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The main points of this article

The charging mode of video number

Commercialization "out of the circle"

Advantages and disadvantages of e-commerce layout

Author | Tang Fei

Editor | Billy Lin

"the brightest business of WXG (Weixin Group) is the video number, which is basically the hope of the whole audience (the whole company)."

This is the speech made by Tencent founder Ma Huateng at the internal staff meeting on December 22 last year, which is full of expectations for the video number.

Prior to this, Liu Chiping, president of Tencent, also said in a conference call that the continued growth of video numbers is very important to Tencent's overall business, and that if a good cash flow can be achieved, it will have a substantial driving force on profits.

As we all know, Tencent's revenue composition can be roughly divided into four parts, namely, value-added services, financial technology and corporate services, online advertising and others. Among them, value-added service is the basic set of Tencent, and H1 accounts for about 53.6% by 2022. Income familiar to consumers, such as game revenue, video members, digital music, virtual props, all kinds of QQ VIP, live broadcast reward and other income are included in the category of value-added services.

However, Tencent's "Cash Bull", represented by games, has encountered a crisis in recent years. Q3 in 2022, the revenue of Tencent's value-added services business was 72.7 billion yuan, down 3% from the same period last year, of which game revenue in the local market was 31.2 billion yuan, down 7% from the same period last year, and social network revenue was 9.8 billion yuan, down 2% from the same period last year.

The attitude of the capital market towards Tencent is more obvious. Before 2021, Tencent is still the "darling" of the capital market, and many investors regard it as the preferred target for investment in Hong Kong stocks.

However, after 2021, Tencent's share price has "fallen endlessly". In February 2021, Tencent's share price reached an all-time high of around HK $760 per share. Since then, Tencent's share price has plummeted, leaving only about HK $450 per share by the end of 2021, down about 41 per cent a year. Entering 2022, Tencent still did not stop falling, and Tencent's share price fell to about 180 Hong Kong dollars per share in October 2022.

Charging "shelf fee" is regarded by Ma Huateng as a C-bit video number, which obviously has to bear greater responsibility in the future.

According to Tencent's "rules for the Management of Technical Service fees for Video Merchants" (hereinafter referred to as "the rules"), starting from January 1, 2023, Video began to charge merchants for technical services. The rate is calculated according to the category of goods or services corresponding to each order, and the rate is 1% and 5%.

The so-called technical service provider refers to the technical service fee charged by the platform for providing merchants with functions including commodity information display, commodity trading capacity, flow support and so on. The specific settlement formula is technical service fee = technical service fee rate × settlement base. The technical service fee rate is calculated according to the category of goods or services corresponding to each order.

Picture Source: "rules for the Management of Technical Service charges for Video Merchants" Puxi, who has 15 years of experience in e-commerce, said that technical service charges can be generally understood as the previous handling charges and payment service charges. it usually consists of the handling fees charged by Wechat / Alipay recharging (margin, advertising, etc.) platform, as well as the payment service fees charged by merchants when they make order transactions.

According to Puxi, as early as 2014, Taobao open platform carried out a comprehensive optimization of API resources, and all service providers calling TOP interface adopted the API charging method, which can be said to be the embryonic form of technical service charges. Subsequently, JD.com and pinduoduo charged all developers for API API calls in September 2019 and July 2020, respectively.

The short video platform also draws lessons from this charging model of e-commerce enterprises. Kuaishou began to charge merchants a technical service fee on July 20, 2019. For goods containing promotion commission information, the amount of the technical service fee is equal to 50% of the promotion commission actually received by the promoters in the settlement cycle; for goods without promotion commission, the technical service fee is equal to 5% of the actual turnover of the order in the settlement cycle. Douyin will charge merchants 10% of the technical service fee from February 1, 2020.

Looking up the list of technical service charges for video numbers, we can find that there are relatively clear technical service charges for common consumer categories, such as MP3 / MP4, portable / wireless speakers, radios for digital audio-visual entertainment, etc., and 5% for personal care equipment, such as electric razors, facial cleaners, hair clippers, etc. The rate of miscellaneous grains, noodles and edible oil in the grain and oil seasoning category of food and beverages is 1%.

Xiao Jia, the owner of lingerie, told ID:ValuePlanet that he had moved into several live e-commerce platforms to bring goods, and that the rates for clothing services varied from platform to platform, such as Douyin, which charges 10 per cent for lingerie, Taobao Live, 9 per cent, and Kuaishou, which charges 5 per cent of the actual transaction volume.

