The prospectus wrote 256 “Metaverses”, and Feitianyundong impacted “the first domestically produced Metaverse”

Another “bundled hype” of the concept of “Metaverse”, Feitian Yundong entered the “Metaverse” track from AR/VR.

In the past 2021, the concept hype of “Metaverse” was in full swing, and it became the concept “top stream” in one fell swoop.

At the same time, many tech giants competed to grab this “ticket” and hurriedly labelled the layout of the Metaverse. The entertainment and media circles are paying close attention to this concept. Therefore, there is such a phenomenon: technology companies want to bundle the concept of the Metaverse, stars hold concerts in the Metaverse, Jay Chou buys “Phanta Bear” on the Metaverse platform Ezek, JJ Lin buys land in the Metaverse, major news The media published an article about the Metaverse…

All eyes are on: which company will succeed in winning the title of “the first stock in the domestic Metaverse”?

Just two weeks ago, Beijing Feitian Yundong Technology Co., Ltd. (Flowing Cloud Technology Ltd, hereinafter referred to as: Feitian Yundong ) submitted a form to the Hong Kong Stock Exchange to be listed on its main board. As a result, Feitian Yundong has high hopes of becoming the “first stock in the domestic Metaverse”.

The prospectus wrote 256 "Metaverses", and Feitianyundong impacted "the first domestically produced Metaverse"

Source: Feitian Yundong official website

Everyone is talking about the Metaverse, so how did the wind in the Metaverse blow? Can Feitian Yundong, who has high hopes, soar into the sky with the blessing of the Metaverse?

The “Past and Present” of the Metaverse

The Metaverse is actually not a new concept in the past two years. As early as 1992, Neal Stephenson proposed “Metaverse” in his science fiction novel “Snow Crash”. and the concept of “Avatar”. People can have their own virtual avatars in the “Metaverse”, and this virtual world closely connected with reality is called “Metaverse “.

But at the time, the Metaverse didn’t get a lot of attention because of the huge gulf between technology and the concept of the Metaverse.

In 2020, the epidemic accelerated the development of new technologies, and at the same time accelerated the formation of a non-contact culture, which led to human society reaching a critical point of virtualization.

Then came 2021, known as the “Year of the Metaverse”, when the concept of the Metaverse really broke out. We might as well follow the timeline to see why the Metaverse just “exploded” in 2021.

The prospectus wrote 256 "Metaverses", and Feitianyundong impacted "the first domestically produced Metaverse"

Source: Google Search Index

According to Google search statistics, there are two changes in the global search popularity of “Metaverse” last year that are worth noting.

The first is that during April and May 2021, the index that has been silent suddenly rose. This change is actually due to the fact that the “online Lego game” Roblox was listed on the New York Stock Exchange DPO (Direct Public offering, direct public offering), and the concept of “Metaverse” was officially thrown out in the prospectus. Through this wave of concept hype, the Metaverse has truly entered the public eye, and Roblox has also become the world’s “first stock in the Metaverse”, with a market value of nearly 40 billion US dollars on the day of listing.

But if you lengthen the time line, the popularity of April and May this time will be insignificant compared to the popularity after October. Why did the “Metaverse” completely “explode” in October? This time, it was because Facebook changed its name to “Meta” and announced its official entry into the Metaverse, throwing out an investment plan for the Metaverse that is expected to reach $100 billion. As soon as Facebook made a move, foreign companies such as Microsoft, Google, Nike, NVIDIA, and GREE entered the game one after another. Of course, domestic technology giants Tencent, Huawei, ByteDance, etc. are also closely following the trend.

At this point, the general timeline related to the Metaverse has been sorted out.

The prospectus contains a very high amount of “yuan”, and relies on AR/VR to cut into the Metaverse track

Similar to how Luo Yonghao mentioned the concept of “Metaverse” many times before he announced his entry into the AR/VR/MR field, Feitianyundong, whose main business is in the field of AR/VR services, did not forget to bring the Metaverse when sprinting for the IPO of Hong Kong stocks. The concept not only bluntly stated that he wants to build his own Metaverse platform, but also mentioned the “Metaverse256 times in the prospectus :

In the introduction of “Our Mission”, the company stated that it will use AR/VR technology to break the dimensional barriers between the real world and the virtual world, and empower customers to achieve digital upgrades and business supplements, “We are determined to help every customer enter the Metaverse. , connect each other, and commercialize digital value in the Metaverse era to create our own Metaverse platform.”

Although the company’s prospectus uses “Metaverse” as its core selling point, the “Flying Metaverse” platform, which is the cornerstone of the company’s Metaverse, was actually established in November 2021, less than three months ago.However, some people in the industry told reporters that as a company that started out as a game, Feitian Yundong will have a certain potential energy advantage in building the Metaverse platform. “Game + marketing is Feitian Yundong’s strengths, and if they can be combined well, there will be unexpected results.”

