Category: personal_noteS

Unit Economics For Streaming on Kuaishou

As of Feb 2021,

For independent individuals – 40% of gross value of virtual gifts, when tax withheld is 20%

Streamers = 40%

Streamer’s tax withheld by Kuaishou = 10%

Kuaishou = 50%

For streamers under a “family/union” – varies.

Unions can set the sharing ratio to between 35% and 50%.

For example, if the ratio is set at 40%, and tax withheld is 0 (to simplify)

Streamers = 40% (certain tax should be withheld)

Union = 10%

Kuaishou = 50%

In addition, Kuaishou gives back additional revenue-sharing (“bonus”) as incentive if certain growth/active targets are achieved, up to 12% of gross value (after-tax I assume).

The larger the union, the higher basic bonus (up to 2%) it can get. Active bonus (1%) requirement is a bit higher for larger union. Growth target is lower for large unions. Growth bonus is tiered and every union can potentially get the full 9% growth bonus.

Therefore, if a union get say 5% bonus, following the previous example, then

Streamers = 40%

Union = 15%

Kuaishou = 45%

Unions can set certain bonus internally for streamers, and often provide a base pay + % commission model for streamers.

We could see from Kuaishou’s reported financials that after deducting “revenue sharing to streamers and related taxes”, Kuaishou retains a bit over 40% of its live-streaming revenue.

Tesla Bought $1.5 Billion Bitcoin

On Monday, Feb 8, Tesla announced it bough $1.5 billion bitcoin and would accept it as a payment method soon.

A few takeaways:

1/ There will be more companies using bitcoin to manage their cash, adding to the demand for it.

2/ Bitcoin as a payment method will be more mainstream. Now people not only can rely on selling it to the market, but maybe can buy a Model Y. The future question would be – what will the “economy” look like on Mars? I bet Bitcoin will be important.

Questions remain –

How Tesla is gonna price its cars? in fixed Bitcoin? that will cause a collision with USD, etc. as Bitcoin is volatile on a daily basis.

Clubhouse Revenue (?)

Clubhouse is a $1 billion business with 2 million weekly active users (as of Jan 2021).

Despite the exploding user count, it appears to have zero revenue now.

Clubhouse mentioned three business model:  tipping, tickets and subscriptions (therefore, no ads – good!).

1/ tipping – it’s an established model in Asia but don’t think it will work well in the US. If rolled out, it will be on a smaller scale and shouldn’t be the main source of revenue, unless it incorporates cryptocurrencies like Dogecoin!

2/ tickets – I think this can work but it’s not sexy. It makes the app more “administrative” and ordinary. Also, eventbrite works well with some 2.5%+ fees.

3/ subscriptions – this sounds interesting and may leapfrog podcast subscription model. Another layer of curation can be added, which Clubhouse might have been working on).

Clubhouse may also think about adding features to be more relevant on a daily basis, than monetizing the app right now.

Spotify management should be worried.

Social medias should be worried too.

GameStop Is Like A Soros Play

A week of blogs about GameStop – why not.

Reflecting on the GameStop mania, I feel it’s more like a macro trade, e.g. how Soros broke Bank of England in 1992.

1/ hedge funds are like the role of Bank of England facing Soros (retail investors, etc.). It’s almost certain that they cannot cover the shorts in the near term – just like BoE couldn’t support fixed exchange ratio.

2/ HFs didn’t realize that reflexivity is so important… they are analyzing the company as if they are the outsiders. But as people realize their short/put positions, they can support both GamStop’s real business and its stock. HF’s participation changes the real world itself. Also, people’s decision of holing GME stock also changes their purchasing behaviors.

3/ social medias (reddit, twitter trending, etc.) are now playing a role like Draghi’s “whatever it takes” speech. When expectation is set, people’s decision change as well – it becomes self-fulfilling.

Seemingly Confusing Terms For China’s Preschools (Kindergartens)

I was reading several articles regarding kindergartens in China. The industry has changed a lot in the past few years, mostly related to regulations/policies and  RYB Education (NYSE: RYB). RYB has renamed itself as GEH Education.

One set of definition is around “for-profit” and “not-for-profit”, which is used in private education in general, not just for kindergartens.

Another definition is “affordable”. In an opinion document issued in November 2018, the target is that 80% of kindergartens should be “affordable”.