In her view, the 5% fee rate for video number is not an absolute advantage, but it is still relatively low, and such a low rate does help attract merchants to move in in the early stages.

According to Cinda Securities, the video number is expected to contribute 1 billion yuan in revenue in the fourth quarter of 2022 and about 30 billion yuan after 2025.

Historical data show that the talent who first started to carry goods live on the video number has made the first bucket of gold.

Belle International was once a generation of "shoe king", with brands "Belle" and "he she". According to New TV statistics, "Belle BELLE official flagship Store" and "he she official flagship Store" each carried more than 50 live video shows in 2022, with estimated sales of more than 80 million yuan.

Video account "Yang" and then strong Wechat carries huge traffic at the national level, as well as the ability to pay almost to cover all aspects of life, while the video number has stepped on the tuyere of short videos and live streaming, it can be said that with the strength of Wechat, the video number "was born in Rome".

According to the 2022 China Mobile Internet semi-annual report released by QuestMobile, the number of monthly active users of Wechat Video account reached 800 million in June 2022. By comparison, Douyin and Kuaishou had 680 million monthly active users and 390 million monthly active users in the same period.

Wechat video number "out of the circle", the most direct benefit to Tencent is that it can help Tencent stay on the "card table" of the short video. According to the 2022 mid-term report, the total number of users of Q2 Wechat video accounts in 2022 exceeded 80% of the total time spent on WeChat moments, and the total number of video numbers played increased by more than 200% over the same period last year. The number of video plays based on artificial intelligence recommendations increased by more than 400% year on year, and the number of daily active users and daily average video uploads increased by more than 100% year on year.

Since the beginning of its launch, the video number has not given up its commercial attempt. The internal test of the video number began in January 2020, and the live broadcast reward function of Wechat beans was launched in October of the same year. In April 2021, the video number organization management platform was officially opened to MCN institutions for registration, while the live broadcast task was launched. In January 2022, the video number launched the first paid live room, and the live broadcast content is Tencent NBA. Users can watch it for free for 3 minutes, and they need to pay 90 WeChat beans (equivalent to RMB 9 yuan) 3 minutes later to continue to watch. In 2022, Q2, Video held a series of music concerts. Singers such as Cui Jian, Luo Dayou, Li Jian, Jay Chou and Backstreet Boys took turns, attracting tens of millions of users to watch each show.

However, the above attempt still stays in the mode of live broadcast + reward. Huaan Securities predicts that the revenue from live broadcast of video number is expected to increase 1.6-3.4 times in three years, and is expected to reach 13.559 billion yuan by 2024.

Photo Source: 2023 Wechat Open course in addition to reward, video advertising is also one of the ways to realize the video number. On July 18 last year, the video account was connected internally to native information stream ads for the first time. Tencent said in its quarterly report that there is a strong demand for video information stream ads from advertisers, especially in the FMCG industry. Video number advertising and Tencent's existing advertising business are complementary, and can bring incremental advertising revenue for Tencent.

Specifically, social and other advertising revenue under Tencent's online advertising sector fell 1 per cent to 18.9 billion yuan in the third quarter, against a backdrop of continued weak advertising demand in some industries. Tencent offset some of the decline in revenue due to the initial realization of video information stream ads.

On the Q3 earnings call, James Michelle, Tencent's chief strategy officer, said that the video number itself has a differentiated audience, which allows advertisers to reach different groups. At present, video number ads are in short supply. Liu Chiping, president of Tencent, also said that video account's advertising revenue has been growing rapidly, and the single-quarter revenue is expected to exceed 1 billion yuan in the fourth quarter of 2022. And this growth is generated without encroaching on advertising revenue from other businesses in Tencent's ecology.

According to Tencent's "Deep net" report, byte jump's advertising revenue in 2021 is as high as 260 billion yuan, of which Douyin's advertising revenue is about 150 billion yuan, generating an average of 37.5 billion yuan a quarter, so even if the video account advertising revenue reaches the level of 1 billion yuan, there is still a huge gap with Douyin.

At the same time, the video number also has some imagination at the e-commerce level. Ma Huateng also said at the internal staff meeting that Tencent has done a lot of attempts to combine short videos with e-commerce, and now that the video number has taken the first step and has stood still, it is hoped that it can be closer to the transaction and do a good job in the closed loop of e-commerce.

