Summary of BlueFocus Conference Call Company Overview - **Company**: BlueFocus - **Industry**: Marketing and Advertising - **Key Clients**: Gaming, E-commerce, Internet, and Application sectors - **Revenue Composition**: Approximately 80% of revenue comes from overseas business, with gaming accounting for 42%-43% and e-commerce around 30% [2][4][5] Core Insights and Arguments - **Market Trends**: - Domestic gaming regulations are tightening, prompting many small to medium-sized gaming companies to expand overseas [6] - E-commerce cross-border business has rapidly grown from 18% to about 30% of total revenue, with major clients including Shein, Pinduoduo, and Alibaba [7] - The company’s global market presence is primarily in Southeast Asia and the Middle East (45%-50%), with North America accounting for 30% [8] - **Financial Performance**: - In Q1 2025, BlueFocus reported revenue of 14.0143 billion yuan and a net profit of approximately 95 million yuan [3] - Projected total revenue for 2025 is around 65 billion yuan, with AI-related revenue expected to reach 1.2 billion yuan in 2024 and between 3 billion to 5 billion yuan in the current year [10][11] - **AI and Innovation**: - AI-related revenue is categorized into content and generative tools, with significant growth potential [11] - The company is leveraging AI to enhance content creativity and improve user experience [12][24] - **VR Projects**: - BlueFocus has implemented VR projects in notable tourist sites, ensuring sustainability through digital applications [12][13] - Initial projects are expected to yield returns within 12-18 months, with a focus on popular tourist attractions [13] Additional Important Points - **Profit Margins**: - The gross margin for overseas marketing remains stable at 1.6%-1.8%, driven by revenue scale effects [19] - Future margin improvements are anticipated through increased collaboration with mid-tier media and the use of generative tools for small to medium clients [20] - **Emerging Opportunities**: - The company sees a bright future for overseas business, particularly in emerging sectors like gaming and e-commerce, despite domestic economic pressures affecting large client budgets [9] - The rise of short dramas as a new revenue source for overseas marketing is noted [17] - **New Platforms**: - BlueFocus has launched two new platforms, Blue X and Blue Turbo, aimed at enhancing game advertising [15] - The importance of online advertising has surged due to changes in consumer behavior during the pandemic [15] - **Collaboration and ROI**: - The effectiveness of different media platforms on advertising ROI is crucial, with a shift towards platforms like TikTok being encouraged for better returns [21] - New marketing scenarios, such as VR, are expected to significantly enhance agency profit margins [22] - **Future Projections**: - The company anticipates completing several high-value projects in the VR space, with a focus on optimizing business models for scalability [27] - The partnership with Applovin for e-commerce is expected to grow, although significant contributions have yet to materialize [28]

Core Viewpoint - BlueFocus, a Chinese advertising and marketing company, has submitted an application for an IPO in Hong Kong, aiming to raise funds to enhance AI research, expand global business networks, improve domestic service capabilities, and pursue potential acquisitions or investments [2][13]. Company Background - Founded in 1996 and listed on the Shenzhen Stock Exchange in 2010, BlueFocus provides marketing solutions across various industries, reaching nearly 200 countries and regions [3]. - The company's revenue is projected to grow from 36.683 billion RMB in 2022 to 60.797 billion RMB in 2024, representing a compound annual growth rate (CAGR) of 28.7% [3]. Main Business Segments - BlueFocus's main business is divided into three categories: 1. **Cross-border Marketing Services**: Includes digital advertising, integrated marketing, programmatic advertising, and other marketing services via its SaaS platform. 2. **Domestic Integrated Marketing Services**: Encompasses public relations, data analysis, and other integrated marketing services. 3. **Domestic Full-service Advertising**: Divided into digital advertising and programmatic advertising services [4]. Revenue Contribution - The cross-border marketing services segment is the largest revenue contributor, expected to generate 48.333 billion RMB in 2024, accounting for 79.5% of total revenue [4]. Profitability and Cost Structure - Despite significant revenue, BlueFocus faces low profitability, with a projected gross profit of only 1.530 billion RMB and a gross margin of 2.5% in 2024 [8]. - Media costs constitute the largest expense, accounting for over 95% of total revenue in recent years, which significantly impacts gross margins [10]. Future Development Plans - BlueFocus plans to transition its cross-border marketing business from an agency model to localized operations and technology-driven approaches, enhancing connections with overseas clients [12]. - The company has developed a large model application engine, Blue AI, aimed at improving automation and operational efficiency, with projected AI-driven revenue of approximately 1.2 billion RMB in 2024 [12]. Strategic Importance of Hong Kong Listing - The IPO in Hong Kong is seen as a crucial strategic move for BlueFocus, providing access to diverse financing channels to alleviate funding pressures and invest in technology and business expansion [13]. - The competitive landscape in the marketing industry is intensifying, with advancements in AI technology changing the dynamics of marketing services, necessitating BlueFocus to adapt and innovate [13].