() The business review of the Board of Directors in the first half of 2022 is as follows:
I. Main businesses of the Company during the reporting period
(1) The development stage of the industry to which the company belongs and the position of the company in the industry during the reporting period.
1, the development stage of the industry.
(1) The development stage of overseas Internet media industry
In the first half of 2022, the Internet media industry in the United States continued to adapt to the rapidly changing consumer behavior. Consumers spend more time in the digital ecology than ever before, but they are also increasingly aware of the value of personal data and pay attention to privacy issues. The major platforms in the industry have been trying to change themselves to meet the needs of consumers, such as the iOS update of Apple App tracking transparency, Google’s plan to gradually phase out third-party Cookies, Yahoo’s overall adjustment of the desktop page jump form policy, the tightening of censorship standards for mobile applications in ensuring users’ right to choose and privacy, and Facebook’s strict review of some applications’ presentation methods, all of which have led to the pressure of realizing, obtaining customers and making profits. These changes, as well as broader economic problems, related regulatory strengthening, and industry adversity, are expected to bring pressure on advertisers’ budgets in the short term, but they also bring opportunities for people who can adapt and innovate quickly to gain market share. It is estimated that by 2026, in the entertainment and media industries, advertising costs will exceed consumer spending and Internet access costs.
The growth of the advertising industry is driven by the transformation to digitalization, and consumers are increasingly spending more time in places where digital advertisements can be reached and where real-time transactions can be made. According to the Global Entertainment and Media Outlook 2022-2026 released by PricewaterhouseCoopers, with the increasing attention of consumers in these five years, the global Internet advertising revenue will reach 723.6 billion US dollars with an astonishing compound annual growth rate of 9.1% in 2026. The growth is mainly distributed in the following channels: digital video, digital audio, social media, search, games and e-sports. In addition, PricewaterhouseCoopers predicts that with the global advertising market reaching $1 trillion.
(2) The development stage of China’s Internet digital marketing industry.
In the first half of 2022, due to the recurrent epidemic in COVID-19 and the macro-environment and other factors, the overall consumption expectation was weak, and advertisers tended to be cautious about advertising. Therefore, the overall Internet advertising market scale declined slightly year-on-year. According to the relevant data of the "2022 Half-year Report on Internet Advertising Market" released by QuestMobile, in the first half of 2022, the scale of China’s Internet media advertising market was 290.36 billion yuan, a year-on-year decrease of 2.30%.
Although the overall scale of Internet media advertising declined slightly, in terms of the internal industry composition of Internet media, the data released by Questmobile in the first half of 2022 was also driven by factors such as the increase of home time caused by the epidemic, and the number of scenes around the "family" space increased, which led to the increase of marketing investment in related household appliances, smart devices and other industries. At the same time, the marketing expenses in emerging economic fields, such as pets, office and other corresponding fields, will accelerate in 2022.
From the media side of Internet advertising, video and social media continue to be favored by advertisers. According to the data released by Questmobile, in the first half of 2022, short video advertising revenue accounted for nearly 40%, which was significantly ahead of other advertising types and became an important channel for digital marketing.
The spread form of short video conforms to the characteristics of fragmentation and decentralized communication of mobile Internet, and meets the diverse content and social needs of users with its rich content types and gradually enhanced social attributes. Under the background that the content planning capabilities of content producers, MCN organizations and marketing service providers are constantly strengthening, the professional capabilities of advertising marketing are increasingly prominent, thus promoting the continuous growth of short video marketing revenue scale. According to the data of "Overview of China Short Video Marketing Industry in 2022" released by Toubao Research Institute, from 2017 to 2021, the revenue scale of short video marketing industry in China increased from 6 billion yuan to 258 billion yuan, with a compound annual growth rate of 156.1%. As the short video industry enters the stage of refined operation, the output of high-quality content will further attract advertisers to increase their marketing budget. It is estimated that the revenue scale of the short video marketing industry in China will reach 360 billion yuan in 2022, with broad development space. Analysis reports such as Forecast and Analysis of Market Status and Development Trend of China Short Video Marketing Industry in 2022, and Analysis Report on Market Prospect Forecast and Investment Strategic Planning of China Short Video Industry in 2022-2027 also made similar predictions on the overall short video marketing market scale in 2022.
The mainstream social media platforms are accelerating, especially the content marketing social media platforms based on Tik Tok, bilibili and Xiaohongshu, which play an important role in the process of social marketing communication. According to the data of "2022 China Digital Marketing Trend Report" released by the Second Hand Marketing Academy, social marketing will continue to grow by 19% in 2022, and the budget growth rate of new advertisers will be more obvious. KOL promotion became the first choice for advertisers in social marketing in 2022, followed by short videos and official account operations. Advertisers have become more and more clear that KOL marketing focuses on planting grass as the main goal, and at the same time look forward to the direct transformation of goods brought by planting grass.
In the first quarter of 2022, Zhidu Zhimai made further efforts in video and social media. Through internal business transformation, personnel reconfiguration and external absorption of the core team with many years of industry operation, the core competitiveness of the content production team was strengthened, and it directly served as a bridge between Tik Tok, bilibili, Xiaohongshu and other media and advertisers, providing advertisers with core services such as short video dissemination and high-quality content. The operating income of new media social marketing business increased by 56.2% compared with the same period of last year. With excellent service and high-quality marketing effect, Zhidu Zhimai has won nearly 40 million orders from direct customers such as Mango Xuanfa, car home, IDO, Lenovo and local government in the first half of the year. We expect that the company will further focus on this field in the second half of the year in line with the continuous growth of video and social media segments.
(3) the development stage of the meta-universe industry
Metauniverse is a new Internet application and social form that integrates network communication, augmented reality, digital twinning, blockchain, artificial intelligence and other new technologies. It is the next information interconnection era after the desktop Internet era connected by PC and the mobile Internet era connected by smart phone. Metauniverse closely integrates the virtual world with the real world in economic system, social system and identity system, and it is a real-time digital world that is always online and constantly refreshed, and everyone and users can participate in creation.
2021 is generally regarded as "the first year of the meta-universe". On the one hand, the concept of the meta-universe continues to heat up, and all sectors of society actively enter the game to explore relevant applications of the meta-universe, and capital continues to help the development of the meta-universe; On the other hand, due to the joint efforts of the upstream and downstream software and hardware industries and the guidance of national policies, the development of metauniverse is expected to accelerate, develop healthily and sustainably. There are corresponding technical support and social life factors behind the rise of the meta-universe: in terms of technology, after years of development, the application of underlying technologies such as virtual reality, artificial intelligence, blockchain, 5G communication and wearable devices is becoming more and more mature; In terms of social life, due to the epidemic and other reasons, online office and online courses are gradually popularized, people stay in virtual space for a longer time, and the proportion of online life is rising.