Nuances:

1/ Technically, “affordable” doesn’t equal to “not-for-profit”. Though it’s not surprising that some confusion may come. (seems to be a good and necessary public education)

The law around “for-profit” and “not-for-profit” is issued by Minister of Justice, and it defined based on legal definitions. “Not-for-profit” basically means the entity cannot distribute residual “profits”. The law itself, by defining “for-profit” private education, actually gives a boost in drawing investment.

“Affordable” is a term developed for policies. For kindergarten owners, it means to accept local government’s guidance on pricing while receiving grants or other help from local government.

In reality, local governments often require that “affordable” kindergartens are registered as “not-for-profit”.

2/ “Affordable” sounds like what parents might want – it indicates that the kindergarten is not expensive (?)

It should be. However, in certain circumstances, “affordable” also mean cost control, which leads to cutting the existing offerings/amenities, which parents might don’t want. And kindergartens might charge extra fees on top of the “basic” package.

3/ “for-profit” implies profits, IPO…?

Nonono.

Many kindergartens won’t be profitable if not with some form of government support.

And it’s not allowed for any public companies to invest or acquire kindergartens, whether it’s for profit or not.

4/ “not-for-profit” means no profits?

No.

I think this is actually the path that many policies would want – “not-for-profit” kindergartens that offers high quality services and can sustain itself. (like non-profit private institutions/universities)

Aphria: Latest Numbers (Good!) Describe The Current State Of Cannabis

Aphria (NASDAQ: APHA), the company to be merged into Tilray (NASDAQ: TLRY),  with 62% post-merger ownership, just released its earnings for the quarter ended on Nov 30, 2020.

And the numbers are good – net cannabis revenue doubled yoy; adj. EBITDA margin continues to improve.

The stocks in the cannabis industry are cheering it up. In the past 3 month, those stocks are up more than 100%.

More legalization and Cannabis 2.0 products helped the sales.

More impressively, cannabis companies are growing their revenue while controlling the costs.

In the latest quarter (FY21Q2), Aphria grew net revenue by 33% yoy while G&A+sales+marketing+R&D grew by only 17%. Its LTM net revenue grew by 34% yoy (amid covid-19, at least two quarters’ sales impacted) while LTM costs (G&A+sales+marketing+R&D) grew only by 26%.

Canopy Growth (NASDAQ: CGC) is more aggressive in cutting costs. Its costs (G&A+sales+marketing+R&D) in decreased by 24% in 2020 Q3, while the revenue increased by 77% yoy.

Tilray (NASDAQ: TLRY) also cut 40% in those costs in 2020 Q3.

How Tech Companies Flex Their Muscle

Tech companies are wielding their influence. People are seeing things that normally they won’t see – things that tech companies are always technically able to do.

Social Medias

  • Facebook on Thursday (Jan 7): “extending the block we have placed on his Facebook and Instagram accounts indefinitely and for at least the next two weeks.”
  • Twitter on Friday (Jan 8): “permanently suspended the account”

App Store

Server

  • Amazon told Parler on Saturday (Jan 9) it intends to cut ties with the company in the next 24 hours – suspend Parler’s (AWS) account effective Sunday, January 10th, at 11:59PM PST. AWS “will ensure that all of your data is preserved for you to migrate to your own servers, and will work with you as best as we can to help your migration”.

Other actions

  • Payment (Shopify, Stripe, Paypal)
  • Other social medias (Youtube/Alphabet, Snapchat, TikTok, Pinterest, Discord, Reddit, Twitch/Amazon), per Axios
  • Airbnb on Monday (Jan 11) announced that it banned certain users from its platform and cancelled certain reservations in the Washington, D.C. metropolitan area

An Update On Jumia: In Coronavirus

Jumia is the probably most famous Africa startup in the past few years and went IPO last year.

I wrote about the potential e-commerce giant in a few blogs before.

On May 13, Jumia reported its 2020 Q1 earnings, which also provides a glimpse into African cities under coronavirus.

Source: Google

The market didn’t react positively after the earnings, but some opportunistic expectations had been built in before.

Although some numbers are not ideal and growth seems lackluster, I would argue in the next blog that Jumia has become a very different company than two years ago.

