Short video apps become new online moneymaker, but not without heavy criticism

By Chu Daye Source:Global Times Published: 2018/5/6 17:58:39

A netizen views a performance by two web hosts on Douyin, a Chinese short video platform. Photo: IC

Zhao Bu'en, a 30-something white-collar living in Beijing, is a heavy user of China's trendy short video platforms, especially Douyin and Kuaishou.

"Not a single day passes by without spending about half an hour on these two platforms," Zhao said, noting that he mainly watches clips of people eating food before taking his afternoon nap or going to bed at night.

"This is really trendy stuff. And the platforms have brought the fame of tourist cities such as Southwest China's Chongqing Municipality to new highs."

This is also a business, Zhao said, "I have heard of people spending tens of thousands of yuan on reward money forwarded to their favorite web celebrities who post video clips or do live broadcasts."

Kuaishou takes away 50 percent of the reward money, Zhao said.

People like Zhao, however, are not alone. There are now about 200 million to 400 million so-called monthly active users in China, according to various sources, with most being consumer-worthy teenagers.

China's short video platforms that offer user-generated content, from dance and sports stunts to instructions and comedy, have been blazing the trail since 2017, and that heat is churning out money.

Douyin is backed by news and information content platform Jinri Toutiao while Kuaishou has secured investment from tech giant Tencent Holdings.

Everyone counts

Xue Yu, senior analyst with IDC China, said that advertising, e-commerce  strength driven by user views as well as user payments, including dividends from reward money, are the three conduits bringing revenues to short video platforms.

"Although currently these means of income have not yet proven to be sustainable for the businesses of the two platforms, and although they have to survive by burning investors' money, the rise of short videos will have a [positive] impact on advertisers," Xue said.

"Web traffic is money for these platforms," Zheng Chunhui, who works in the internet sector, told the Global Times on Friday.

"It is understood among the industry that in the current market, each short video user is valued at 7 yuan. From this perspective, it is easy to see why large amounts of money are being spent on marketing events that generate new users," Zheng said.

As of February 2018, Kuaishou had recorded 218.8 million monthly active users, up 70.49 percent from the same period in 2017, according to a report released by Analysys.

Meanwhile, Douyin has 98.04 million such users, but its year-on-year growth stands at a staggering 3,807.7 percent. Both platforms have sponsored a number of trendy television shows, with Douyin reportedly spending more on such marketing campaigns, waging a war to attract more users.

To lure more users, Kuaishou handed out hundreds of thousands of red envelopes ranging from 66.6 yuan to 8,888 yuan to those who sent New Year video greetings on the platform. It also put up posters on 280 high-speed trains running across the country to boost its brand awareness.

According to Analysys, Chinese people spent 5.1 billion hours watching short videos in February alone.

A user of China's Quora-like platform Zhihu named Pangguan Zheshuo, also a short video marketing professional, told the Global Times over the weekend that livestreaming is an "enormous" revenue contributor for Kuaishou.

"Seeing the value of huge traffic, web hosts will rack their brains to stage liveshows to gain rewards [of which Kuaishou takes a certain portion], and the platform does not have to pay a penny to these content producers," Pangguan said.

Kuaishou also has an internal channel to match web hosts that have large viewer bases with companies that pay the platform for adverts, and the internal matcher negotiates a price with the hosts.

"Hosts taking ads on their own are very likely to be demoted or have their accounts shut down," Pangguan said.

For Douyin, it derives the majority of its revenue from commercial adverts, as the reward money flow is much less active on its platform, Zheng said.

In September 2017, Douyin worked with American carmaker Chevrolet, short-term rental service Airbnb and Harbin Beer, China's oldest brewery, to run adverts to target user groups.

Cost factors

In terms of costs, Zheng and Xue disagree with each other.

Zheng said the platforms' main costs derive from servers used for storage, while minor costs come from bandwidth, as short videos are less demanding of it than long videos.

Xue, however, believes the majority of costs have gone into maintaining the platforms' attractiveness to clients, like maintaining daily operations and marketing campaigns to raise exposure.

"The average cost for infrastructure, including servers, is less than 3 percent of the total cost. Talent and marketing are predominant cost factors," Xue said.


Both platforms are subject to policy uncertainties, experts said. In fact, many mainstream media have been heavily criticizing short video platforms, especially Kuaishou, over concerns for vulgar content and its influence on children, especially in terms of addictiveness.

"The Chinese government has heavily scrutinized web content, and the frequent interventions taken lately to ensure positive societal morale have had serious negative impacts on these platforms' businesses," Xue said.

Kuaishou announced that it has recruited 3,000 additional staff whose job is to scrutinize its content, while banning 56,000 accounts that had published inappropriate content, news site reported on April 16.

All content containing popular children's cartoon Peppa Pig has reportedly been removed from Douyin after it became an unexpected cultural icon of Chinese subculture, since it "counters mainstream values."

"The cleansing of content will affect Kuaishou's business, as much of its content is vulgar and not sanctioned by the government. However, Douyin will be less affected, as its content tends to carry higher value," Zheng said.

Viewer Zhao says he had to quit Kuaishou for a while after discovering that his homepage no longer displays recommendations for meal-eating series, but rather those that promote mainstream values.

"These platforms have basically no technological thresholds; they attract the crowds with their content. And the key for their well-being will be to retain user interest, an increasingly capricious one. It is hard to say which new services will emerge to replace them," Xue said.

"Video apps will be the mainstream internet apps, at the expense of text and graphics-based apps. The question is whether short videos can keep it up, rather than become a one-time thing," Xue said.

Newspaper headline: Virtual goldmine


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