Meta-cosmic hardware equipment. In the next few years, the launch of new VR products by head brands in the industry is expected to promote the rapid growth of VR hardware sales, and lead the continuous upgrading of hardware, continuous enrichment of content and continuous optimization of user experience. According to IDC data, global VR shipments increased by 92.1% year-on-year to 10.95 million units in 2021. It is estimated that global VR shipments will reach 13.86/20.55 million units in 2022/2023, up by 27/18% year-on-year. According to the data of the Tracking Report on the Shipment of VR/AR Industry in the First Quarter of 2022 and the Tracking Report on the Shipment of VR/AR Industry in the Second Quarter of 2022 released by Weishen WellsennXR, in the first half of 2022, the actual global shipment of VR headsets was 5.08 million units, up by 27.12% year-on-year, including 4.15 million units of Meta, 430,000 units of Pico and 40,000 units of iQiyi. After ByteDance acquired Pico in 2021, it made full efforts in 2022 after half a year’s integration. Through the large-scale promotion of online e-commerce platform and traffic support, as well as the rapid spread of offline flagship stores and counters, PicoNeo3 achieved rapid sales growth, and Pico raised its annual sales target to 1.8 million units. While the sales volume of VR continues to increase, it is also constantly improving the user experience. According to the documents of the Federal Communications Commission and market news, the new products that Pico will launch have a lot of functional innovations around the pain points of users, and a variety of new technologies are used.For example, Pancake optical scheme can make VR body thin and light; Color perspective allows users to better determine their position in the boundary of the head display without removing the head display, and can also perceive the external environment, making it possible to wear the VR head display continuously; Bare-hand recognition+facial recognition+eye tracking can make users get rid of the handle, and use algorithms to capture human gestures, eye movements and facial expression changes to make virtual characters come alive in virtual social interaction, so as to achieve the effect of "catching the eye" and make the emotional changes of real people "lossless" transmitted to the virtual world, allowing users to enjoy a clearer and more immersive visual experience and attract more users. With the growth of VR shipments, the improvement of functions, the improvement of user experience and the growth of users, a positive feedback incentive has gradually formed between the software and hardware industry chain, which will also encourage developers to develop more content software, thus broadening the market scale of the whole meta-universe.
The content development of the meta-universe. Metauniverse content is spreading from games to social, audio-visual, industrial, educational and other scenes. At the same time, the digital collection and virtual human market are heating up, and the UGC content output model has attracted much attention. Metauniverse brand marketing has added a new marketing situation. Among them, the game is the most interactive content form. According to Omdia data, in 2021, the revenue of VR games accounted for more than 80% of the total revenue of VR content. In terms of categories, BeatSaber is famous for its lightness and creativity, and its sales volume is the best, which is expected to reach a wider audience. In "Half-life:Alyx", players can see high-precision modeling, cinematic expressiveness and interactive design of objects everywhere. From games to socialization, VR socialization is the continuation of VR games and the final form of virtual world. VR games have changed people from interacting with the virtual to being immersed in the virtual, and "socialization" may be a bridge to further link the virtual and the real world. At present, the mainstream VR social applications mainly include Horizon(META Research), RecRoom, VRChat and so on. In China, Baidu Xirang and Byte Social Center are also planning to build their own social system platform. At present, major brands have also created more attractive and exciting consumer experiences through the meta-universe, such as Balenciaga releasing the latest fashion series in the form of video games, Louis Vuitton launching video game mobile games to cooperate with NFT, Gucci and Roblox game platform to create virtual goods display and sales. In addition,Dior and Nike cooperate with the virtual game platform to develop the brand virtual world. Players can customize Avatar’s avatar, interact in the virtual world and buy it online through network links. In addition, including the "Trend Digital Age" plan launched by Xiaohongshu and Xiaoyang of Hunan Satellite TV will appear on the TV screen as the first virtual host; China Post announced the establishment of the world’s first metauniverse concept virtual post office "Metauniverse Post Office", which reflected the beneficial exploration of metauniverse content in different degrees.
In the national policy of the meta-universe. Since 2020, digital transformation has been one of the key policies promoted in China, and many policy documents, including Opinions of the Ministry of Culture and Tourism on Promoting the High-quality Development of Digital Culture Industry (Wenlv Industry Development [2020] No.78), have provided strong policy support for this, and the concept of metauniverse coincides with digital transformation. Therefore, starting from 2021, both at the national level and local governments, the policy design for the meta-universe-related industries has begun to advance in an orderly manner. At the national level, in January 2022, the Ministry of Industry and Information Technology said at the press conference on the development of small and medium-sized enterprises that it would cultivate a group of innovative small and medium-sized enterprises to enter emerging fields such as the meta-universe, blockchain and artificial intelligence. At the local government level, in December 2021, the 14th Five-Year Plan for the Development of Electronic Information Industry in Shanghai was issued. As a frontier emerging field, Metauniverse was listed as the development focus of electronic information industry in Shanghai, which was the first time that Metauniverse was written into the local 14th Five-Year Plan. The plan proposes to strengthen the forward-looking research and development of the basic capabilities of the core technology at the bottom of the meta-universe, promote the development of new terminals that deepen perceptual interaction and the construction of systematic virtual content, and explore industrial applications; In July, 2022, Nansha District of Guangzhou issued "Nine Measures for Guangzhou Nansha New District (Nansha Area of Free Trade Zone) to Promote the Ecological Development of Metauniverse".Support the development of Nansha Meta-Cosmic Industry from nine aspects: technical research support, innovation platform funding, industrial agglomeration support, R&D investment subsidy, application scenario construction, innovative ecological construction, talent introduction subsidy, technology and finance support and intellectual property promotion. Up to now, more than 20 provinces/cities have mentioned Meta-Universe in the Tenth Five-Year Plan, government work report, Meta-Universe industry planning and supporting policies, or have issued supporting policies for the development of Meta-Universe industry. As local governments continue to introduce policies related to the meta-universe, digital culture, venues and performing arts activities are expected to become the first application scenarios for virtual cultural and creative projects.
The company and the company invested () (002045.SZ), and Zhidu Universe, a holding subsidiary of Zhidu Group, was established in early 2022, focusing on the development of the "Meta Other Side" Meta Universe Art Community Project. The company has a complete blockchain underlying technology, rich experience in Internet media operation, broad digital marketing channels and game distribution capabilities, and can provide blockchain underlying technical support, application distribution and promotion services for the company "Meta". Guoguang Electric Appliance invested by the company has the advantage of industrial chain in VR/AR equipment at the entrance of the meta-universe. It is the supplier of major acoustic modules for major head VR products at home and abroad, and has built a VR machine workshop with VR machine production capacity. At present, Guoguang Electric has obtained official orders from some customers for VR complete machines, and is vigorously exploring other customers for VR acoustic modules and VR complete machine business. Its familiarity with the functions and technical trends of VR hardware and VR hardware manufacturers can help the development direction of the company’s metauniverse business and the adaptive development and advanced development of metauniverse software application projects, and help the metauniverse project and VR hardware manufacturers to establish closer cooperation. The company will strengthen the "soft and hard" combination with Guoguang Electric in the meta-universe business, so as to jointly promote the development of the company’s meta-universe business, and at the same time enhance the company’s comprehensive competitiveness and sustainable development ability.
2. The position of the company in the industry
At present, among the company’s two main businesses, the Internet media business is iterative around PC/ mobile upgrade, which has a wide international influence on multi-platform, multi-vertical track and multi-equipment. SPE is one of the world’s leading digital service providers, with first-class professional level in Internet marketing, application research and development, and data analysis technology. The PC-side business spans over 30 content fields, with daily search volume exceeding one million and monthly users exceeding two million, which can provide customers with high quality, timeliness and large-scale accurate audience access.