This post summarizes things that appear to be positive for Jumia, from its Q1 earnings and the shareholder letter in April, among other communications:

  • Partnership with Reckitt Benckiser, a global health products manufacturer selling through Jumia,  is financing free shipping nationwide (8 markets that Jumia operates) on all listed products; Jumia takes 0% commission. -> free marketing / user acquisition that ensures a good first online shopping experience; keep logistics team operate
  • Focusing on contactless delivery options & online payments. -> accelerating JumiaPay adoption when cash is still considered important; building trust, also encouraged by governments
  • Providing affordable basic foods and sanitary essentials. -> shaping perception on online shopping to everyday purchases
  • In South Africa, it launched Jumia platform with an assortment of essential products (Reckitt Benckiser and P&G) that can be delivered despite the lockdown (was selling fashions via Zando which is shut down).
  • Jumia Food pivots to grocery delivery
  • Increased demand from sellers to join the Jumia platform as offline distribution channels are largely disrupted – high-profile brands on Jumia Mall, including Coca-Cola and Nigerian Breweries in Nigeria, PepsiCo and Nivea (Beiersdorf) in Egypt.
  • Launched JumiaPay in Tunisia
  • Consumers can purchase game subscriptions or credit for in-app purchases on the JumiaPay app for popular games
  • Advertising services were available across 9 out of 11 countries, compared with 5 at the end of 2019 – in Q1 run campaigns for high-profile brands including Adidas, L’Oreal, Microsoft, Sensodyne and Mondelez
  • Volumes surged in some markets, such as Morocco and Tunisia, while limited in countries such as South Africa and Nigeria
  • The countries that have been the most severely affected by confinement measures have experienced a gradual volume recovery since mid-April, while the countries that saw a surge in volumes continued to experience robust momentum throughout April. Overall, in terms of items sold, we ended the month of April c.3% above the first week of March levels.
  • The United Nations Development Programme (UNDP) in partnership with Jumia Uganda, have launched an online platform – to enable small and medium enterprises to connect with consumers
    • Jumia will use its infrastructure which includes riders trained to provide safe and contactless deliveries, to provide a platform for the vendors to reach customers who are currently under lockdown.
    • Consumers will have the option of giving feedback on the level of satisfaction of both the product and the service through the Jumia Vendor App.
  • Jumia and Mastercard announced a partnership to incentivize the use of cashless payments platforms – consumers who purchase essential products using their Mastercard on the Jumia platform will receive up to a 10 per cent discount on their order

Things that are implying negative developments:

  • The early signs of the COVID-19 disruption were felt in our cross-border operations as a result of manufacturing facility shutdowns in China. Supply chain disruption in China also impacted our local sellers, many of whom source their goods from China.
  • Different forms of confinement measures have been affecting operations to varying degrees, food delivery business, brief closures of warehouse, sellers’ inability to deliver, etc.
  • Currently expect continued GMV weakness over at least the first half of 2020, with better Order and Annual Active Consumers growth, on a year-over-year basis.

 

to be continued…

Airbnb’s IPO Plan & Capital Allocation

Airbnb did well in the past quarters before 2020 and doesn’t have much concerns for cash. It was one of the most financially healthy startup.

Actually, its full year earnings turned positive as early as 2017, when it generated earnings of about $100m while bookings grew around 150%. It became profitable in the second half of 2016.

In 2018, it made $93 million in profit on $2.6 billion in revenue.

More recently, it took in more than $1 billion in revenue in 2019Q2.

However, Airbnb racked up a $322 million net loss for the nine months through September, down from a $200 million profit a year earlier.

In 2019Q3 alone, Airbnb increased its revenue to $1.65 billion in the third quarter, up almost $400 million from a year earlier, one of the people said. But costs rose faster. Net profit for the quarter was $266 million – less than the $337 million profit for the same period in 2018

All sorts of reports said Airbnb is preparing to go IPO in 2020… until coronavirus hit.

When WSJ reported in Feb, it says Airbnb’s business in China is currently down about 80% compared with last year.

Now as travel industry worldwide is hit, Aribnb total revenue could decline 70-90% and might have cash flow problem.

It now has raised debt and cancelled summer internships.

In early April, Airbnb raised $1 billion in debt and equity from private equity firms Silver Lake and Sixth Street Partners.

Last week, Airbnb raised another $1 billion in debt. Fidelity, T Rowe Price and Blackrock are participating along with Apollo and Oaktree.

While Airbnb should be fine and solvent, how its revenue gonna recover & how to show its growth rate will be an IPO headache.