Feng Xin, CEO of Storm: In 2017, Storm business will fully embrace information streaming

In 2017, Storm Business will fully embrace information streaming. In other words, after Stormwind Sports "Today's Headline", Stormwind's three major platforms, Storm TV, Storm Mirror, and Storm Video, will be fully revised in the form of information flow.

Interview with Feng Xin, CEO of Storm: The A-share market's ignorance of the Internet will last for five years.

Storm Group's 2016 financial report recently released shows that the company's operating income last year was 1.65 billion yuan, a year-on-year increase of 153%. After deducting non-recurring profits and losses, the net profit attributable to shareholders of listed companies was 37.57 million yuan, a decrease of 31% from the previous year.

After the financial report was released, Baofeng's share price fell. You know, when it landed on the GEM in early March 2015, Baofeng had risen to a high price of 148 yuan/share with 28 daily limits, but now Baofeng Group's share price has been hovering around 40 yuan for a long time.

"Storm has enjoyed huge dividends from A-shares, and we have opportunities for further development, but at the same time Storm also needs to bear the problems of A-shares. There's nothing to complain about."

When Feng Xin accepted an exclusive interview with reporters, he classified the current dilemma of Internet companies such as Storm in A-shares as the dilemma of understanding: "The A-share market's ignorance of the Internet has lasted for at least five years. A-share market traders and analysts don't understand the Internet as much as U.S. stock analysts. When they couldn't understand it before, they blindly pursued concepts. After discovering the bubble, but now they are completely viewing the Internet with traditional thinking."

The traditional thinking in Feng Xin's mouth refers to the business model of the manufacturing industry. Income, production costs, channels, marketing, advertising fees, operating expenses, and profits can all be directly quantified and evaluated.

Feng Xin attempted to build a similar model to allow investors to clearly see the true state of the storm.

As shown in the picture above, Feng Xin divides the development of Internet companies into three stages. The focus of the construction phase is on the construction of products, core modules, online and offline sales channels, APRU modules, and user modules; the focus of the implementation phase is to generate continuous data, and the ARPU value will increase by reducing the cost of acquiring customers, thus ushering in a single user profit turning point and business profit turning point; finally, the harvest phase, and the overall business enters a profitable period.

"A user's customer acquisition cost will decline with the increase in volume, and the ARPU value will increase little by little from advertising to e-commerce. Starting from scratch, we will encounter the first turning point. We call the profit point for a single user; there is another interval, that is, the profit point where management costs are deducted. When we find these two points, we will find that this business is the same as the traditional industry."

He hopes that by clearly telling investors the clear stage where Internet companies are in, investors can use this model to consider the value of Internet companies and understand where the companies are.

The following figure is the business timetable drawn by Storm VR based on Feng Xin's theoretical model.

It is unclear whether Feng Xin's new financial model will impress investors. The business that deserves the most attention from the outside world at present is Storm TV, its current largest source of revenue.

Storm TV is a business that Storm Group started doing after it went public. In July 2015, Storm Group announced that it would join forces with Rishun, Aofei Animation and Sannuo Digital to establish Storm TV. In December of that year, the first generation of Storm Super TV was officially released.

The annual report shows that currently, the proportion of Storm TV in total revenue has replaced the original advertising revenue and become the first. According to the financial report, the company's annual advertising revenue in 2016 was 578 million yuan, accounting for 35.14% of total revenue. This business accounted for 70% of operating income last year. The largest contribution in 2016 was revenue from commodity sales, accounting for 55.68% of the annual revenue. The revenue from commodity sales here mainly refers to the revenue of Storm TV.

Storm TV sold approximately 800,000 units in 2016, with sales revenue reaching 930 million yuan, a year-on-year increase of 644%. The average revenue (ARPU) of Storm TV users increased tenfold in 2016, with an annual average of 61 yuan, and the average customer acquisition cost of approximately 400 yuan.

However, what cannot be ignored is that the cost of Storm TV terminals accounts for 88.03% of the entire Storm Group's operating costs.

Cost issues are common problems faced by the entire TV industry. "Everyone was in trouble last year. The price of panels increased too fast." Feng Xin said with a wry smile, but he pointed out that the problem is not the cost increase, but the time difference between the cost increase and product pricing. "At that time, retailers had already set the price. It would take time to change it. If they didn't change quickly, they would lose money. As a result, everyone lost money, and now they have all made adjustments. No one is burning money in this industry right now, but last year, prices suddenly increased and we lost money."

Feng Xin mentioned that the cost of acquiring customers for Storm TV will decrease this year. He does not expect Storm TV to become the number one sales player, but hopes that Storm TV will rank first in boot rate, user usage time and user interactions. What Storm TV still needs to do this year is "differentiation".

The content of Storm TV is connected to Storm Video and iQiyi. "We call iQiyi's platform, and the TV system is a storm." Feng Xin said: "It was wrong for LeTV to rely on its own strategy in the early days. The content must be done in a comprehensive manner."

The comprehensive business of today's headlines

storm is currently divided into three lines: the platform line is Storm Video, Storm TV, and Storm Mirror; the content line is Storm Pictures and Storm Sports; other business modules include finance, advertising, O2O, e-commerce, games, shows, etc.

In Feng Xin's view, the platform is the foundation and survival of Storm, while content and business modules are relatively less urgent.

Storm's new strategy also continues the previous style of "not burning money"-in 2017, Storm's business will fully embrace information streaming. In other words, after Stormwind Sports "Today's Headline", Stormwind's three major platforms, Storm TV, Storm Mirror, and Storm Video, will be fully revised in the form of information flow.

In June last year, Storm Sports was officially established. At the beginning of its launch, Feng Xin emphasized the positioning of Storm Sports: to provide personalized content that meets user preferences through data analysis capabilities. Previously, Feng Xin disclosed his interest in today's headlines several times in public: "I have been studying today's headlines for more than one or two years."

He is extremely positive about Today's Headline's efficiency model and agrees with Today's Headline's strategy. Take Storm Sports as an example. The difference between it and Suning and LeSports lies in the idea of burning money to obtain copyright.

Feng Xin told reporters that during the game between Real Madrid and Barcelona last year, Storm conducted a statistical analysis. "It's particularly magical. On the day of the game, the number of PPTV downloads was 5-7 times higher than usual, but the next morning we found that the number of people watching the game information was 3-5 times higher than the number of people watching the live broadcast." Feng Xin believes that although sports copyright is scarce and important, the linear relationship between copyright and customer retention is not as good as information. Short Video are cheaper, more important, and more cost-effective.

At the beginning of this month, Storm Sports officially announced that it had signed a contract with Sports Olympic Power and obtained the right to live video every week in the China Football Association Super League in the 2017 season and the rights to on-demand Short Video and highlights. Another company that obtained the copyright of the Super League Short Video is today's headline.

Editor: Nancy