Opportunities and challenges coexist in the Internet digital marketing industry. Industry integration, differentiated development, technological innovation progress, private domain marketing and content marketing will be the development focus of the Internet digital marketing industry. On the basis of providing advertisers with all-round and one-stop comprehensive services, the company’s digital marketing business constantly upgrades its business model, enhances customer stickiness, maximizes marketing value, and occupies a leading position in industry competition.
In terms of Meta-Universe business, the company seized the development opportunity of Meta-Universe, made full use of the underlying technology and operation experience of the company’s blockchain, years of digital marketing channels, Internet operation and game distribution capabilities, focused on digital art, and created the first Meta-Universe art community in China, which has the first-Mover advantage.
(2) The main businesses, products, uses and business models of the company during the reporting period.
Zhidu Co., Ltd. is committed to developing and providing high-quality Internet products and services based on technology precipitation in the fields of Internet search, big data, AI, IOT, blockchain, and high-quality customer and media resources condensed by long-term high-quality services. During the reporting period, the company’s main business did not change significantly. On the basis of developing its main business, it further strengthened the coordinated development among business segments and with strategic partners.
During the reporting period, the company strengthened the coordinated development of digital marketing business and meta-universe business, and provided marketing services based on meta-universe scenes for advertisers mainly facing C-end. At the same time, the company fully utilized the hardware advantages of Guoguang Electric in VR equipment production and research and development, constantly explored the application scenarios of meta-universe, and strengthened the "soft and hard combination"; In the development of its own brand business, relying on the company’s brand operation ability and the acoustic technology of Guoguang Electric, Guangzhou Weifa successfully developed acoustic support and services, and enhanced the company’s core competitiveness.
The main business and business model are as follows:
1. Internet media business
The company’s Internet media business mainly faces North America, including PC-side traffic portal (mainly SPE company) and mobile-side traffic portal (mainly PM company).
The business of PC-side traffic portal mainly focuses on search, an important portal for PC-side Internet traffic. SPE has a variety of self-developed desktop-side paid applications, including VuzeTorrentDownloader, AdGoneAdBlocker and YTDVideoDownloader, which rank among the best in application distribution platforms and are deeply loved by users. At the same time, SPE provides users with a variety of Internet services through a variety of products such as self-developed browser WaveBrowser and Chrome plug-ins, and makes a multi-dimensional analysis of delivery channels, user portraits and customer acquisition effects with big data and algorithms, and distributes search requests to Internet companies such as Yahoo, Google and Bing at low cost, thus obtaining considerable commercial realization income. SPE has extensive international influence on multi-platforms, multi-vertical tracks and multi-devices, spanning more than 30 content fields, with daily search volume exceeding one million and monthly users exceeding two million, which can provide customers with high-quality timeliness and large-scale accurate audience reach.
(Desktop self-developed application)
The mobile traffic portal business is mainly developed around the mobile product matrix. PM Company develops diversified mobile applications in various vertical tracks, such as weather, entertainment, news, file scanning, etc., to provide users with high-quality content and good experience, and provide accurate traffic realization services to world-renowned enterprises such as Google, Meta, Yahoo and Amazon through advertising display, search and application aggregation. At present, PM Company has more than 4 million monthly users.
(Mobile Product Matrix)
2. Digital marketing business
The company’s digital marketing business mainly includes integrated marketing, effective marketing, information flow, OTT big screen, social marketing and other businesses.
The company is the exclusive advertising agency of Huawei’s HUAWEIAds in the domestic game, social and tool industries, as well as its Internet industries such as audio-visual entertainment, tourism, reading and finance, as well as non-Internet industries such as electronic appliances, food and beverage, daily cosmetics, etc. The agency scope includes Huawei’s (including Glory) Android and HarmonyOS operating systems. HUAWEIAds is a digital marketing platform with over 700 million users, which gathers the media traffic under Huawei’s 1+8+N full-scene ecological layout. The advertising business represented by the company mainly accesses several apps such as Huawei browser, Huawei video, Huawei music, etc., and puts them in multiple display positions such as screen locking, screen opening and information flow. At the same time, based on the good cooperation between the company and Huawei HUAWEIAds in the early stage, the company has reached a cooperation with Huawei to carry out advertising agency business overseas, and the company will provide quality services for domestic advertisers’ marketing services at Huawei’s overseas terminals. Subsequently, the company will further explore the strategic synergy between Huawei’s overseas business and Internet media business, so as to protect domestic high-quality products from the sea to the greatest extent.
Zhidu Yifu, a wholly-owned subsidiary of the company, is a leading marketing service provider in the industry. It has the core qualifications of many media channel agents, including Baidu core distributor, Tencent advertising agency, iQiyi effect advertising agency and huge engine agency authorization, covering the mainstream high-quality media on the Internet in an all-round way.
Zhidu Zhimai, a wholly-owned subsidiary of the company, focuses on the digital brand advertising business. At present, it focuses on the development of brand new media social marketing business and the agent of large-screen media brand advertising in the family living room economy. It can also provide live e-commerce business for brands and realize the full-link integrated marketing service from brand exposure, effect transformation and e-commerce sales. Its main business includes: (1) In the social marketing business of new media, Zhidu Zhimai directly serves as a bridge between Tik Tok, bilibili, Xiaohongshu and other media outlets and advertisers, providing advertisers with core services such as short videos to spread high-quality content. With excellent service and high-quality marketing effect, in 2022, Zhidu Zhimai became the annual service provider of mango IP announcement, providing content promotion services for Hunan Happy Sunshine Interactive Entertainment Media Co., Ltd. and mango TV variety shows, dramas, documentaries, brand promotion and other projects in 2022; (2) In the smart screen business of family scenes, Zhidu Zhimai has the exclusive agency right of Mango TV-OTT in 2020-2022, and at the same time, as (1) the national IPTV core agent, it helps the brand to achieve full coverage; At the same time, Zhidu Zhimai is also a partner of OTT manufacturers such as Skyworth, Hisense, Konka, Huanwang, Xiaomi, etc., and provides integrated marketing services for smart big screens for brands through hardware pre-installation. (3) In the vertical media, Zhidu Zhimai cooperates closely with the main media in their respective sub-sectors, such as Tigers, Knight Cards, and Know the Ball Emperor, to provide refined brand promotion services for the marketing and promotion of the head brand in the sub-market. (4) In terms of live e-commerce business,The company provides customers with systematic marketing programs such as live broadcast and content e-commerce operation services, and realizes live broadcast and delivery for brands such as Baiqueling and Gaozi. In addition, Zhidu Zhimai has made great efforts to gradually explore the integration and development of online celebrity’s new economy and new consumer market on the basis of live e-commerce business, constantly improve the company’s industrial layout, and realize the deep integration and synergy between the company’s main business and innovative business.
3. Other businesses
During the reporting period, the company further increased the layout of the Internet industry service business, including investment in its own brand, new retail, blockchain, meta-universe and other businesses.
