Business Model Evolution of Content Platform in Emerging Economy: A Case Study of Bilibili ()
1. Introduction
The content platforms in China are flourishing. In recent years, the number of content platforms has increased; there are content platforms such as iQIYI, Youku and Tencent for TV drama fans, Douyin (Tiktok in China) and Kuaishou for people from “the lower class”, Renren Video which almost monopolized all foreign TV series and Bilibili for young people. However, content platforms are facing such challenges as intensified competition in the industry, high user requirements for the platform’s functions, diversified user needs, high cost in attracting more customers, and low user stickiness. At the same time, the platform’s customers are beginning to accept paid services as an opportunity for content platforms to grow and expand.
The development of content platforms in China, an emerging economy country, is different from their western counterparts. Most content platforms in China are involved in derivative businesses such as games and e-commerce, and all platforms have bullet screens as instant tools for customer interaction to increase customer stickiness. (Bullet Screen is an emerging new feature on online video sites in China and Japan, which allows real-time comments from viewers to fly across the screen like bullets.) YouTube, the world’s largest video site, has little of that. Thus, content platform in emerging economy is more complicated. This article focuses on the development of content platforms in emerging economy.
The development of content platforms in emerging economy is related to elements in association with industry and enterprise interfaces, such as value proposition, resource integration and channel, etc. The interfaces of company and industry can be characterized by the concept of business model. Therefore, I’ll try to analyze the business model of content platforms in emerging economy.
Bilibili, as a rising star among content platforms in China, has only experienced 12 years of development and become a must-see website for young people in China. Its story well presents the entire development process of a content platform in emerging economy. This paper will take Bilibili as a case, and discuss the business model evolution of content platform in emerging economy, so as to contribute to the research of business model evolution in emerging economies, and provide new insights for the study of content platforms.
2. Literature Review
Although there is a lack of consensus on the definition of business models (Bigelow et al., 2021), Magretta (2002)’s basic understanding of business models is widely accepted. She defined business model as the stories that explain how enterprises work. Osterwalder (2004) defined the business model as the translation of a company’s strategy into a blueprint of how the company earns money and pointed out that the concept is more holistic that embraces all such elements as pricing mechanisms, customer relationships, partnering and revenue sharing.
There are several major perspectives on business model research. Firstly, the institute-based view (Wruk et al., 2019) believes that business model of the company needs to be consistent with legitimation strategies and social expectations. Secondly, organizational design (Zott & Amit, 2007; Anderson, 2016) researchers use organizational factors to explain the success of the business model. These researches try to analyze business models in element level, while mine tries to use the business model canvas proposed by Osterwalder (2004), which is a combination of elements.
There are relatively few studies on business model evolution. Based on the 1950-2021 search results on Web of Science (Search time: June 14, 2021), only 20 articles had “business model evolution” in the title, and 41 articles had it as a topic. The reason might be that business model evolution research needs to involve a large number of elements and evidence, and the mutual coordination between the elements. Balboni et al. (2019) introduced the whole process of business model transformation in three different stages, from start-up to change in design themes of novelty design to combinative effect of efficiency and novelty. Fritscher & Pigneur (2014) introduced how the method of business model canvas should be applied to the study of business model evolution. I follow their ideas.
According to Hoskisson et al. (2000), an emerging economy can be defined as a country that satisfies two criteria: a rapid pace of economic development, and government policies favoring economic liberalization and the adoption of a free-market system (Arnold & Quelch, 1998). Obviously, China is an emerging economy.
Transition economy is a similar concept to emerging economy. It refers to the rapidly growing countries of Central and Eastern Europe that emerged after the collapse of the Soviet Union in 1989 (Hoskisson et al., 2000). These countries have shifted from socialist economy to market economy, and their governments are willing to strengthen their market mechanisms through liberalization, stabilization, and the encouragement of private enterprises (Hoskisson et al., 2000). China is also a transition economy. The emerging economy has some clear characteristics. Firstly, these countries lack the well-defined property rights that convey exclusivity, transferability, and quality of title (Devlin, Grafton, & Rowlands, 1998). Secondly, the emerging economy has a strong dynamic characteristic. Thirdly, the politic, economic and institutional environment in these countries is unstable, which may have a significant impact on the development of economies. Fourthly, these countries are lack of strong legal frameworks so that opportunism, rent shifting, bribery, and corruption are more popular (Nelson, Tillery, & Walker, 1998). Fifthly, the development of market institutions has been slower and more difficult. Sixthly, emerging economies are heterogeneous even in the same geographic region.
