On August 28, Make Friends released its financial report showing that revenue growth fell to single digits for the first time in the first half of this year, while net profit declined by more than 30%. To control costs, Make Friends chose to divest its broadcasting business this year. Between 2023-2024, Make Friends expanded across multiple platforms including Douyin, Taobao, and JD.com, but comprehensive expansion also increased management costs and complexity across all channels. As the live streaming industry's growth rate gradually slows and the "Luo Yonghao effect" weakens, Make Friends has had to carefully calculate every expense.

**Traffic Costs Rise Significantly**

In the first half of this year, Make Friends faced considerable pressure on performance, with revenue of approximately 620 million yuan, up about 9.8% year-on-year, with growth dropping to single digits. Net profit was 55.4 million yuan, down 37.4% year-on-year, while adjusted net profit was 71.28 million yuan, compared to 120 million yuan in the same period last year. Make Friends' gross profit performance was also affected. In the first half of this year, gross profit from the new media services business segment, including live streaming e-commerce, fell from 300 million yuan in the same period last year to 270 million yuan, with gross margin dropping to 43.7% from 53.8% in the same period last year. Make Friends explained that due to rising platform traffic acquisition costs and continued investment in the development and operation of the "Friends Cloud" intelligent system, both group costs and expenses increased simultaneously, leading to the decline in net profit.

To control costs, Make Friends chose to sell its "burden." In March this year, Make Friends signed an agreement with an independent third party to sell 100% equity in subsidiaries covering traditional broadcasting business, completing the transaction on July 31. According to reports, Make Friends' divestiture of its business units was mainly due to the rapid development of new media formats (such as short videos and live streaming e-commerce) impacting traditional radio and television business, as well as challenges facing traditional broadcasting business including audience diversion, shrinking advertising demand, and single profit models, causing traditional broadcasting business growth to lag behind the group's overall strategic direction.

The broadcasting business accounted for a relatively small proportion of Make Friends' overall business. In the first half of last year, Make Friends' broadcasting business revenue was 58.42 million yuan, accounting for 9.4% of total revenue. At the same time, affected by market, exchange rate, technology, and labor factors, the cost increase of this business exceeded revenue growth, with gross margin declining 11.2 percentage points to 29.8%.

Make Friends believes that after selling the traditional broadcasting business, it will optimize asset structure, reduce inventory and accounts receivable pressure, release cash flow, and improve financial indicators.

**Expansion Intensifies Operating Pressure**

In the first half of 2023 and the first half of last year, Make Friends showed high-speed development, with revenue growth rates of 215.5% and 43.8% respectively, and revenues of 430 million yuan and 620 million yuan respectively. Net profit performance was also impressive. In the first half of 2023, Make Friends turned from loss to profit, with adjusted net profit of 94.635 million yuan, up more than 17 times year-on-year. In the first half of last year, Make Friends' adjusted net profit growth also increased 17% year-on-year.

From 2023-2024, Make Friends was at its peak, coinciding with its expansion beyond Douyin to multiple channels including Taobao, JD.com, and WeChat Video Accounts, while accelerating the construction of vertical live streaming account matrices on Douyin. Previously, in October 2022, Make Friends entered Taobao Live, and on the night of Luo Yonghao's live broadcast, Make Friends' live streaming room accumulated 26 million viewers and gained 1.1 million followers. During the "6.18" period in 2023, Make Friends partnered with JD.com, with Luo Yonghao using the "gimmick" of selling a Hangzhou property at a 6.18% discount to attract attention. That night, the live streaming room's total sales exceeded 150 million yuan, with over 17 million viewers.

Additionally, to reduce dependence on Luo Yonghao's IP while reaching more segmented customer groups, Make Friends established a "1+N" live streaming matrix at the end of 2023, creating vertical accounts on Douyin covering categories such as fashion apparel, home living, snacks and food, and beauty and skincare. As of the end of June last year, Make Friends had over 50 live streaming rooms with a combined total of over 68 million live streaming fans and GMV (Gross Merchandise Volume) of 5.96 billion yuan, up 18.2% year-on-year.

