On May 30, the Operation Monitoring and Coordination Bureau of the Ministry of Industry and Information Technology released the operating conditions of the Internet and related service industries from January to April 2022, showing that platform enterprises mainly providing life services (including local life, car rental, travel, financial services, automobiles, housing, etc.) saw a year-on-year business revenue decrease of 20.2%, with the decline expanding by 2.8 percentage points compared to the first quarter.
Cai Jinfeng, Executive Director of Frost & Sullivan Greater China, was interviewed by South China Morning Post to discuss the reasons behind the widening revenue decline of Chinese internet companies in the life service sector.
Nanhua Morning Post
Q: 'The revenue decline of enterprises in the life service sector has widened. From January to April, the business income of platform companies mainly providing life services (including local life, car rental and booking, travel, financial services, automobiles, housing, etc.) decreased by 20.2% year-on-year.' What are the reasons behind the widening revenue decline?
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Cai Jinfeng
Executive Director, Greater China, Frost & Sullivan
Cai Jinfeng:There are actually three main reasons for the significant decline this year. On one hand, it is due to the recurrence of the epidemic in various regions at the beginning of 2022, which has had some negative impacts on these enterprises related to living services. For example, travel: In 2021, the overall epidemic control was stable, and national tourism demand grew rapidly, with related enterprises gradually easing their underestimation from 2020. However, in 2022, due to the sporadic and local outbreaks of the epidemic, especially in popular destinations such as Jilin, Shanghai, and Yunnan, weak tourism consumption dragged down the entire tourism economy, further putting pressure on these travel-related businesses. Enterprises related to car rental and booking are also restricted because in cities where the epidemic occurred, residents' daily travel frequency has greatly reduced, and travel/business trips have been limited, affecting the demand for car rental and booking. This is why the revenue of these enterprises has also shown contraction. The impact of the epidemic on certain cities has exacerbated the shortage of automotive chips and the reduction in automobile parts production, leading to a decline in both automobile production and sales. As a result, automobile brands have also significantly reduced their advertising and promotion expenses, affecting the revenue of these platforms.
Secondly, 2021 was a relatively stable year for China, and the overall consumer-related market actually rebounded significantly. As a result, the year-on-year data decline appeared quite large. Lastly, due to the suspension of the online education sector, which had been developing rapidly under this category, in mid-2021, the revenue from all lifestyle-related platforms also showed a significant decrease.