Content platform is a new thing. Extant researches focus on issues such as user contribution performance (Son, 2016) or consumers’ use and self-investment trajectories (Linden et al., 2020). Other researches focus on analyzing the content provided by content platforms or the mode of content upgrading or the commercialization of content (e.g. Chen et al., 2018; Zeng, 2019).
3. Methodology
3.1. Research Method and Data Collection
This paper adopts a single case study method. Eisenhardt (1989) pointed out that case study can be very useful when we know little about the problem being studied or try to start from a new perspective. This research chooses Bilibili as the single case because the case is typical which meets the application conditions of the theory in all aspects, and is suitable to the application of the exploration of new study fields. Bilibili is a content platform in China, an emerging economy market country, and it thrived after going through a business model evolution process. Actually, there is few foreign content platforms with such operational model that contains bullet screen and derivative business as Bilibili, which is also novel in China.
Bilibili is a video platform for the young generation in China. Founded on June 26, 2009, it is affectionately known as “B Zhan” by fans. On March 28, 2018, Bilibili was listed on Nasdaq; on March 29, 2021, it had a second listing in Hong Kong, China. Bilibili was an ACG (animation, comic, game) content creation and video sharing site in its early days. After 12 years’ development, the company has built a content ecosystem for users and content creators, and has developed into a multicultural community covering more than 7000 interest circles. Bilibili had about 223 million monthly active users in the first quarter of 2021.
I have collected data about Bilibili’s history, subsidiaries, related companies, organizational structure, corporate operation status (including revenue, users and paying users, changes in main business structure, stock price information), industry information and institutional environment, main founders and managers, and major partnerships in recent years. Data sources are Bilibili’s annual reports and online public data such as Baidu, public interviews, and corporate resources from Qichacha, etc. The data are collected from Bilibili’s founding year of 2009 to May 7, 2021. The history of the enterprise is shown in Table 1. The information about finance and operation of Bilibili are shown in Table 2.
Note: “uploaders” here refers to the content creators on Bilibili’s platform. The meaning of “uploaders” in following texts is the same.
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Table 2. The finance and operation information of Bilibili (2015-2020, unit: RMB).
Source: Bilibili Annual Report 2018-2020. Note: The average monthly paying users in the table not only includes the fee of premium membership program, but also includes sales of in-channel virtual items for use in live broadcasting so that users can send them to hosts to show their support, which comprise of either consumable items, such as gifts and items that create special visual effects, or time-based items, such as privileges and titles. Those who spend money on Bilibili Comics and Mao’er FM are all Bilibili paying users. And the vacant parts in the table are missing data in Bilibili annual report.
All the data concerning Bilibili’s profitability (net revenues and gross profit), key activities (key components of results of operations), monthly active users and revenue earned from these users (and the data about average monthly paying users for mobile games are also included), sales and marketing expenses and total cost of revenues are shown in Table 2.
3.2. Variable Measurement
This research uses the nine elements proposed by Osterwalder (2004)’s business model canvas as variables to analyze Bilibili’s business model evolution from 2009 to present, and summarizes the elements of a company’s business model into nine elements under the four pillars (see Table 3).
4. Case Analysis
According to the evolution of contents provided by Bilibili, this study divided Bilibili’s business model evolution into three stages, the self-entertaining mode from 2009 to 2013, the trial-and-error mode from 2014 to 2016, and the consolidation and promotion mode from 2017 to now. This paper will use the Business Model Canvas to analyze the four pillars of business model in different phases.