The company’s own brand business is mainly electro-acoustic brand developed and promoted by itself. Guangzhou Weifa combines the company’s accumulated experience in digital marketing for many years, and builds a professional talent team in the consumer goods market, relying on the strong industrial chain foundation of Guoguang Electric in the acoustic field to create its own electro-acoustic brand matrix. At present, Guangzhou Weifa has brands such as Vifa, Ailang, Zhujiang and Aiwei, and its products cover home theater products, portable outdoor audio, Bluetooth headsets and other acoustic categories. In terms of marketing strategy, different from traditional enterprises, Guangzhou Weifa builds a high-end, middle-end and low-end product matrix, defines the respective positioning and audience of brands, and makes its products exported to the United States, Germany and other countries and regions with accurate digital marketing capabilities and solid cross-border marketing system. In addition to the self-developed electroacoustic brand, Guangzhou Weifa, as a Danish national treasure acoustic brand with a history of 89 years, focuses on the research and development of audio technology and product application, and impresses consumers with superb electroacoustic technology, excellent manufacturing technology and high-quality product quality; Guangzhou Weifa is building a brand+technology+sales company, gradually turning Vifasound acoustic capabilities into products and gradually forming a brand of acoustic capabilities. At present, Guangzhou Weifa has provided acoustic support and services with international brands such as Lenovo and Huawei, and has carried out pre-research and cooperation with many automobile brands.
The company’s new retail business is a new retail platform based on big data, with live broadcast platform as the channel, providing intelligent matching between brand and traffic end, analyzing with big data, and accurately pushing brand to the right people to realize "finding people by goods".
The company’s blockchain business includes innovative research and development of the underlying technology of blockchain and innovative research and landing of industry upgrading solutions based on blockchain technology. At present, the company has completed the construction of a relatively advanced blockchain underlying technology platform, and completed the design and application of blockchain solutions in the fields of supply chain finance, smart government affairs, traceability anti-counterfeiting, and meta-universe; In the application layer of blockchain, business has been carried out and some substantial progress has been made, and rich resources and experience have been accumulated. Guangzhou Zhidu Supply Chain Finance Co., Ltd., a holding subsidiary of the company, has obtained permission from Guangdong Provincial Finance Bureau to engage in blockchain+supply chain financial technology services. The "blockchain+supply chain finance" platform provides financing support services, fund settlement support services, credit consultation and financing management services to financial institutions, core enterprises and their suppliers. In the future, the company will continue to make efforts in supply chain finance to solve the financing difficulties of small and medium-sized enterprises, as well as government affairs handling and data flow of local governments. In order to make full use of the underlying technology and operation experience of the company’s blockchain, years of digital marketing channels, Internet operation and game distribution capabilities, the financial advantages and resource integration capabilities of Zhidu Group, and the position and role of Guoguang Electric in the VR industry chain at the entrance of the Meta Universe, the company focuses on the development of "Meta Beyond" Meta Universe Art Community projects and social game projects in VR environment.
(C) the main performance drivers
1. Technology-driven advantage is the core competitiveness of the company’s business development.
By combining product research and development, big data technology, AI algorithm and other technologies with media optimization experience and outstanding analytical ability, the company continuously studies and gradually applies them to its business. Through the advantages of data already carried, it improves service efficiency and quality, reduces operating costs, creates differentiated competitive advantages, strengthens the layout of traffic portals, and actively expands new businesses such as new retail, private brand and blockchain, and the synergy effect driven by technology gradually matures. The company’s overseas mobile media matrix has developed rapidly with its technical advantages and cooperation with other businesses of the company.
2. High-quality and stable partners are a powerful guarantee for the company’s performance improvement.
In the years of operation, the company has accumulated a large number of high-quality customers and established a long-term trust and stable cooperative relationship with customers and partners. The company’s major customers cover FMCG, finance, online service, entertainment, mother and baby, beauty cosmetics, automobiles and luxury goods, including Aauto Quicker, ByteDance, Dianping, Pinduoduo, China Merchants Bank, Wyeth, (), Wuling Automobile, Volvo Automobile, Estee Lauder, Procter & Gamble, Unilever, Coca-Cola, Pepsi, Yizi, Dyson, Sanjin, Volvo Car. Well-known high-quality customers have strong strength, credibility and anti-risk ability, and the budget scale is relatively stable. At the same time, the company has maintained a good partnership with well-known media at home and abroad for a long time. Its subsidiaries have long-term in-depth cooperation with head media at home and abroad such as meta, Google, Yahoo, Bing, Amazon, Baidu and Tencent, and with the company’s rich digital marketing experience, it has become the exclusive advertising agency for Mango OTT in 2020-2022, and actively explored emerging media such as Huawei and Xiaohongshu. On the basis of consolidating the cooperation with existing core customers, the company continuously explores the demand potential and can meet the multi-dimensional requirements of customers for brand, effect and exposure. With the continuous emergence of technical advantages and the continuous improvement of service level, it provides a strong guarantee for the improvement of performance.
3. The promotion of brand effect provides a strong impetus for the company’s business development.
All business entities of the company have continuously consolidated their influence, and have many years of business experience in the field of Internet business and stable high-quality customer resources. Relying on the technological advantages such as algorithms, big data and blockchain, we will combine products and services, content and creativity to provide customers with customized, integrated and one-stop services, further enhance the brand influence of the company, improve the core competitiveness of the company, and promote the continuous growth of the company’s performance. With years of accumulated industry experience and comprehensive service capabilities, the company has gradually formed a good reputation and high brand awareness in the industry.
4. The blockchain technology independently developed has been unanimously recognized by the industry.
The company’s blockchain business has developed rapidly, constantly strengthening the integration of Industry-University-Research, strengthening market education, and participating in the research and release of many national and group standards. The blockchain enterprises under Zhidu Co., Ltd. are the first batch of blockchain information service filing enterprises, the governing unit of "Trusted Blockchain Promotion Plan", the governing unit of China Institute of Electronic Technology Standardization, the member unit of China Internet Finance Association, the president unit of blockchain professional committee of China Food and Drug Quality and Safety Promotion Association, and the executive vice president unit of Guangzhou Blockchain Association. With the breakthrough of the underlying technology research of the company’s blockchain and the landing of application scenarios, it is expected to promote the company’s performance growth.
5. Keenly capture industry trends to improve business layout and create new performance growth points.
With many years of digital marketing experience, the company actively explores new digital marketing models, lays out new media social marketing in advance, and creates social marketing value together with brands that have cooperated in many fields. The social marketing business scope includes cooperation with talents, video shooting, private domain operation of enterprises, live broadcast business, etc. Through high-quality creativity and service content, it helps brands to stimulate social communication and continuously increase the market share of the company in social marketing. On the basis of realizing "product efficiency" in social marketing, help brand customers realize sales transformation, and better realize the full-link marketing service from "brand promotion-effect transformation-sales transformation" for brand customers. In order to promote the company’s sustainable development, constantly improve the company’s layout in the field of metauniverse, and accelerate the company’s strategic transformation, the company seized the development opportunity of metauniverse, made full use of the underlying technology and operation experience of blockchain, digital marketing channels, Internet operation and game distribution capabilities for many years, laid out the metauniverse business, and built the first metauniverse art community in China. The company will constantly improve its business layout and explore new business, which will bring new performance growth points to the company.
