Produced by | Tiger Sniff Financial Group
Author | Zhou Yueming
Caption | Visual China
Keep, an online fitness platform that has been rumored to be listed many times, has finally "moved" this time. Recently, Keep submitted a prospectus to the Hong Kong Stock Exchange, officially opening the road to listing.
But the company, which has 74% of its users under the age of 30, is facing the problem of increasing revenue without increasing profits.
According to the financial report, Keep's revenue in 2020 was 1.1 billion yuan, an increase of 66.9% year-on-year; revenue in the first three quarters of 2021 was 1.159 billion yuan, an increase of 41.3% year-on-year.
However, net losses for the same period were 106 million yuan and 695 million yuan, respectively.
It is worth noting that according to the Keep prospectus, as of 2021, it has accumulated the world's largest online fitness user base, a mobile app known to 70.1% of the fitness population in China, and the platform has recorded about 1.7 billion exercises in total.
However, as a leading company in the online fitness platform, Keep has not yet achieved profitability, which may reflect the difficulty of monetization in the online fitness industry to a certain extent.
"The demand for home fitness in the epidemic period may bring dividends to online platforms such as Keep, and its net loss in 2020 is indeed greatly narrowed, but for such online fitness platforms, the real difficulties and pain points are how to enhance user interaction and increase user stickiness." When people's travel is no longer too restricted, can online fitness give people the same experience as the gym? An online marketing expert said to Tiger Sniff.
Judging from the series of key data given by Keep at present, it has been revealed that there is some resistance in stimulating user activity and stimulating the willingness to pay.
Keep's slogan "self-discipline gives me freedom", but it is precisely because of the difficulty of self-discipline that the pain points of online fitness platforms are caused. Selling "self-discipline dreams" at one time, or being able to continue to interact with users, is a problem that the online fitness industry is thinking about.
However, it can also be seen from some of Keep's trends that it is also trying to solve the problem of online platform interactivity and user stickiness. Not only has it launched interactive live courses, but also begun to sell fitness equipment that can synchronize APP content (such as live broadcasts, courses), such as smart bicycles, smart treadmills, etc., in addition, there are offline gym Keepland sports space, which are intended to open up online and offline scenes and overcome the common pain points of online fitness platforms.
Can the status quo be improved in the future? The industry is also waiting for the leader to give an answer.
Interactive confusion
Tiger Sniff flipped through keep prospectus and found that it disclosed average monthly active user data for 2020 and 2021. It was 29.7 million and 34.4 million, respectively, an increase of 15.8% year-on-year in 2021.
In addition, from the quarterly average monthly active user data disclosed by it, the year-on-year growth rates in the four quarters of 2020 were 74%, 48%, 11%, and 29%, respectively; the year-on-year growth rates in the four quarters of 2021 were 14%, 7%, 27%, and 12%, respectively.
It can be seen that there are three quarters in 2021 that the growth rate is lower than the growth rate in 2020.
But at the same time, it is worth noting that in the first three quarters of 2019, 2020 and 2021, Keep's sales and marketing expenses were 295 million yuan, 301 million yuan and 818 million yuan, respectively, of which 2020 was only 2% year-on-year, and the first three quarters of 2021 were 172% higher than the whole year of 2020.
If you compare the growth rate of the above key data, it can be found that the investment in Keep sales and marketing expenses does not match the average monthly active user growth rate.
Sales and marketing expenses increased by only 2% year-on-year in 2020, but sales and marketing expenses increased by at least 172% year-on-year in 2021, compared with a monthly active user growth rate of 15.8% in the whole year of 2021. In addition, the growth rate of each quarter is far less than the 172% and the growth rate of the quarters of 2020 (except for the third quarter).
These data may reflect a problem that Keep is currently encountering, that is, while burning money violently, stimulating monthly active users has been a little weak.
It should be known that for this type of online fitness platform, the growth of monthly active users means the value of traffic, which is related to the realization of the platform, if the growth rate of active users slows down, it is a signal worth vigilance for such platforms.
Moreover, what is the proportion of monthly active users in the total registered users, and is it increasing or decreasing? These can also reflect the activity and stickiness of the platform from the side. But Keep doesn't disclose data about the number of registered users each year.