4.1. Self-Entertaining Mode (2009-2013)
In terms of value proposition, Bilibili was originally founded to provide users with a high-quality bullet-screen video website. During this period, because of the lack of supervision, the content was mainly plagiarized from other websites and resources, and it only targeted on young and low-end (“low-end” here refers to the low consumption will and affordability) ACG lovers. Bilibili aimed to improve and optimize the existing basic functions. For example, on August 10, 2009, Yi Xu, founder of Bilibili, launched a video titled Special Bullet-Screen Test. Till April 22, 2010, Bilibili had almost completed the bullet screen management system development. Bilibili started as a website that plagiarized Japanese animations to cater for the interests of ACG lovers and the function optimizations of its platform was rather scarce (the Special Bullet-Screen Test video
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Table 3. Pillars, elements, and measures of the business model canvas.
to test the bullet-screen function and the completion of bullet screen management system development). Thus, I define the business model of Bilibili at this stage as a Self-entertaining Mode because the company mainly focused on ACG culture and catering for the users’ love for ACG culture.
In terms of customer relationship, at this stage, Bilibili mainly targeted on low-end users who are keen on ACG culture. The relationship between Bilibili and its customers can be simplified as content creators (i.e., uploaders) → Bilibili platform → fans who watch the videos uploaded by content creators. Both uploaders and their fans are Bilibili’s customers, and Bilibili is an intermediary platform connecting these customers. Bilibili mainly improved and optimized the existing basic functions of the website to maintain customer relationships. For example, users were allowed to delete or protect the videos they submitted. Bilibili also made timely adjustments based on user feedbacks. Besides, Bilibili strictly restricted videos with bad influence, pirated or plagiarized videos and videos with poor picture quality. From the perspective of customer segments, Bilibili mainly concentrated on ACG lovers. In terms of channels, Bilibili developed some channels at this stage, but did not carry out in-depth development of these established channels. For example, on April 14, 2013, Bilibili’s Game Section was officially established. However, it only launched a handful of games in 2013, one of which was Daybreak, but it is no longer available for downloading in mobile app stores now.
In terms of key activities, at this stage Bilibili provided its users with animations and encouraged uploaders to make creative videos. In terms of key partnership, there was only low-level cooperation with some technical personnel. Rui Chen, chairman of Bilibili since 2014, recalled his meeting with Yi Xu (founder of Bilibili) in 2011: “At that time, Xu and several other co-founders were all in their early 20s, crammed into an apartment with a monthly rent of ¥3000 RMB in Hangzhou without any investment.” From the view of key resources, it invested resources to optimize the website and the bullet screen function. For example, Bilibili has carried out a series of website optimizations: on June 14, 2010, it improved the function of real-time bullet screen chat; on June 23, 2010, it added tag function.
From the perspective of revenue, Bilibili had almost no revenue from 2009 to 2013, which can be inferred from the fact that all the data in Bilibili’s annual report started from 2015. In terms of cost structure, the cost was probably mainly spent on optimizing and upgrading the server and on buying a better server.
4.2. Trial and Error Mode (2014-2016)
4.2.1. Product and Service
In terms of value proposition, Bilibili wanted to enter the mid-end and high-end market promptly during this period in order to transform Bilibili into a full spectrum video community covering a wide range of content categories and diversified video consumption scenarios. From 2014 to 2016, Bilibili made some moves that had a positive impact on the company. For example, Bilibili bought the copyright of some animation series in 2014. However, Bilibili has also undergone lots of trial-and-error. In 2014, after Rui Chen joined, Bilibili made some aggressive operations and investment, as shown in Table 4. The reason for the trial and error at this stage is that the value proposition went far beyond Bilibili’s own resources and capabilities.
At the same time, Bilibili’s strategy was also greatly influenced by institutions. From late 2014 to early 2015, Bilibili was involved in a number of lawsuits concerning the infringement of the rights to spread information online filed by iQIYI, Douyu and Huashi Wangju etc. Yet Bilibili survived and even thrived through these intellectual property right violations.