(IV) Operation of the Company during the reporting period
In the first half of 2022, the domestic epidemic situation was repeated, and the external macroeconomic situation continued to be turbulent. Combined with the epidemic situation and market changes, the company firmly established the business strategy of "cash flow first, profit second and income third", continuously and actively contracted low-margin business, new retail and other business segments, strengthened cash flow, control of accounts receivable and risk control, and optimized the company’s business structure at the right time, achieving a decline in operating income but a significant increase in the company’s overall gross profit margin. At the same time, the company strictly controlled all kinds of expenses, with sales expenses dropping by 33.17% and financial expenses dropping by 82.45% compared with the same period of last year. Thanks to the joint efforts of all employees, the company’s asset-liability ratio dropped from 25.00% at the end of last year to 17.49%, the current ratio increased from 2.48 in the same period last year to 3.42, and the net cash flow from operating activities greatly increased from-106 million yuan in the same period last year to 294 million yuan. The company held 897 million yuan in monetary funds, plus 235 million yuan in cash asset management products with low risk and high liquidity that have not been redeemed.
The management of the company closely revolves around the strategic arrangement of the board of directors, consolidates the basic disk of the first curve Internet media and digital marketing business, strives to develop the second curve’s own acoustic brand business, and at the same time promotes the third curve metauniverse, blockchain technology and application scenarios, stably carries out various business management work, actively optimizes resource allocation, and enhances core competitiveness, operational capability and comprehensive strength.
During the reporting period, the company achieved a total operating income of 1,591,051,000 yuan, a year-on-year decrease of 550.7% compared with 3,540,925,700 yuan in the same period of last year, and a net profit attributable to shareholders of listed companies of 78,476,900 yuan, a year-on-year decrease of 12.29% compared with 89,470,500 yuan in the same period of last year. Among them, the Internet media business realized an operating income of 502.26 million yuan. Digital marketing business realized operating income of 988,303,700 yuan, accounting for 62.12% of the company’s total operating income, and realized gross profit of 69,094,400 yuan, accounting for 21.41% of operating gross profit. During the reporting period, the company achieved an operating gross profit of RMB322,704,200, a decrease of RMB26,068,300 compared with RMB348,772,600 in the same period of last year, a decrease of 7.47% and a gross profit margin of 20.28%, an increase of 10 percentage points compared with 9.85% in the same period of last year. Among them, the improvement of gross profit margin is mainly due to the company’s further optimization of business structure in digital marketing business, shrinking the effective marketing business with low gross profit margin and high risk of bad debts, focusing more on core brand customers and quality customers, and actively expanding the market. At the same time, the company’s overseas subsidiaries continue to forge ahead, and the product diversification strategy has achieved remarkable results, while the operating income has decreased but the gross profit margin has increased.
1. The Internet media business has been developed steadily, and the product diversification strategy has achieved remarkable results.
The company’s Internet media business mainly includes PC-side traffic portal and mobile-side traffic portal. The overseas subsidiary SPE is mainly engaged in PC-side traffic portal business, and PM company is mainly engaged in mobile-side traffic portal business. During the reporting period, with strong technical barriers, high-quality brand customers and excellent business team, the overseas subsidiaries of the company kept forging ahead, and achieved remarkable results in product diversification strategy, realizing diversified composition of operating income of Internet media business and achieving good results. During the reporting period, Internet media business realized revenue of 502 million yuan, and the proportion of operating income increased from 9.81% to 31.57% compared with the same period of last year, and the proportion of operating gross profit increased from 48.82% to 62.57%.
On the PC side, the company continued to implement the product diversification strategy, steadily developing plug-in business and paid application business, while constantly increasing the proportion of browser and digital media business in PC-side business income. SPE’s own browser team is committed to improving the scale and quality of customer acquisition, and continuously optimizes products to improve user experience and retention. This strategy has successfully brought about user growth, with daily search volume exceeding 1 million and monthly users exceeding 2 million, and realized operating income of 144,095,300 yuan, an increase of 219.30% compared with the same period of last year, accounting for more than 40% of the total business income of PC, which is the driving force for the growth of core business of PC. Benefiting from the product diversification strategy deployed by overseas companies at the beginning of the year and the strong implementation of the management, the PC-side digital media business realized an operating income of 95,549,700 yuan, an increase of 176.3% over the same period of last year, and an operating gross profit of 16,090,100 yuan, an increase of 157.2% over the same period of last year.
On the mobile side, we have made every effort to accelerate the product layout. There are more than 40 tool-based advertising realization apps and customer-paid subscription apps, all of which have been put on the shelves through Google’s compliance audit. Among them, weather apps and news apps have been ranked in the top ten in the same category in GooglePlayStore and AppStore for a long time. Through the strategy of enriching product categories, expanding delivery channels, optimizing user experience and continuous and accurate delivery, PM Company has continuously provided high-quality and convenient services for mobile users, which has brought rapid growth of mobile services and enhanced commercial liquidity. During the reporting period, the revenue of mobile business was 136,228,700 yuan, an increase of 33.31% over the same period of last year, and the gross profit was 62,338,300 yuan, an increase of 113.48% over the same period of last year.
2. Optimize and integrate the digital marketing business and fully develop the socialized marketing business of new media.
During the reporting period, due to macro factors such as the epidemic situation in China, especially in Shanghai, which led to the decrease of advertisers’ budget demand and the company’s further optimization of the business structure of the digital marketing sector, the effective marketing business with low gross profit margin and high bad debt risk was greatly reduced, and the operating income of digital marketing business declined, but at the same time, according to market changes, the company gave priority to customers with good reputation and strong strength as partners, and the gross profit margin of digital marketing business increased. The digital marketing business realized an operating income of 988,303,700 yuan, a decrease of 2,096,758,400 yuan compared with the same period of last year; The operating gross profit was 69,094,400 yuan, a decrease of 52,567,800 yuan compared with the same period of last year, and the gross profit rate was 6.99%, an increase of 3 percentage points compared with the same period of last year. With the domestic epidemic situation gradually improving since May, the budget demand of advertisers gradually picks up, the demand for advertising picks up and the scope of the company’s advertising agency expands, the scale of the company’s digital marketing sector is expected to be repaired in the second half of the year.
The company has been deeply involved in the digital marketing industry for many years, accumulated a large number of high-quality customers, and established a long-term trust and stable cooperative relationship with its customers, covering FMCG, finance, online service, entertainment, maternal and child, beauty cosmetics, luxury goods and so on. The company continues to study the development trend and new technology research in the new era of Internet, the marketing resources and manifestations of emerging media, fully develops the socialized marketing business of new media, and continues to deepen cooperation with core media and head customers in various industries. At present, it is in a leading position in the field of integrated marketing. At the same time, the company seized the opportunity for users to return to the home big-screen media, and with the help of industry reports and advertisers’ cognition, laid out the advantages of resources in the media of home scenes, constantly laid a solid foundation and promoted the all-round development of the business. In the future, the company will continue to expand new customers and fully integrate marketing resources within the system, focusing on new media social marketing business, vertical media and sub-sectors, live e-commerce and other businesses, and continue to provide customers with high-quality digital marketing services, attract more excellent partners, and enhance the company’s core competitiveness and operating performance.
3. Accelerate the incubation of its own acoustic brand business, such as audio, and shrink new retail business in due course.