Of course, the higher growth rate of monthly active users in 2020 is also related to the more serious epidemic situation at that time, and the demand for home has made many people start to seek online fitness, which also brings a certain dividend period to Keep.
But when the demand for home is not so strong and people can travel freely, Keep's data performance reflects the difficulty of stimulating monthly active users.
Many Keep users have expressed to Tiger Sniff the difficulty of actively using Keep, such as the user Lin Qing said, "Keep has always been in my mobile phone, but watching Keep's classes and videos can not last too long, their own fitness lack of atmosphere and supervision, to rely on strong self-discipline, which is a little difficult for me." Xiaoting even mentioned, "Keep I uninstalled many times, and re-downloaded many times, but each time I can't stick to it for a long time, I don't have a strong willpower support for my fitness, and I am always a little lonely." ”
Of course, there are also paid members of Keep who believe that "the course is so cheap compared to offline, what bicycle do you want, the more you insist, the more you save more personal training fees, Keep does bring me a lot of help." ”
In this regard, Li Da, an industry insider in the fitness industry, believes that "in fact, the biggest problem of online fitness is interactivity, and how much real-time feedback users can get when they watch video training is more conducive to persistence." Offline fitness has a sense of atmosphere, and personal trainers can clearly recognize the training results of each node, but how much can the online fitness platform open up this scene? ”
"The interactivity of the online fitness platform will indeed bring a lot of impact, the interactivity is not strong enough, it will make the user sense of acquisition reduced, the stickiness is reduced, if more and more users use a few times, buy a class, feel that they can't stick to it and give up, it is bound to affect user activity, and user activity is exactly the lifeline of this type of online platform, selling equipment, selling members and even selling advertising, all rely on this." Wang Lei, an online fitness platform operation expert, said to Tiger Sniff.
Difficult to stimulate the willingness to pay
In addition to encountering resistance in stimulating user activity, from the current financial report, Keep's data related to liquidity also shows signs of slowing growth.
In the prospectus, Keep also disclosed the data of the average monthly subscription member and the average monthly DTC paying user (DTC: Direct to customer, which refers to the users who pay on the Keep platform, Tmall, and JD.com self-operated stores).
From 2019 to 2021, the average monthly subscription membership was 800,000, 1.9 million and 3.3 million, respectively, with a year-on-year increase of 137% and 73% in 2020 and 2021.
During the same period, the average monthly DTC paying users were 184,000, 292,000 and 365,000, respectively, an increase of 58% and 25% year-on-year in 2020 and 2021.
But again, this growth rate is not matched relative to the growth rate of sales and marketing expenses in the same period.
In 2020, Keep selling expenses increased by only 2% year-on-year, but the average monthly subscription membership and average monthly DTC paying users increased by 137% and 58% year-on-year, respectively. While sales and marketing expenses expanded significantly in 2021, at least 172% year-on-year, the growth rate of monthly subscription members and monthly DTC paying users in 2021 declined, 73% and 25% respectively, and the monthly active growth rate was only 15.8%, which was far from the growth rate of 172% of expenditure.
Of course, the higher growth rate in 2020 is also related to the epidemic situation at that time, but these data also reflect the monetization ability of online fitness platforms when people's travel becomes more and more normal.
"How long can this money-burning model last? At present, the growth rate has been weak, if there is not so much money invested, will these core increases even decline? What is the status of Keep in terms of retaining users and stimulating users' willingness to pay? One investor raised his question to Tiger Sniff.
A test of liquidity
Why is the scale of burning money expanding, but the loss is expanding, and the speed of core data increase is slowing down?
First, let's take a look at some of Keep's top revenue streams, namely private label products, membership subscriptions and online paid content, as well as advertising and other services. (See the figure below)
It can be seen that private brand products (mainly including smart fitness equipment--- smart bicycles, fitness bracelets, smart weight scales and treadmills, fitness equipment, clothing and food, etc.) account for the largest proportion of revenue, basically accounting for more than 55% during the reporting period, in addition to membership subscriptions and online paid content, accounting for about 30% after 2020, while advertising and other services account for about 12%.
However, the business with the highest proportion of revenue has the lowest gross profit margin. Because Keep also disclosed the operating costs of these businesses (see figure below).