Since March 2015, the Ministry of Culture in China has remedied some violent and terrorist cartoons on the Internet, focusing on the animation products that induce crime, violence, pornography and terrorist activities. A large number of animations were banned because of violating of these regulations. In June 2015, a list of companies that had violated the “Internet Audiovisual Program Service Management Regulations” or “Interim Provisions on Internet Culture Management” to provide animation products with illegal contents was released, and Kuan Yu Digital Technology was a company on that list. Within the organizational structure of Bilibili, Shanghai Kuan Yu Digital Technology is a subsidiary of Hode Shanghai Limited. In other words, in 2015, Bilibili’s online audio-visual services were given a heavy blow by these regulations. At that time, Bilibili deleted some of the animations, but also continued to provide banned animations by renaming them (such as renaming Assassination Classroom, which was banned, as Class E, Year Three).
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Table 4. Trial and error of Bilibili during 2014-2016.
This reflects the transition of emerging economies, changing from lacking a strong legal framework to the gradual establishment of a well-developed policy and regulatory system.
It also suggests that perhaps Bilibili was seeking to change its strategies and seeking better development due to the change of supervision and regulation on content platforms. However, as an emerging economy enterprise, Bilibili lacked resources and capabilities. There was no doubt that Bilibili couldn’t achieve the leap to mid-end and high-end market.
4.2.2. Customer Interface
In terms of customer relationship, Bilibili’s customer relationship was still based on the good relationship with the content creators and their fans. Specifically, in October 2014, a system called B Coin went online to please the uploaders, users can send B coins to uploaders to show their support, which can be transformed into uploaders’ actual monetary income. The actions to please the fans who watch videos on Bilibili’s website were: in 2015, Bilibiliyoo launched a tourism project to Japan; in December 2015, the official Taobao store of Bilibili was opened for business; on September 23, 2016, Bilibili announced that they are the exclusive agency of mobile game Fate/Grand Order in China; in 2016, Bilibili Pictures released three films.
From the perspective of customer segments, at this stage, Bilibili’s target customers were relatively out of order. The launch of tourism projects was aimed at high-end users who have the ability to pay, while the operation of B coin system, the opening of official Taobao stores and participation in the production of movies were aimed at mid-end and low-end users who have relatively low affordability.
In terms of channels, Bilibili’s sales channels were also in dreadful disorder. From the cooperation between Bilibili and other channels in 2015, on April 25, 2015, Bilibili cooperated with Zhihu and became the partner to live-broadcast the grand annual event “Zhihu Salt Club”; on June 28, Bilibili cooperated with Baidu. A voice search for “I want + Bilibili memes” would redirect users to watch relevant videos on Bilibili. Besides, Bilibili and Sina organized the “Chinese Animation Month” event together in December, 2015. Zhihu is aimed at higher-end intellectuals with more knowledge and cultural awareness, while Baidu and Sina microblog are applications for mid-end and low-end users to search and browse news and anecdotes, which shows the disorderliness of Bilibili’s channel.
4.2.3. Infrastructure Management
The key activities of Bilibili in this stage are shown in Table 5.
Key partnership at this time is shown in Table 6.
Therefore, the key resources of Bilibili at this stage were in a mess. Not only did Bilibili need the resources to maintain the operation of various activities (such as tourism, film and documentary), but also acquired resources through cooperation with other content platforms and enterprises.
4.2.4. Financial Aspects
In terms of cost structure, the cost structure of Bilibili at this stage is shown in the following Table 7. (Data are from Bilibili’s 2018 annual report, and the data before 2016 are missing, unit: RMB.)
It can be seen from Table 7 that in the revenue costs of this stage: besides revenue-sharing costs and staff costs, server and bandwidth cost were much higher than content cost, indicating that the majority of revenue cost in this stage was the relatively low-end kind of technology expenses (bandwidth cost), and the proportion of content cost was not high. In operating expenses, the general and administrative expenses accounted for as much as 70%, while the sales and marketing expenses and the research and development expenses were basically the same and both are below 16%, indicating the operational capability of Bilibili was not good enough during this phase, and it did not have enough money to support the expansion of various lines of businesses.
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Figure 5. Key activities of Bilibili from 2014 to 2016.
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Table 6. Key partnership of Bilibili from 2014 to 2016.
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Table 7. Cost structure of Bilibili in 2016.