And how does Feitian Yundong link the company’s business to the Metaverse? It explained: AR/VR is an important application for realizing and enabling an immersive Metaverse experience, and it is a prerequisite and entry barrier in the development of the Metaverse.

At present, the company is mainly active in the scene application and the underlying technology layer by providing AR/VR content and services and AR/VR technology. The company has created businesses that provide AR/VR-related full-service services, mainly including (1) AR/VR services, (2) AR/VR content, (3) AR/VR SaaS, and (4) IP services.

In short, Feitian Yundong’s main business is to create and place advertising and other marketing content for customers in VR, AR and other scenarios .

AR/VR service is the model of “I develop it and help you use it”, that is, the company provides service solutions to customers through cooperation with media platforms and their agencies, including the placement of AR/VR interactive content advertisements. Customers are ultimately charged for service results (such as marketing performance).

AR/VR content is a model of “I develop it, you use it”, that is, the company develops AR/VR content according to the customer’s requirements, and the customer applies this to its business and provides it to end users. Companies generally charge customers a one-time fee when offering content products.

AR/VR SaaS is a “you develop and you use” model, that is, the company’s AR/VR SaaS platform enables customers to generate, publish and utilize related AR/VR content by themselves. Companies charge customers for ordering SaaS products or developing custom SaaS solutions. It is worth noting that in 2020, Feitian Yundong has also become a partner of Tencent, and its AR/VR SaaS platform has become the only AR/VR product supplier selected for Tencent’s Qianfan plan.

IP business means that the company grants IP rights to customers, allowing customers to develop games, animations, TV series, movies and other works. However, in this business, the company’s main focus is: using IP resources to support AR/VR services, and granting IP rights on a case-by-case basis to meet specific customer needs.

According to the revenue of various businesses, Feitian Yundong’s main revenue sources are concentrated in AR/VR services and content. And, from the perspective of financial indicators, from 2018 to 2021, these two businesses have developed by leaps and bounds. From 75.15 million yuan in revenue in 2018, accounting for 45.8% of revenue, it jumped to 256.45 million yuan in 2020, accounting for 75.8% of revenue. In the first six months of 2021, the proportion of revenue even climbed to 91.4%, and the revenue of AR/VR services in the first six months has exceeded the revenue of this business in the whole of 2020.

The prospectus wrote 256 "Metaverses", and Feitianyundong impacted "the first domestically produced Metaverse"

Source: Prospectus

According to iResearch, the company ranks first in China’s AR/VR content and services market in terms of revenue, with a market share of 2.3% in 2020.

It is worth noting that compared with the VR/AR market, which is not large at present, the “VR/AR content service” market is even smaller. The size of this market in 2020 is about 11.5 billion yuan, and it will only be 21.1 billion yuan after a round of rapid growth in 2021.

At the same time, the prospectus also revealed that there are more than 5,000 competitors in this field. Even if Feitian Yundong takes the top spot in the industry, its proportion is less than 3%, which means that the industry is still in the initial stage of development, and Feitian Yundong’s market share advantage is not yet obvious.

The game “started” and successfully transformed

The story of Feitian Yundong actually dates back to 2008. In March of that year, Yang Xuekai, Guo Xiaofeng, and Song Pengpeng jointly funded the establishment of Feitian Technology, engaged in game-related business, and this was the predecessor of Feitian Yundong.

In 2009, the main shareholders of the company, Wang Lei, Li Yanhao, etc., signed a share transfer agreement with the three to acquire all their shares. In the same year, Wang Lei officially resigned from Palm Fun Technology and joined Palm Feitian Technology as the general manager. According to the prospectus, Wang Lei is now the largest shareholder of Feitian Yundong.

There have been media reports that in 2017, Du Haitao, the host of Hunan Satellite TV, also participated in the investment in Feitian, with a shareholding ratio of 8.6%, becoming the company’s third largest shareholder in one fell swoop.However, with the continuous capital increase of Feitian, Du Haitao’s shareholding ratio gradually decreased. In August 2021, Du Haitao sold his shares at a price of 1.8393 million yuan.

The prospectus wrote 256 "Metaverses", and Feitianyundong impacted "the first domestically produced Metaverse"

Source: Prospectus

Wang Lei, born in 1982, both games people and advertisers dual identity. After graduating from North China University of Technology with a major in automation in July 2005, he has worked in information technology and game development in HandWand and HandFun. Under his helm, the company has independently developed a number of stand-alone mobile games, including “God of Racing”, “Alice in Wonderland”, “Battlefield Gunslinger” and so on.

In 2015, with the rise of VR in China, Wang Lei seized the opportunity to start related accumulation. In 2017, he decided to shift the company’s focus to AR/VR content and services.

At that time, the business related to the new technology of AR/VR was extremely expensive. Therefore, Wang Lei began to expand the company’s financing channels. In 2017, Feitian Technology applied for listing on the New Third Board. On July 14 of the same year, the company successfully landed in the capital market.