Take Kuaishou, which is in the same video industry as an example, it was only a pure short video platform before, but since 2018, Kuaishou has gradually increased its e-commerce business. Today, e-commerce has become the "second curve" of Kuaishou.

According to the financial report, Q3 Kuaishou's revenue from other services represented by e-commerce business in 2022 was 2.592 billion yuan, an increase of 39.4% over the same period last year, ranking first among all sectors. The GMV of Kuaishou e-commerce is expected to be about 410 billion yuan in 2022, a year-on-year growth rate of 26 percent, LatePost reported. This also means that Kuaishou e-commerce still maintains good growth potential.

However, compared with Douyin and Kuaishou, two competitors in the short video industry, the commercialization of video numbers in the e-commerce sector started relatively late. Under the background that Taobao has held out Weiya, Li Jiaqi, Douyin belt Huo Yonghao and Dong Yuhui, and Kuaishou owns the Simba family, Video still does not have an "ace anchor" who can compete with the above-mentioned anchors.

On the other hand, the video number is not dominant in terms of length of use. Xiang Shuai, former associate professor and doctoral supervisor of the Finance Department of Guanghua School of Management at Peking University, believes that the rise of short videos from 2017 to 2021 is actually a new revolution in the mode of information dissemination, threatening the foundation of Tencent's business model. From 2017 to 2021, the amount of time Chinese netizens spent on short videos doubled from 70 minutes to more than 2 hours. While Tencent has fallen behind in the field of short videos in the past, the proportion of App users using Tencent has dropped from 54.3% in 2017 to 35.7% at the end of 2021.

In addition to the decline in overall user usage, the performance of games, cloud services, cloud music, news and information, film, and other businesses is not satisfactory, so the video number that conforms to the trend of network users has become the "hope of the whole audience."

For the commercialization of video number, Ma Huateng is more soberly aware that Tencent is relatively strange in this field. Ma Huateng believes that Tencent acts as an assistant and mainly plays a connecting role in e-commerce transactions, so how to do a good job in the closed loop of e-commerce without going out to be an e-commerce business is a challenge that video accounts need to face in the future.

Xiao Miao, an analyst at brokerage, believes that video number will be an important starting point for the commercialization of Wechat in the future, providing new space and growth opportunities for Tencent to compete with other Internet companies in the second half.

What are the odds of betting on e-commerce? In the 2023 Wechat Open course, the video number was placed in an important position at the conference, and the total speech time occupied more than half of the conference time.

At the conference, the video account proposed to become the most atomized content component in the Wechat system. This also means that the use of video number will also be more abundant.

According to insiders, Wechat internal video number has been with the official account, Mini Program, WeCom and other traffic entrances.

After a series of preparatory actions are completed, you can see how much Tencent attaches importance to the video number.

However, over the past year, people have been accelerating their embrace of e-commerce. Fast hand CEO Cheng Yichao personally took over the e-commerce business. Han Shangyou, vice president and live broadcast director of Douyin, became the new head of Douyin at the end of last year-the change in organizational structure shows that Douyin will attach more importance to e-commerce as the model matures.

Coupled with Taobao, JD.com, pinduoduo and other traditional e-commerce giants capture the city and land, leaving "Houlang" video number can not dig much space.

The dilemma of video number is mainly reflected in three aspects: user base, ecology and supply chain.

Let's start with users. Generally speaking, video number is a platform dominated by private domain traffic, and it is difficult for most VJs to get traffic outside the pool.

According to the feedback of some VJs, even if the platform gives recommendations and obtains some public domain traffic for live broadcasting on video numbers, it is difficult to keep these "passers-by" because the tone of the platform is different from that of other short video platforms. without a basis of trust, it is also difficult for this kind of studio to convert orders.

The official data released by Wechat also confirm the VJ's feedback. In 2021, private domains accounted for more than 50% of the GMV with goods in the video number.

Tu Yuan: 2023 Jerry, head of operation of a MCN institution in Hangzhou in 2023 Wechat Open course, said that his company has built a full-platform and multi-channel live broadcast matrix for each anchor from the very beginning, and through the live broadcast and operation of different platforms, they have also found the differences between different platforms.