During the reporting period, the company’s own brand business team continued to sort out the sales channels at home and abroad and formulated a standardized price system; At the same time, based on the strong supply chain of Guoguang Electric Appliance Co., Ltd. (002045.SZ), another listed company under Zhidu Group Co., Ltd., the company gradually established the supply chain system of acoustic brand itself, which integrates procurement, logistics and warehousing. Guangzhou Weifa is an important subsidiary of the company to carry out its own brand business, developing overseas online direct D2C Amazon stores and independent stations, steadily operating businesses in Europe and North America, and optimizing key offline channels; Domestic layout of mainstream e-commerce platform self-operated flagship stores, and gradually explore the channels of top-level offline digital collection stores in domestic first-and second-tier key cities. At present, more than 300 offline stores have been opened in China, mainly covering domestic mainstream electroacoustic product dealers, buyers and high-end audio collection stores. In terms of marketing, the real-time bidding delivery mode, which combines online-based content and media delivery at home and abroad, has been launched, with ROI as the guide and refined operation mode to gradually establish brand awareness; In terms of products, we will position our own brands vifa, Ailang, Zhujiang and Aurasound, improve the product segmentation matrix, and complete the development of new earphone products and the iteration of App products; After-sales, the European after-sales center and the American after-sales center have been established;
In terms of business development, Guangzhou Weifa, a subsidiary of the company, signed a cooperation agreement with Lenovo, a manufacturer of head computer equipment, in April 2022 to provide projector acoustic debugging services, and provide projector product tuning services according to the way of charging brand licensing fees and service fees for each set, so as to realize cross-border cooperation of brands, and will further strengthen cooperation with various head manufacturers in the future.
During the reporting period, the company’s new retail business continued to cooperate with new retail channels such as Tik Tok, Aauto Quicker and social e-commerce, providing intelligent matching between brand and traffic in new retail scenes such as short video, live broadcast and social networking, and implementing it on the new retail platform of "finding people by goods". Affected by the national epidemic in the first half of 2022, the supply chain and sales logistics capabilities have dropped significantly, and the purchasing power and demand of consumers have weakened. In addition, since July 2021, Tik Tok Platform, the company’s main sales terminal, has successively issued Detailed Rules for the Release of Goods (Jewelry Wenwan) and Detailed Rules for Goods Prohibited for Sale in Jewelry Wenwan Industry, and the minimum weight requirements for "pure gold and platinum pendants" and "K gold and Pt950 pendants" for the products on the shelves have been raised to 1.00g/ piece and 0.5g/ piece respectively. However, most of the pendants with high gross profit margin in the company’s new retail business do not meet the minimum weight standard, which leads to the failure to sell them on the Tik Tok platform and other macro and platform policies, and the development of the company’s new retail business is affected to some extent. The company adjusts its business strategy according to market changes, actively shrinks the new retail business as a whole, avoids the squeeze of inventory, and pays back the money as soon as possible to ensure the company’s cash flow.
4. Continue to increase the technical investment mainly in blockchain and continuously promote the application projects.
During the reporting period, the company continued to vigorously expand the blockchain business and actively promoted the upgrading of the underlying technology empowerment industry and smart governance of Zhidu blockchain. In the research and development of the underlying technology of blockchain, optimize the technical performance, build the underlying supporting facilities, continuously improve the applicability and application ability of the underlying technology of Zhidu blockchain, maintain the leading position in key technologies, and complete the construction of the open underlying foundation and supporting facilities of the software demonstration platform Zhilian 2.0 blockchain to meet the company’s business development needs. In terms of blockchain supply chain finance business, the company has reached business cooperation with China Bank, China Construction Bank, Shanghai Pudong Development Bank, China CITIC Bank, Guangzhou Bank and other financial institutions based on the "Zhilianbao" supply chain financial service platform, targeting Guoguang Electric Co., Ltd. (002045.SZ), Huitong Communication Co., Ltd. (002861.SZ) and Shenzhen () Technology Co., Ltd. By the end of the reporting period, it had helped small and medium-sized enterprises to complete financing of 625 million yuan, effectively solving the problem of "difficult and expensive financing" for small and medium-sized enterprises. At the same time, the company is actively exploring and trying in the field of digital RMB application. Zhidu Factoring, a subsidiary of the company that conducts supply chain finance business, has opened the digital RMB wallet of the People’s Bank of China, aiming at providing financing services based on digital RMB for small and medium-sized enterprises through the pilot platform of supply chain finance.In the future, the company will continue to make efforts in supply chain finance to solve the financing difficulties of small and medium-sized enterprises, as well as government affairs handling and data flow of local governments.
In terms of the application of blockchain technology, the company participated in the Guangzhou blockchain international trade platform "YueYitong", realized the application of blockchain technology in the field of modern trade business, completed the construction of the first phase of Mengniu Group’s "Zhiniu Chain" project, actively shared the value of Zhidu blockchain technology and products and services, and incubated and cultivated Zhidu blockchain branch industries through complementary cooperation models. At present, the company has completed solutions for the application of blockchain technology in more than ten industries such as supply chain, insurance, Internet of Things, advertising, food and drug traceability, and digital art. In the future, the company will continue to explore and invest in core technology fields such as blockchain, and accelerate the development of blockchain technology and industrial innovation.
After years of accumulation of the company’s blockchain business, Zhilian 2.0, the underlying platform of the blockchain independently innovated by the company, has obtained 2 invention patents and 4 software copyrights, and has applied for 4 new blockchain invention patents, all of which have entered the actual trial stage. The company participated in the formulation of two national standards, namely, Guidelines for the Application of Information Technology Blockchain and Distributed Bookkeeping Technology, Specification for the Implementation of Intelligent Contracts for Information Technology Blockchain and Distributed Bookkeeping Technology, and seven group standards, including the Operation and Maintenance Specification for Blockchain Enterprise Platform and the Requirements for Blockchain System Testing, five of which have been published. The company has passed the blockchain function test of the Electric Standard Institute of the Ministry of Industry and Information Technology, and has been selected as a software demonstration platform in Guangzhou, and won the titles of "Top 50 Industrial Blockchain Enterprises in China in 2020", "Excellent Provider of Blockchain Basic Platform in Guangzhou in 2020", "Financial Case of Trusted Blockchain Ecological Potential in 2021" and "Excellent Case of Industrial Blockchain in China in 2021".
5. Seize the development opportunity of Meta-Universe and vigorously develop related businesses of Meta-Universe.
Since 2021, the concept of metauniverse has risen rapidly. In the fourth quarter of 2021, the company began to prepare for the Meta-Universe project, and on January 21, 2022, it jointly invested with Zhidu Group and Guoguang Electric Appliance to establish a joint venture company, Guangzhou Zhidu Universe Technology Co., Ltd. The purpose of setting up the joint venture company is to seize the development opportunity of Meta Universe, make full use of the underlying technology and operation experience of the company’s blockchain, years of digital marketing channels, Internet operation and game distribution capabilities, the capital advantages and resource integration capabilities of Zhidu Group, and the position and role of Guoguang Electric in the VR industry chain at the entrance of Meta Universe, so as to meet the users’ immersive experience needs to the maximum extent, and focus on the development of "Meta Beyond" Meta Universe art community projects and social game projects in VR environment.
