AR/VR marketing has brought a subversion to the online advertising industry. Compared with traditional marketing methods, the immersion of AR/VR in communication can leave a deeper impression on consumers. Therefore, AR/VR marketing is likely to create new increments for the digital advertising market.

In anticipation of a slowdown in global economic growth, advertisers are becoming more and more cautious about advertising. The notable feature is that it is effect-oriented and pays attention to the input-output ratio of advertising.

With the current mobile Internet traffic dividends peaking and traffic costs high, Feitian Yundong's marketing services still have a gross profit margin of 23%, thanks to the click conversion rate of AR/VR marketing as high as 25%, enabling it to own Higher than the pricing power of graphic and video network marketing.

Most importantly, with its advantages in AR/VR marketing, Feitian Yundong is expected to further improve its own metaverse ecology.

Since embarking on the road to listing, one of the biggest highlights of Feitian Yundong is SenseTime, which emerged as a cornerstone investor.

As the leading AI company in China, SenseTime leads the frontier research of artificial intelligence. Looking at his past investment experience, he has participated in projects including Shanghai Artificial Intelligence Research Institute, city-level intelligent IoT platform "Tesley Alliance", interactive video technology service provider "Moviebook Technology", etc., all of which are in various sub-fields. A leading company in artificial intelligence application level.

It is understood that Feitian Yundong and SenseTime have carried out a lot of cooperation around the frontiers of Metaverse commercialization such as virtual humans, Metaverse entertainment, digital collection distribution, brand VR marketing, etc.

In the next stage after listing, Feitian Yundong's self-developed engine will be combined with SenseTime's AI core to jointly explore multi-dimensional cooperation with local governments in the urban metaverse and promote the digital upgrade of cities.

Continuing to cooperate with leading companies is in line with Feitian Yundong's consistent development path, and the endorsement of investors such as SenseTime is also conducive to Feitian Yundong's stock price performance after its listing.

However, the transition to the metaverse is a long process. Although the commercialization is progressing smoothly, Feitian Yundong has achieved high growth and strong profitability in the past, but Feitian Yundong should not overestimate the expansion process of Feitian Yundong in the fields of virtual human and metaverse entertainment.

As written in the article "How the Metaverse Rewrites Human Social Life" on the website of the Central Commission for Discipline Inspection and State Supervision: "Rationally look at the new round of technological revolution brought about by the Metaverse and its impact on society, and do not underestimate the 5 to 10-year opportunity. , and do not overestimate the evolutionary changes in 1 to 2 years.”

Feitian Yundong also pointed out, "Because the AR/VR content and service industry in which we operate is relatively new and developing, our future operating results and prospects, as well as our ability to forecast them, are subject to various uncertainties. , could have a material adverse effect on our profitability and prospects."

The development of the Metaverse is still uncertain, and Feitianyun is in an industry based on technology and creativity. Investors should view its development rationally and optimistically.

Hong Kong Stock Research Institute