Based on this, Tiger Sniff roughly calculated that in the first three quarters of 2021, the gross profit margin of the private label product business was 29%, the gross profit margin of membership subscription and online paid content was 58%, and the gross profit margin of advertising and other services was 59%.
According to Keep itself in the prospectus, the increase in revenue from private label products was mainly due to the increase in sales due to the increase in dtc paying users.
However, from the perspective of the growth rate of DTC paying users, it will still be 58% in 2020 and 25% in 2021. The slowdown in the growth rate of paying users is also reflected in the growth rate of private labels, with private label revenue growth still 60% in 2020 and 33% in the first three quarters of 2021.
"The private label business has a low gross profit margin, if you invest heavily in sales and marketing expenses, but the conversion rate is poor, then it will further swallow up the profit space of this piece of business, and losses are inevitable." Investor Li Mi said to Tiger Sniff.
Tiger Sniff probably calculated that the penetration rate of DTC paying users in 2020 and 2021 (accounting for the proportion of monthly active people in that year) was 0.9% and 1% respectively, which can be seen that the change is not large. But what should be known is that at the same time, Keep's sales and marketing expenses have not remained unchanged, and the first three quarters of 2021 have increased their expenses significantly, but they have not exchanged for a significant increase in DTC paying users in 2021, and the penetration rate has not increased much.
"It doesn't seem like a good deal." Li Mi said.
This is related to whether Keep's private label products can stimulate users' willingness to buy. Wang Lei, a marketing expert in the fitness industry, told Tiger Sniff, "For example, Keep's yoga mats, sportswear, etc., such products can be selected too much, and users can buy themselves on other shopping platforms." If you want to raise the price of such products, you must form a certain brand loyalty, for example, you can refer to lululemon's strategy to form an identity through the form of community, but Keep is just an online sports platform, the user scene is scattered and cannot be aggregated, mutual socialization, mutual influence is weak, how to create identity, is a problem. However, Keep has also launched its own offline gym to see if it can become a breakthrough point. ”
There are also Keep users who say to Tiger Sniff, "This kind of sports products, clothing and the like, are more willing to choose more cost-effective, practice at home no one sees, comfortable is good." ”
It should be known that when a product wants to pursue higher profit margins, or build its own core supply chain, or form a brand premium, otherwise it will be limited on both the cost side and the pricing side. For example, such products as yoga mats, lululemon has its own brand culture, a yoga mat can be sold to 480 or even 580, keep several fitness mats that sell more hotly are about 100 yuan. According to Keep, in 2021, it is the largest yoga mat brand in China, with a market share of 14.9%, and if the product is more community attributes and brand culture attributes, it is more likely to seek higher pricing power.
Of course, in addition to lighter products such as clothing and food, Keep has also launched a lot of its own smart fitness equipment, such as smart bicycles, fitness bracelets, treadmills, etc., and tried to maximize the interactivity of these devices through live broadcasts, synchronous APP-related courses, etc. In addition, there is an offline gym Keepland.
One benefit of combining fitness content with equipment is that it can increase user stickiness, because the price of the device is high, and the cost of user migration is higher. But these premises are whether the interactivity of the fitness equipment is good enough.
It can be seen that Keep is also working hard to improve the interactivity of its own fitness equipment. For example, smart bicycles, treadmills, smart scales, etc., can be interconnected with Keep's courses and online live broadcasts, and synchronize mileage, quantity and other related sports data online and offline. Some users who use smart bicycles told Tiger Sniff, "Stepping on smart bicycles at home, you can exercise with other users who participate in online live broadcasting, and live broadcast teachers will also create an atmosphere, like offline fitness." Some users told Tiger Sniff that the reason why they bought Keep's devices was because they valued the rich content of their online lines.
But there are also investors who pay attention to the fitness industry who have expressed doubts about Tiger Sniff, "This kind of interactive fitness equipment, many other products can also do it, how many barriers do Keep's products have?" In addition, in the current environment of the explosion of fitness content, Keep's content also faces a lot of traffic competition. ”
In this way, Keep on the one hand gives people the right to be lazy, without traveling, without spending too much money, can achieve "fitness freedom". But on the one hand, it is constrained by people's "laziness", compared to offline fitness can be supervised, more interactive, keep how long can keep users?