During the reporting period, Zhidu Universe, a holding subsidiary of the company, was engaged in the research and development operation of the digital art Meta-universe community, creating the first meta-universe art community in China. In the more than four months since the launch of "Meta Beyond", "Meta Beyond" has not only completed the VR product release of PICOVR and Iqiyi-Adventure VR and many major update iterations, but also attracted and retained more than 25,000 users on the VR side and realized an operating income of about 4 million yuan. At the same time, the "Meta Other Side" Android mobile phone terminal can download the experience in major application stores such as Huawei. "Metashore" mainly adopts VR, AR, MR, blockchain, cloud computing, artificial intelligence and other technologies, breaking through the limitations of traditional art by time, space, cost and other factors, empowering the art industry through multi-dimensional presentation effects and immersive interactive experience, and holding art exhibitions in the metauniverse in a more convenient, fast, innovative and interesting form, providing a new way for art to open. At present, "Listen to the Yellow River Waves-Huijun Xv" and "Take a walk, stop!" have been launched in the art Meta-universe community on the other side of Meta! -Duan Innovation, () Game Art Museum, China Arts and Crafts Capital-Chaozhou-Yuan Universe Boutique Museum, Yuan Universe Art Museum of NLD Academy of Fine Arts, Zhihui Huadu Museum, Taihu Stone, Flowers and Butterflies, Ink Art Museum, Between Lights, Floating City and Summer Palace.Hundreds of digital collections based on blockchain technology have been issued; In the future, more artists, cultural and creative IP, game IP, traditional arts and crafts IP and brand IP will be introduced to create a rich meta-cosmic art ecological community.
("Metashore" Meta Universe Art Community)
With the company’s exploration of the Meta-universe business, the meta-universe art community can not only realize the function of holding art exhibitions, but also provide users with rich meta-universe scenes and social interaction services, provide scene building services and brand marketing for enterprises, build venues for local governments to show local cultures and realize government service functions.
(1) The management mode and profit model of providing rich metacosmic scenes and social interaction services (TOC) for C-end users. The company distributes digital collections based on art copyright, meta-universe rights and brand products to users in combination with the meta-universe scene, which increases users’ stickiness, attracts more users to participate in the construction of the meta-universe, and becomes a "meta-resident" who builds and shares the art meta-universe community. At present, the company has issued hundreds of digital collections of artistic copyright based on blockchain technology, and has also issued a number of digital collections of rights and interests with the function of meta-cosmic interactive scenes.
(2) The scene construction for B-end enterprises and the operation mode and profit model of TOB. The company builds venues for enterprises in the "Meta other shore", provides curatorial services for enterprises, and provides marketing planning services for brand marketing of enterprises. During the reporting period, Guangzhou Sanqi Mutual Entertainment Technology Co., Ltd., a subsidiary of Zhidu Universe and Sanqi Mutual Entertainment Network Technology Group Co., Ltd., a company listed on the main board of Shenzhen Stock Exchange (stock abbreviation: Sanqi Mutual Entertainment, stock code: 002555.SZ), signed the Strategic Cooperation Framework Agreement of Zhidu Universe, giving full play to the company’s advantages in science and technology, innovation, digital marketing and ecological resources, as well as the resources advantages of well-known games IP, arts and crafts, Game model and so on. The purpose of this cooperation is to implement the "internet plus" action plan in the "Meta-shore", to build the "first national metacosmic game art museum" with the characteristics of mutual entertainment of Sanqi, and to hold the metacosmic digital art exhibition with the characteristics of mutual entertainment of Sanqi on a regular basis, and to create, build and share it through the cooperation forms of game element implantation, virtual character co-construction and activity linkage. The company cooperates with integrated marketing service providers, and plans to build the "Automobile Park" Meta-Universe Exhibition Hall in the "Meta-shore". Eleven traditional and new energy automobile brands will be displayed in the exhibition hall, and digital collections of related brand products will be released in combination with the brand marketing demands of enterprises, so that every user can get a unique immersive virtual scene interactive experience in the exhibition hall.
(3) The management mode and profit model of government-oriented scene construction and cultural publicity service (TOG). The company builds venues for local governments on the other side of Meta, realizes the perfect integration of art and technology, and continuously empowers the development and inheritance of culture and art with technology. During the reporting period, Zhidu Universe, a subsidiary of the company, and Chaozhou Bureau of Industry and Information Technology jointly built the first local arts and crafts museum of Meta Universe "Chaozhou Arts and Crafts Meta Universe Boutique Museum" in China, which promoted the integration and development of Meta Universe and Chaozhou cultural heritage, broke the time and space constraints and promoted Chaozhou culture and handicrafts. The museum was selected as one of the 10 typical cases of digital application in the field of culture and tourism in 2022 by Guangdong Provincial Department of Culture and Tourism and Guangdong Provincial Department of Industry and Information Technology. Zhidu Universe and Guangzhou Huadu District Bureau of Science, Technology, Industry, Commerce and Information Technology jointly built the "Zhihui Huadu Pavilion" in the "Meta Other Side" to showcase the outstanding innovative enterprises and achievements of scientific and technological innovation projects in Huadu District. At the same time, with the advancement of government digitalization, the company is cooperating with some government departments on facilitating government services on the other side of Meta. In order to help digital technology deeply empower the innovation and spread of Lingnan culture and accelerate the coordinated development of Guangzhou’s Meta-universe industry, in the activity of "Non-legacy Guangzhou Red Encounter Meta-Universe" sponsored by the Guangzhou Municipal Party Committee’s Network Information Office, the company joined hands with Sanqi to build the "Non-legacy Guangzhou Red" meta-universe virtual camp on the other side of Meta, breaking the geographical, time and space restrictions.It allows users to experience the camp activities composed of eight non-legacy projects in Guangzhou, such as Cantonese opera, Guangdong music and Cantonese telling the ancients, around the clock in the virtual camping scene through VR or mobile phone. Through the above-mentioned entrustment to jointly build the museum, the company not only achieved good social effects, but also obtained financial benefits by charging the service fee and modeling fee for building the museum.
In the future, "Meta Beyond" will continue to optimize iterations, realize more social functions and the functions of hosting art activities for art exhibitions, conferences and online education in the Metauniverse, provide digital collection distribution services based on blockchain technology for more artists and IP, and provide digital art creators with digital art creation tools. Meta Beyond further plans to develop UGC user-generated content services, support users to create their own digital works of art, and hold their own art exhibitions to provide a richer user experience. While continuously providing users with service value, the company will continue to explore the profit model on the other side of Meta, including digital collection distribution service income, digital marketing income, museum building and curatorial service income, membership rights service income and so on.
6. Other businesses
Zhidu Small Loan independently developed an Internet small loan system, a risk control decision engine, an operation management system and an intelligent drainage platform based on AI and big data technology, and launched a small and decentralized business in inclusive finance through online exhibition on the Internet. In the process of exhibition industry, Zhidu Small Loan is prudently exhibited in strict accordance with the requirements of relevant financial regulatory agencies. All customers are Zhidu Small Loan, which relies on the industry experience and resource capacity of Zhidu Shares in the field of digital marketing and is independently obtained through the Internet. The loan business is small and scattered, and the bad debt rate is low.
