Kuaishou: Plan to Increase Ad Load, Augment Content, and Enter New Business to Increase Monetization

Kuaishou 01024 hosted its analyst day on Sept. 21 and provided some insight into its future strategy and how it plans to increase its monetization. We maintain our fair value estimate of HKD 70 as the company did not provide any new information on its guidance but was confident that it can reach 400 million daily active users in 2024 as previously mentioned. The key takeaways are that it plans to: increase ad monetization by increasing ad load; integrate artificial intelligence into its platform; create better content; and develop a local services business that will compete with Meituan and Alibaba.

Kuaishou indicated that it accounts for about 10% of time spent on the internet in China and that its long-term goal is to take up the same market share for online advertising revenue. For second-quarter 2023, the company indicated its market share increased by 40 basis points from 4.7% to 5.1% year on year. It plans to expand its ad load through native advertisements in order to maintain user experience rather than through branded ads. We believe that Kuaishou’s ad load rate is at about 8%-10% compared with larger social media peers at 15%, which will likely increase advertising revenue. While Kuaishou did not previously indicate that it would increase ad load, we expected the platform to do so given peer rates.

Kuaishou also plans to integrate its search function as a bigger part of its ecosystem where users can search for content as well as businesses that have a social media presence. We are uncertain whether users will choose Kuaishou for search advertising purposes, but the company is developing its search engine by focusing on AI and encouraging better content creation. The company emphasized that AI will be an important part of its platform in the future and that it has stockpiled 10,000 Nvidia A800 chips.