Take Douyin and video account as an example, the difference in user operation between the two is mainly reflected in four levels. First, the GMV of the two platforms may be a hundred times different for the same content. For example, in the studio of a certain category TOP100, almost every one of the 100 rooms on Douyin can contribute tens of millions of GMV, and the head can even exceed 100 million yuan, while only three or four video numbers may exceed 10 million yuan.

The second difference is the unit price of customers, such as 3C digital, books, entertainment, watch accessories and so on. The unit price of Douyin is significantly higher than that of video number, but the unit price of other categories, such as clothing, shoes, bags, snacks, wine, consumer goods, household goods, etc., is almost 10 times higher than that of Douyin. For example, when selling snacks, the unit price of Douyin is about 30-40 yuan, but the unit price of video number is close to 200 yuan, with a gap of 5-6 times. "the reason for this phenomenon is mainly because most of the video numbers are private traffic, and everyone already has a basic trust in Wechat, so they will naturally be willing to spend more money to buy things from me. This is the advantage of video numbers."

The third difference is the ability to operate in the private domain. At present, all major network platforms regard private domain operation as an important task, but in the private domain, this video number crushes Douyin, because Wechat is naturally private, and now Douyin is also starting to make efforts in this area. various algorithms are maintaining private traffic.

The fourth difference is reflected in interaction. The exact same content is posted on Douyin and the video account, but likes may be 10 times worse. For example, a Douyin short video may have 500 likes, while a video account may have only 50 likes. This interactive difference may also be due to the fact that Wechat socializes with acquaintances, and their likes and even comments will be seen by friends, which limits netizens' desire to interact to some extent.

Xia, head of Bright Media Operations, believes that video accounts emphasize content attributes more than other platforms. Brilliant Media has been ranked by the Video Association TOP10 for two years in a row, with anchors such as Li Jiulin, Panda talk Show, Xiaochai talk Show and Wang Fugui who are well-known on the video account. In summer, Douyin and Kuaishou only need to broadcast 3-4 hours a day, but the ideal live time for video number is 6-8 hours, which requires VJs to output more content to support. Like Vanda, which entered the video account earlier, it is also partly due to the lack of content output, resulting in not being able to broadcast for a long time.

Photo Source: in addition to the ecology of the new list, the content of Douyin and Kuaishou is more entertaining and "time-killing", so it can be used by users for longer time and more retention, which provides the soil for impulse consumption. According to aurora big data, the average daily time of Q3 Douyin in 2022 will be 140 minutes, while that of Kuaishou's three quarterly reports will be 129 minutes, while the video number is currently only about 35 minutes.

At present, the content ecology of video number is more inclined to the "information" of information and tool attributes. However, if you take "information" as the core, users are likely to leave after reading it. The monthly list of video numbers released by the new data shows that the creators of video numbers are focused on film and television entertainment, people's livelihood, education and so on.

In order to reverse this situation, the team of Video account in Wechat Open course revealed that it will upgrade the "Polaris Project". In addition to providing support to qualified high-quality creators, special incentive programs will also be launched for music, funny, games, drama and other key categories. Obviously, the video number hopes to match the depth of the user through vertical content to improve user stickiness and content distribution ability.

Deep Douyin user Xiao Xi, who spends about three hours a day browsing Douyin and watching live streaming, said she hardly opened her video account because she was used to using Douyin for recreation. Even Kuaishou itself was uninstalled after a short use, because I felt that I didn't like the above content very much.

Even though her favorite Douyin anchors, "Crazy Brother Yang" and "Zhu Guagua" started broadcasting on the video account, she did not follow or watch it.

There are also people who attach great importance to the potential value of video numbers. according to industry insiders, if you only use video numbers as a tool for live streaming, you will overlook its unique advantage of sharing Wechat ecological users and traffic.

"Video number is actually more valuable to the enterprise than to VJ and MCN. With the help of video number, brands can refine the operation of private domain traffic, fully tap the social relationship chain of users, and bring new traffic and new value by reaching old users. Through the private domain pry the public domain, and then convert the public domain users to the private domain traffic pool to achieve the purpose of customer acquisition, precipitation and repurchase." The above industry insiders said.

Finally, and the most difficult-- the supply chain. In the final analysis, in addition to platform traffic, e-commerce ultimately competes for supply chain and compliance service capabilities.