II. Analysis of Core Competitiveness (I) Globalization Development Mode The company actively promotes international business and adheres to the globalization strategy, with offices in China, the United States, Cayman Islands and Cyprus. With SPE+PM Company as the core platform for overseas business development, through rich overseas realization experience, user base, product matrix and competitive experience in big data, algorithms and blockchain technology, we will give full play to the advantages of all parties, improve the quality of traffic management platform and commercial realization efficiency, and promote the global development of the company’s business. (II) Diversified product matrix and efficient distribution and operation capabilities Through advanced big data technology and customer acquisition strategy, the company independently developed and operated diversified product matrices on the mobile side and PC side to help advertisers reach users more efficiently. At present, overseas subsidiaries have independently developed more than 100 applications, forming a diversified product portfolio covering all mainstream platforms; Multiple products entered the top ten in GooglePlayStore and AppStore; All applications have passed the strict compliance review of Google and Yahoo, and passed the AppEsteem certification, and have won the highest score in Yahoo’s traffic quality ranking for a long time. SPE is a member of CleanApps Business Association. The company-wide KPI reporting system can track the real-time performance of each organization, so as to realize the independent operation of the team and make intelligent decisions based on data around management objectives;The distribution strategy of direct users can bring profitable customers, thus continuously generating profits; Streamlined operation mode can track market changes and realize real-time resource reallocation. (III) High-quality media/brand partners After years of development and cooperation, the company has formed a highly competitive Internet traffic management platform, and its media expansion ability has been continuously strengthened. It has good cooperative relations with well-known media at home and abroad, such as Meta, Google, Yahoo, Bing, Amazon, Huawei, Baidu, Tencent, Huge Engine, Iqiyi, Mango, China Telecom, Lebo, Hupu, Migu. Relying on technical advantages, the company combines products and services, and combines content and creativity to provide customers with high-quality integrated marketing services, and provides customized blockchain transformation and upgrading solutions supported by leading blockchain underlying technologies, which not only enhances the stickiness of upstream and downstream customers in the industrial chain, but also attracts partners from different industries. During the reporting period, most of the customers who cooperated with the company came from leading brands in various industries and Fortune 500 companies. With the steady development and rapid upgrade of the company’s business, the company will continue to expand and deeply explore customer needs, enhance the company’s competitiveness and achieve sustained growth in performance. (IV) Professional and international talent companies account for about 70% of employees with a bachelor’s degree or above, and have introduced more overseas Internet industry-related talents. The core technical team comes from world-renowned universities and first-tier Internet companies.Have in-depth understanding and research on the global Internet market. The company’s management team has rich industry experience and a deep understanding of the industry, and has accumulated rich experience in the fields of mobile Internet industry trend judgment, resource integration operation, traffic realization, advertising business cooperation, blockchain technology research and development, and formed its own methodology. The company’s core personnel have many years of working experience in the industry, and have worked in well-known enterprises such as IBM, Google, Huawei, Baidu, Tencent, Ali, Ant Financial, Aauto Quicker, etc. They have a precise grasp of industry development and competition, and are keen on analyzing business opportunities and market situation. The company constantly improves the talent cultivation system, and enhances the professional ability and professional service spirit of employees through multi-stage and multi-level directional training mechanisms such as induction and internal and external on-the-job training, and improves their recognition and loyalty to the company. (V) Cutting-edge technology development capability and application The company has 19 blockchain core products, including intelligent chain underlying blockchain platform, multi-chain dynamic committee scheduling module, node monitoring suite, management background and intelligent chain blockchain browser, covering all blockchain core modules such as consensus, password, smart contract and cross-chain. The blockchain business segment independently developed a large-scale open license chain, and achieved three core technological breakthroughs: "consensus algorithm system based on VRF and POS integration", "node balanced dynamic scheduling system" and "data privacy protection system based on trusted computing technology", which greatly improved the performance of blockchain while supporting 10,000 nodes.Improve the flexible deployment of the main side chain architecture, and build a large-scale alliance chain underlying platform with independent intellectual property rights. At present, it has completed the leading application solutions of blockchain technology in the fields of supply chain finance, food and drug traceability, smart government, meta-universe, etc., and continues to explore the application of blockchain in many scenarios such as credit reporting, Internet of Things, advertising, smart government, meta-universe, etc.
III. Risks faced by the company and countermeasures 1. Market competition risks The rapid development of the mobile Internet industry has attracted more and more competitors to enter the market. The market competition has been increasing, the demographic dividend advantage has gradually weakened, and customer needs have become more diversified and demanding. In this context, if the company cannot strengthen and consolidate its leading position in the industry, it will miss business opportunities and its operation may be affected. The company will continuously improve its core competitiveness, maintain its ability of continuous innovation and business development, base itself on customer needs, enhance brand awareness, and realize the overall improvement of the upstream and downstream of the industrial chain with the help of the synergistic effect of its subsidiaries. 2. Risk of Personnel Management and Brain Drain The Internet industry is a talent-intensive industry, and its upgrading speed is far faster than other industries, which requires high talents. If the company cannot retain the existing core top talents and introduce new talents according to the rapid development of the market, the company’s technological advantages will not be brought into full play, and it will face the risk of reduced competitiveness. The company will continuously improve and improve the salary and welfare of employees, optimize the performance appraisal mechanism oriented by sharing and responsibility results, and design differentiated incentive schemes according to different business sectors, different development stages and different groups of people, so that all internal and external outstanding talents can participate in the process of value creation and value distribution, and drive organizations and employees to create greater and better values. In addition, the company will further publicize and implement the corporate culture.Improve the cultural literacy and moral standards of employees, form cohesion, centripetal force and binding force, enhance the corporate image and improve the comprehensive competitiveness of enterprises. 3. Downward economic risks caused by the COVID-19 epidemic At present, the COVID-19 epidemic is still spreading all over the world. Although the overall prevention and control of the domestic epidemic is good, there are still risks of export and sporadic outbreaks in some domestic regions. The epidemic has affected the production and operation of all walks of life to varying degrees, and it is expected that the market economy, production and consumption will still take some time to recover, which is both a challenge and an opportunity for the company. Under the current limited offline activities, the number of active Internet users in the world has increased significantly, and the migration to the mobile terminal has been accelerated. Because the company’s main business is Internet media and digital marketing, it has a strong correlation with the economic environment, and the epidemic situation leads to economic downturn or is not conducive to business development. At the same time, because all business forms are online economy, and all income comes from Internet-related income, it is relatively less affected by the epidemic. But in the long run, if the global economic situation is hit hard, the risk of shrinking market demand will not be ruled out. The company will continue to pay attention to the development of the epidemic situation, strengthen the management of the company, continuously optimize the ability of strategy, resources, management and cooperation, optimize the organizational structure, improve efficiency and reduce costs, and control risks. Continue to rely on the company’s technology and data resources, upgrade and improve existing technologies, improve internal operational efficiency, and help upgrade existing business models. 4. Risk of Market Fluctuation Caused by Concepts Related to Metauniverse The Metauniverse is in the early stage of development, involving many fields and concepts. It still takes some time to verify and realize the link and interaction between the virtual and the real level, and it does not rule out obstacles in the future economic or technical level. At the same time, there is a risk that the development of infrastructure, equipment and technology supporting the Metauniverse may be less than expected. Tencent Magic Core, a domestic digital collection platform, announced that it would stop the distribution of digital collections and suspend the sales service of digital collections of Tencent News APP. From this point of view, there is great uncertainty in the pattern of each link of the concept of meta-universe, and the related industries are still in the investment exploration period. Investors are requested to fully understand the risks in the stock market, make prudent decisions and invest rationally. The company continues to pay attention to the development of the Meta-Universe industry. With the help of Guoguang Electric’s position and role in the VR equipment industry chain, combined with the company’s experience in brand marketing, blockchain, game development and other fields, the company will have both the first-Mover advantage and technical barriers of hardware and software, seize the development opportunity of the Meta-Universe, vigorously develop the Meta-Universe business, and constantly extend the application scenarios to accelerate the commercialization process.