In terms of revenue stream, it can be seen that the box office of the three films were not impressive, each of which did not exceed ¥200 million RMB. Thus, the three films released by Bilibili Pictures were not popular enough. And Bilibili’s tourism program was suspended after less than a year and a half’s operation, suggesting that its ability to generate revenue was not impressive either. The incomes of Bilibili’s various lines of businesses were not remarkable compared with subsequent years.
4.3. Consolidation and Promotion Mode (2017-Now)
4.3.1. Product and Service
Starting from 2017, Bilibili’s value proposition is to consolidate its relationship with existing low-end users and try to attract more mid-end and high-end users.
In 2018, Ni Li, the Vice Chairwoman of the Board of Directors and Chief Operating Officer of Bilibili, said, “Documentaries have become an important part of the content ecosystem of Bilibili”. The word “content ecosystem” here indicates that Bilibili, as a content platform, wants to gradually attract more mid-end and high-end users. Bilibili’s 2020 annual report defined content ecosystem as an ever-growing content ecosystem that is centered on video-based content including PUGV, live broadcasting, OGV and more. Bilibili’s full-spectrum content ecosystem enables them to become a one-stop platform for users to find a wide variety of content that matches their interests, and for content creators to fully showcase their talent.
On April 19, 2017, the Ministry of Culture in China released the “Cultural Industry Development Plan during the 13th Five-Year Plan Period”, which proposed that 11 industries would be paid attention to during the period of the “13th Five-Year Plan”, animation and games were included in these criteria, indicating that the ACG culture and Bilibili’s lines of business have gradually been accepted and paid attention to by mainstream culture. This reflects the willingness of transition countries to strengthen their market mechanisms through market liberalization and stabilization.
Since 2018, Bilibili has been making efforts to protect the intellectual property rights of their content. On Jan 24, 2019, Bilibili filed a lawsuit against a company called Dilidili. Dilidili plagiarized Bilibili’s animation Sword Art Online (season three), which Bilibili had overcome a lot of difficulties to buy its copyrights. Viewers would have to pay a price or join in the Premium Membership Program (viewers will have to pay for this program’s subscription) on Bilibili to watch this animation, but people can watch this animation for free on Dilidili, and Dilidili did not even get rid of the “Bilibili Original” watermark in those videos. This incident suggests that Bilibili, as a company thriving in emerging economy context, understood that China has no longer been in the situation of lacking of well-defined property rights, so they started to protect the copyrights of their own content.
4.3.2. Customer Interface
In terms of customer relationship, Bilibili is trying to better maintain and consolidate the good relationship with content creators and people who watch videos on Bilibili over the years, so that content creators can release more creative videos and help attract more fans. On January 26, 2019, Bilibili held the first Bilibili Power UP 2018 Annual Uploader’s Award Ceremony in Shanghai, and awarded the 10th Anniversary Achievement Award to outstanding content creators (i.e., uploaders).
In terms of customer segments, Bilibili’s 2019 annual report includes this statement: “We have a young and culturally aspirational user base” ... “We empower users to create, discover and share quality content”, indicating that Bilibili is consolidating its relationship with low-end “young and culturally aspirational users”, so as to have more quality content on the platform and attract more mid-end and high-end users. Then, in Bilibili’s 2020 annual report, there is an analysis that “Our user base is quickly broadening to include users across different age groups and locations, who take interest in a full spectrum of content”, indicating that Bilibili wants to attract more high-end users.
In terms of channels, Bilibili cooperated with a variety of mid-end and high-end content platforms during this period, as shown in Table 8.
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Table 8. Cooperation of Bilibili in various channels from 2018 to 2020
4.3.3. Infrastructure Management
In terms of key activities, the key activities of Bilibili were gradually being sorted out, which can be interpreted from Bilibili’s basic lines of businesses—mobile games + live broadcasting + video contents + e-commerce + advertisement, and peripheral services such as Premium Membership Program, live-broadcasting’s “Big Voyage” membership and the services that require users to spend money on Bilibili Comics and Mao’er FM, etc. Besides, Bilibili’s key resources have gradually been sorted out during this phase. And the key partnerships of Bilibili are mainly established with leading enterprises (see Table 9).