Some industry insiders have pointed out that there are still many areas that need to be improved in the background of the video number, such as the lack of functions of the video number shop and the relatively weak supply chain capacity. Although Tencent has always tended to match only merchants and consumers, it is clear that aspects such as compliance and customer service are also crucial to building users' trust in the platform.

By contrast, Video's rivals have begun to polish the supply chain. Starting from 2021 bytes, we have successively laid out the related fields of logistics. Douyin has completed docking with Shun Feng, Post, JD.com, Santong Yida and other enterprises. In June last year, Douyin e-commerce issued a notice on the supply chain service platform, which showed that Douyin e-commerce had launched the one-click shop function of distributors, the function of supporting suppliers to modify qualification information and the function of suppliers specifying supply prices. Almost at the same time, Kuaishou established Chengdu Express supply chain Management Co., Ltd., and its business scope includes supply chain management services, international freight forwarders and so on.

In theory, Tencent, which has "banknote ability", can solve the problem of performance ability by acquiring or investing in the supply chain. However, in the current macro environment, hastily start a large-scale supply chain investment, which also means huge financial pressure and risk.

The video number shop owner told us that his shop mainly engaged in zodiac pendants, furnishings, the user group is mainly middle-aged and elderly, young people generally do not believe these. When I first started to bring goods, because there was no suitable supplier, I bought a plug-in on the network at a price of 15 yuan / month. Through this plug-in, I imported all kinds of pendant products on 1688 with one click. After setting the price and postage, you can add it to the bottom of the video and sell it directly.

The sales unit price of Xingyi is generally about double the purchase price of 1688. In actual operation, after deducting the platform service fee and the postage cost of a piece sent on behalf of the company (except Xinjiang, Xizang and Hong Kong, Macao and Taiwan), the store can maintain a net interest rate of about 50%.

Image source: the network, however, this mode of "restocking" from a third party was quickly stopped. In early November last year, Youzan issued an announcement saying that Wechat will stop working with third parties and will only be able to use its own delivery center with the video account. From November 30, 2022, merchants will not be able to access the video number "delivery center" through the transaction component, and no third-party service provider will be able to access through this mode. At the same time, many anchors' accounts have also been notified to pay a deposit. The deposit ranges from 20, 000 to 50, 000 yuan

Earlier, the commercial closed-loop tools of video are not their own, such as likes shopping, magic chopsticks, small shops, Taobao, JD.com and so on. Now Ma Huateng puts forward the closed loop of e-commerce, which obviously draws lessons from part of the experience of Douyin's commercialization, and takes a lot of detours.

Industry insiders said that after the three-party platform shops of the video number were cleared, there was a fault in the goods that the merchants could choose in the delivery center, coupled with the influence of restrictions such as margin, the number of goods in the same category would become very small, and even some categories would have no goods to add to the window.

To sum up a clear trend is that the commercialization of video numbers is gradually accelerating from 2022.

On Singles Day in 2022, video number did three things: first, it announced double 11 brand incentives and made a special topic; second, it invited some major brands to launch live shows; and third, it improved the ability of video number stores and launched the online selection alliance.

This seemingly conventional operation actually sends a clear signal that "Tencent e-commerce" is back.

Lin Yue, chief consultant of Lingyan Management Consulting, believes that in the business model, the traffic distribution of Douyin and Kuaishou is mainly in the public domain, while the unique social recommendation distribution mechanism of the video account is mainly in the private domain, which determines the question of "in what sea area to fish".

Lin Yue believes that the advantages and disadvantages of video numbers are very obvious, and the advantage lies in the relatively accurate matching of content and crowd, which makes it easier to trigger interaction and facilitate transactions, while the deficiency is that it is unable to reach more potential users.

The video account, which is jokingly called "the hope of the whole village", bears Tencent's mission of "improving efficiency" or even "increasing income" under the pressure of games, overtaking cloud business and losing content. In this sense, the pressure on video accounts will only become greater and greater.

Reference:

[1] "Tencent Holdings: the game goes out to sea to open up a broad space, and the video number accelerates the realization of traffic", Huaan Securities

[2] "the ecological richness of content needs to be improved, and the infrastructure of ecological commercialization is constantly improving-- the second report of Wechat video number series", Oriental Securities.

This article is from the official account of Wechat: value Planet Planet (ID:ValuePlanet). By Tang Fei.

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