Since then, the business of Feitian Technology has ushered in the take-off stage, and the company has launched its first AR/VR SaaS platform. According to public data, in 2018, the company achieved revenue of 170 million yuan, an increase of 114.43% over the same period; the net profit attributable to shareholders of the listed company was 43.5412 million yuan, an increase of 129.18% over the same period.

However, when Feitian Technology was in the ascendant stage of development, Wang Lei made an unexpected decision: withdraw from the New Third Board. He explained in the prospectus: “In order to implement our future business strategy, we are seeking to enter the capital market with a wider investor base in other stock exchanges.”

On August 27, 2019, the shares of Palm Feitian Technology were officially delisted from the New Third Board. In the following years, the company’s SaaS platform was further iterated, and the VR panoramic store project was launched, covering multiple industries. In addition, the company should reach a strategic cooperation with Baidu VR and become the core supplier of Jingdong VR.

The next story is obvious. The explosion of the concept of “Metaverse” in 2021 will bring huge opportunities for the company, and this company that has been deeply involved in AR/VR for many years has attracted a lot of attention from the market.

On November 30, 2021, Feitian Technology officially established the new Metaverse business “Feitian Yundong”; on December 2, Feitian announced its entry into the “Metaverse” field and changed its name to “Feitian Yundong”; December 28 , the company formally submitted the prospectus to the Hong Kong Stock Exchange.

Under the leadership of CEO Wang Lei, the company not only completed the transformation, but also successfully grasped the concept of “Metaverse”, and tried to knock on the door of IPO.

Does it stand the “first stock” test?

From the perspective of the company’s revenue, from 2018 to 2020, Feitian Yundong’s revenue was 164 million yuan, 251 million yuan, and 339 million yuan respectively, with a compound annual growth rate of 43.76%. The revenue in the first six months of 2020 and the same period in 2021 was 121 million yuan and 278 million yuan, more than doubled.

If you only look at the change in comprehensive gross profit margin, the main change is that 41.7% in 2018 fell to 30% in 2019.

The prospectus wrote 256 "Metaverses", and Feitianyundong impacted "the first domestically produced Metaverse"

Source: Prospectus

Through further analysis, the gross profit margins of the company’s main businesses—AR/VR services, AR/VR content, and AR/VR SaaS—showed a slight upward trend as a whole. Therefore, the sharp decline in comprehensive gross profit margin was mainly due to the change in gross profit margin of IP and other businesses.

Regarding the decline in the gross profit margin of these two businesses, the company explained that: the gradual decrease in the gross profit margin of the IP business is mainly due to our plan to use IP resources to promote the future development of the AR/VR business and keep high-quality IP rights for our own use ; other businesses The decrease in gross profit margin was due to the higher gross profit margin of our games and game-related businesses that ended in 2019 .

On the basis of considering relative changes, we also need to pay attention to the size of its absolute value. In fact, Feitian Yundong’s gross profit margin is not low. Among them, the gross profit margin of AR/VR SaaS business is the highest, reaching more than 50% , followed by AR/VR content, and the gross profit margin remains at 47% .

The prospectus wrote 256 "Metaverses", and Feitianyundong impacted "the first domestically produced Metaverse"

Source: Prospectus

However, with the increasingly fierce competition in the industry, Feitian Yundong’s investment in research and development is not ideal. From 2018 to 2020 and the first half of 2021, the company’s R&D investment was 7.58 million, 11.425 million, and 15.046 million, respectively. In the first half of 2021, the R&D investment was 9.012 million, accounting for 4.6%, 4.6%, and 4.4% of the current revenue, respectively. % and 3.2%.

For Feitian Yundong, whose main business is based on “money-burning” technologies such as AR/VR, there is still a question mark on whether the annual R&D investment of about 4% can support its company’s competitive advantage.

An investor once said, “In terms of building the Metaverse alone, this is an investment of billions or even tens of billions. Therefore, it is difficult to create a true Metaverse without sufficient investment.” This is also an important reason why long-term funds are still only optimistic about giants despite the current concept boom.

The Metaverse concept has indeed brought fire to many technology companies last year, but in fact, after the hustle and bustle, it is very difficult to live by the concept, and it seems that it will be more reliable to cultivate core advantages in technology. Today, some Metaverse concept stocks have also shown a downward trend-Choice data shows that the stock prices of 22 Metaverse concept stocks will fall back in 2021.

As the People’s Daily commented on the Metaverse not long ago: “Although the Metaverse seems to have vast space and many possibilities, it is still an emerging thing that has not yet been formed. Everyone still needs to view the current Metaverse upsurge rationally, and be wary of any technology based on technology. Flickering with the future in the name. Is it a mirror image or a touchable future, a capital hype or a new track, a new bottle of old wine or a new technological breakthrough. You may wish to calm down and think twice and beware of the risk of scalding.”

Therefore, while chasing the concept of “Metaverse”, if a business system of a closed Metaverse is required, the implementation and application of new technologies are crucial and fundamental conditions.

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