4.3.4. Financial Aspects
The cost structure of Bilibili during 2017-2020 is listed in Table 10 and Table 11 (data source: 2018-2020 Bilibili Annual Report, unit: RMB).
According to Table 10, in Bilibili’s cost of revenues, besides the revenue-sharing costs, the proportion of server and bandwidth costs decreased from 41.7% in 2016 to 24.4% in 2017, and the proportion continued to fall to 12.5% in 2020, which means that the relatively low-end technology expense (bandwidth costs) no longer makes up the most in the cost of revenues. The technology required to run Bilibili platform have gradually become mature. In addition, content costs, e-commerce and other expenses have gradually risen to about 20%, indicating that Bilibili has paid more attention to the quality of content and services provided by its platform during this stage.
As seen in Table 11, it can be found that in operating expenses, the proportion of general and administrative expenses decreased from 70% in 2016 to 33.7% in 2017, and then decreased to 16.3% in 2020, indicating that the administrative expenses are no longer the main expenses of Bilibili’s operation. The proportion of sales and marketing expenses and research and development expenses in recent years increased from 15.9% and 14.1% in 2016 to 30.1% and 36.2% in 2017, indicating that Bilibili has paid more attention to research and development expenses and marketing expenses, and hopes to attract more mid-end
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Table 9. Key partnerships of Bilibili in 2018-2020.
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Table 10. Bilibili’s cost of revenues from 2017 to 2020.
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Table 11. Operating expenses of Bilibili from 2017 to 2020.
and high-end customers through promotion of technology, advertising and other marketing methods. Up until 2020, sales and marketing expenses accounts for 58.4% of operating expenses, while research and development expenses accounts for 25.3% (less than 30%), indicating that Bilibili’s technology development is gradually becoming mature and Bilibili pays more attention to attracting more mid-end and high-end users (in sales and marketing expenditure from 2018 to 2020, marketing and promotional expenses has made up more than 70%).
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Table 12. Bilibili’s revenue structure formed after 2017.
During this period, Bilibili has established a stable revenue structure as shown in Table 12.
5. Conclusion
In the end, I summarized Bilibili’s business model elements in different stages in Table 13.
Table 13 shows that Bilibili’s business model has three phases. It started from a low-end mode (self-entertaining mode), and suddenly it wanted to step into the high-end market and caused element allocation problems (trial and error mode), and finally returned to consolidating the relationship with low-end customers, and try to attract more mid-end and high-end customers (consolidation and promotion mode).
Business model concept helps my research to be more integrated and unbiased, compared with the studies that merely focused on analyzing the content provided by content platforms or the mode of content upgrading or the commercialization of content. I combine the overall environment of the emerging economy with Bilibili’s business model evolution, and draw the conclusion that the emerging market economy has a profound influence on Bilibili’s business model evolution. In an environment that lacks strong legal frameworks, Bilibili gradually thrived from illegally plagiarizing Japanese animations. As China transformed, Bilibili modified its business model immediately to serve the high-end user market. Due to the lack of resources and capabilities, this modification did not work very well. Then, Bilibili began to actively participate in
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Table 13. Bilibili’s business model evolution from startup to the present
defending their content creators’ and their own intellectual property rights, and finally found the business model that is suitable for their company.
The contributions of this paper are as follows. Firstly, this paper provides a holistic perspective for the firm growth and evolution. Secondly, it provides new ideas for business model evolution of emerging economy enterprises. In addition, this article also provides a way to look at content platforms by analyzing the content provided by content platforms or the mode of content upgrading or the commercialization of content. Practically, this case study shows that strategies of content platforms in emerging economy should not be too aggressive at the early stages when they do not understand the market very well. They should wait until they have enough capital, resources and managemental experience to gradually start to enter mid-end and high-end market.
In addition, this study also has some minor limitations. Firstly, this study didn’t include quantitative methods to analyze the business model evolution process of Bilibili, the elements of business model canvas can be studied with the help of some econometric models. Second, a single company’s case alone might not be able to reveal the overall picture of emerging economy, further theoretical development could focus on comparative case study of this field.