This year, Make Friends established partnerships with Baidu E-commerce and Kuaishou, with AI-dimension cooperation becoming one of the focus areas. In June, Make Friends launched "Luo Yonghao Digital Human" for the first time and conducted its live streaming debut on Baidu's e-commerce platform, attracting over 13 million viewers and achieving GMV exceeding 55 million yuan. Make Friends also partnered with Kuaishou's Keling AI, hoping to leverage AI technology to optimize live streaming room interactive experience and conversion efficiency.

In just a few years, Make Friends expanded to almost all mainstream e-commerce channels in the market and capitalized on key periods when platform traffic bonuses were tilted, driving overall revenue and profit to surge significantly. However, this also means Make Friends needs to adapt to differentiated rules across various channels, with corresponding increases in labor and operational costs.

In the first half of this year, Make Friends' sales costs were 350 million yuan, up 33.7% year-on-year. Among these, due to business strategy expansion, core talent reserves, and compliance operation needs, sales expenses for Make Friends' new media services business segment increased by 2.5 million yuan year-on-year. However, the proportion of expenses to revenue for this business segment decreased by 2 percentage points, showing an optimization trend.

In January this year, Make Friends CEO Li Liang stated that Make Friends' urgent task is to optimize operational models and balance the contradictory conflict between live streaming room quantity expansion and quality improvement.

Moreover, Make Friends must respond to sudden situations in platform live streaming ecosystems. A reporter noticed that on August 17, Make Friends quietly began broadcasting on the Kuaishou platform. Due to the timing being close to Simba's "8.18" fan promotion festival, Make Friends' live streaming room's debut attracted only 2.095 million viewers, selling products including home appliances, mobile phones, and daily necessities, with Luo Yonghao not appearing in the live streaming room.

**Strengthening Cost Reduction and Efficiency Enhancement Capabilities**

To seek more growth, according to Make Friends' plans in the financial report, on one hand, it will strengthen the content competitiveness of matrix live streaming rooms and expand vertical business through multiple channels; on the other hand, it will optimize internal resources through automated tools to improve operational efficiency, strictly control non-essential expenditures, and accelerate the advancement of data algorithms for precision in traffic placement. "The group will focus on the dual-wheel drive of intelligent and technological transformation with refined operations," Make Friends stated.

In the first half of this year, management expenses for Make Friends' new media services business segment were 61.9 million yuan, down 2.8 million yuan year-on-year. Make Friends believes this was mainly due to the new media services business segment promoting digital management upgrades, using digital tools to achieve cross-departmental resource sharing, reduce waste to lower management expenses, while implementing budget control and dynamic tracking for non-core management expenditures, with obvious control effects.

Additionally, in industrial ecosystem layout, Make Friends will accelerate strategic coordination with regional industrial belts and integrate and optimize supply chain resources. At the same time, by strengthening traffic operations of main accounts and vertical field matrix accounts, it will further improve precise user reach capabilities and new category expansion space.

Live streaming organizations increasingly emphasize refined operations, which is also influenced by the slowing growth rate of the overall live streaming e-commerce market. Data from iiMedia Research shows that from 2022-2024, using the "6.18" promotion as an example, live streaming e-commerce sales growth rates declined from 124% in 2022 to 12.1% last year.

Zhao Zhenying, a researcher at the National Engineering Laboratory for E-Commerce Transaction Technology, believes that as live streaming e-commerce enters the second half, it will test live streaming organizations' capabilities in supply chain management, technology application, content creation and operations, private domain traffic operations, and compliance operations.

"Technology empowerment is an important trend in live streaming e-commerce development, with AI and other technologies deeply embedded in product selection, operations, after-sales, and other segments. From a customer management theory perspective, technology applications can improve customer experience," Zhao Zhenying stated. As platform traffic acquisition costs rise, the value of private domain traffic becomes increasingly prominent. Companies should focus on private domain traffic operations and can deepen understanding of customer needs through community operations, membership systems, and other methods, providing personalized services and recommendations for customers to improve customer repurchase rates and loyalty.