Strategic Analysis Report of China Online (300364.SZ): Over RMB 3 Billion in Losses in 8 Years, Can Short Drama Overseas Expansion Break the Deadlock?

Based on collected data and market information, I conduct a comprehensive analysis of the strategic issues of China Online (300364.SZ).

As the “first stock of digital publishing”, China Online has undergone multiple major strategic shifts since its listing in 2015[1][2]:

Period	Strategic Focus	Investment Scale	Outcome
2016	ACG (Anime, Comic, Game) / Game Track	Acquired Chenzhike for RMB 1.7 billion	Sold Chenzhike for RMB 324 million in 2020, with a loss of approximately RMB 1.4 billion
2021	Metaverse Concept	Positioned as “the direction for the next decade”	The concept cooled down a year later, with no stable revenue generated
2023	AIGC Sector	Launched “Chinese Xiaoyao” Large Model 1.0	Continuously iterated to version 2.0, but with limited revenue contribution
2025	Short Drama Overseas Expansion	Surge in promotion expenses	Sales expense ratio reached 86.7%, with losses widening

According to financial data, China Online has accumulated losses of over RMB 3 billion in the 11 years since its listing[1][2]:

• 2018
  : First massive loss of RMB 1.509 billion, a year-on-year plunge of 2054%
• 2019-2024
  : Only marginal profits in 2020 and 2021, with losses in all other years
• 2025
  : Expected loss of RMB 580 million to 700 million, with cumulative losses exceeding RMB 3.06 billion in 8 years

From technical analysis data, the company’s P/E ratio is -39.47x, ROE is -73.65%, and net profit margin is -42.23%, indicating that the company is still in a state of continuous losses[0].

The most worrying aspect is the company’s expense structure:

Indicator	2025 First Three Quarters Data	Normal Industry Level
Sales Expense / Revenue	86.7%	Typically <30%
R&D Expense / Revenue	Approximately 4%	Typically >10% for tech enterprises
Sales Expense / R&D Expense	12.45x	Healthy ratio should be <2

In the first three quarters of 2025, sales expenses reached RMB 660 million, a year-on-year increase of 93.65%, while R&D expenses were only RMB 53.37 million[2]. This “marketing-heavy, R&D-light” model makes it difficult to establish a sustainable competitive advantage.

Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, pointed out that the root cause of China Online’s losses lies in its business model of “

”[1]:

In the digital content industry, royalty costs account for only about 22%, but channel promotion expenses have remained above 60% for years. To scale up revenue, the company must simultaneously increase user acquisition spending.

This means the company is trapped in a dilemma of “

” — revenue increased by 25.12% to RMB 1.011 billion, but net loss widened from RMB 188 million to RMB 520 million[2].

Looking at its history, each strategic transformation of China Online appears overly hasty:

• ACG Track
  : Acquired for RMB 1.7 billion, sold for RMB 324 million, with a loss of over 70%
• Metaverse
  : Made a high-profile announcement of “ten-year strategic focus”, but rarely mentioned it a year later
• AIGC
  : Followed the trend to lay out the sector, but clearly warned of “risk of technology development falling short of expectations” in its financial reports

According to reports, in May 2025, multiple executives sold their shares collectively. Among them, Wang Jingjing, the Secretary of the Board, sold shares at an average price of RMB 34.2, timing the sale precisely at the stock price peak, cashing out over RMB 10 million[1]. Executives selling shares on the eve of widening losses sends a negative signal to the market.

In 2025, China Online shifted its strategic focus to short drama overseas expansion and launched the FlareFlow platform, achieving impressive results[2]:

• Monthly recharge revenue growth exceeded 500% within 3 months of launch
• Cumulative downloads of approximately 10 million
• Covering 177 countries and regions worldwide
• Topped the free app charts for entertainment on iOS and Google Play in the U.S. region

However, concerns are equally evident:

1. Cost Out of Control
   : Q3 sales expenses reached RMB 394 million, accounting for 86.71% of revenue
2. Intensified Competition
   : 80% of the top 50 companies in overseas short drama in-app purchase revenue in 2025 are Chinese companies, and the sector has entered a phase of “user acquisition involution”
3. Doubts about Market Size
   : Analysts predict that the overseas short drama market will reach approximately USD 10 billion in 10 years, far lower than the “USD 100 billion track” claimed by the company[1]

Jiang Han, a researcher at the Pangoal Institution, pointed out that while China Online has advantages in IP reserves, it has no significant moat in key links such as short drama production, overseas operations, and algorithm recommendation[1]. The marginal profit of the pure “domestic hit drama transplant” model is rapidly approaching zero.

Indicator	Value	Interpretation
Market Capitalization	USD 22.7 billion	Relatively high
P/E Ratio	-39.47x	Loss-making status
P/B Ratio	48.02x	Overvaluation risk
Beta	1.8	High volatility
1-Year Growth Rate	29.29%	High component of concept speculation

The stock price rose from RMB 24.6 at the beginning of the year to a peak of RMB 42.5 (a 144% increase), but has recently fallen back to RMB 31.16, showing characteristics of sharp volatility[0].

Overall, China Online’s strategy has the following core issues:

1. Lack of Strategic Focus
   : Frequently chases hot trends, with heavy investment each time but slow monetization, leading to “expenses front-loaded, profits back-loaded”
2. Dubious Business Model
   : Over-reliance on user acquisition, excessively high sales expense ratio, making it difficult to achieve economies of scale
3. Insufficient R&D Investment
   : R&D expense ratio is only about 4% for a tech enterprise, lacking core technological barriers
4. Corporate Governance Issues
   : Executives sold shares during a period of poor performance, damaging investor confidence

• If the short drama overseas expansion business fails to achieve profitability, the company may face liquidity pressure
• Current net assets are low, resulting in weak risk resistance
• Concept speculation is unsustainable, with high risk of stock price correction

Short drama overseas expansion may be China Online’s last window of opportunity, but it needs to make breakthroughs in the following areas:

1. Establish localized content production capabilities, rather than simply “transplanting” domestic content
2. Optimize expense structure and improve the efficiency of each unit of investment
3. Increase R&D investment to build differentiated competitive advantages

Otherwise, the company may fall into a vicious cycle of “chasing hot trends - incurring losses - chasing new hot trends - incurring more losses”.

---

[1] Sina Finance - “8 Years of Losses Totaling RMB 3 Billion! China Online Bets on Short Drama Overseas Expansion: A Cure or a New Trap?” (https://finance.sina.com.cn/stock/s/2026-01-20/doc-inhhyfuv7356928.shtml)

[2] International Finance News - “China Online’s Rally Hits the Brakes, Cumulative Losses of Approximately RMB 3 Billion Since Listing” (https://www.ifnews.com/news.html?aid=798037&cid=49)

[0] Jinling AI Financial Database - Financial Analysis, Technical Analysis and Company Profile of China Online (300364.SZ)