How did a free reading app gain tens of millions of users in just half a year?

Free reading apps have gained tens of millions of users in half a year. Taking Qimao, Fanqie, Midu, etc. as examples, the author analyzed the operational ideas behind them and summarized them.

1. Research Background

After Tencent established China Literature Group in 2015, it raised the banner of rights protection and forced Baidu Tieba and Alibaba's UC Browser, which were once the hardest hit areas of online literature piracy, to shut down pirated online articles. In addition, with the benefits of mobile traffic and payment, legitimate online reading has been able to develop rapidly. Platforms such as Alibaba and Tencent have directly inserted themselves into the upstream of creation, providing integrated services such as IP incubation, distribution, and content payment.

As of the end of 2018, online literature accounted for 7.8% of the usage time of various applications, which was even greater than games (5.3%), live broadcasts (5.5%) and news (5.8%).

(Data from CNNIC "Statistical Report on Internet Development in China" - 2019.02)

However, the seemingly stable online literature market has been constantly impacted since the launch of Lianshang Free Reading in August 2018. The free MiDou Novels and Qimao Reading apps have attracted a large number of free users in a short period of time, and have occupied half of the reading apps with more than 10 million monthly active users.

(The average daily download volume of various free novels comes from QuestMobile-2019.03)

The launch of LianShang Free Reading marks the official entry of the mobile reading industry into the paid 3.0 stage.

• In the 1.0 content payment stage, users paid directly for chapters or the entire book, and later it became possible to directly reward the author. Most online literature products on the market now follow this model.
• 2.0 is the time-based payment stage. Some manufacturers innovated user payment objects, and users began to pay for time, that is, the entire content was free for a limited time. The representative product is NetEase Wugou Reading;
• 3.0 is the advertising payment stage, represented by "Lianshang Free Reading", "MiDou Novels", "Qimao Free Novels", "Book Chasing Artifact Free Edition", etc., which open the platform content to users for free, but add advertisements to the novels. Users can choose to watch with advertisements or pay VIP to watch without advertisements.

This survey selected four free reading apps, namely Qimao, Fanqie, Lianshang and Midu, and focused on analyzing their user growth strategies, while also aiming to find growth points that can be used as reference.

2. Growth Analysis

The comprehensive comparison chart of Qimao, Fanqie, Lianshang and MiDu is as follows:

2.1 Qimao Novels

2.1.1 User Growth

(Data from Qimai Data)

Qimao Novels was launched in May 2018, and initially focused on time travel and romance novels:

At the end of February this year, the 1.7 version was released and the product was renamed. Since then, Qimao has made a great leap from a player outside the thousand on the book list. In less than a month, its ranking soared to the top 3 on the list, and its monthly active users reached tens of millions.

(Data from Qimai Data)

Now the number of new downloads of Qimao is stable at around 300,000 per day. Qimao achieved this remarkable result mainly through two strategies: channel distribution and user communication :

First of all, in terms of channel placement , Qimao has made considerable investments in mainstream apps and offline advertising, and has also worked hard on ASO optimization. Its keyword coverage is twice as good as Tomato Reading, a similar product of Toutiao:

(ASO comparison: the top picture is Qimao Novel, the bottom picture is Fanqie Novel)

In terms of user communication , Qimao has copied the gold coin master-apprentice system of Qutoutiao. You can get cash rewards by inviting friends and gold coin rewards by submitting to friends through daily tasks. The specific gameplay is broken down as follows:

When a new user enters the App for the first time, a strong pop-up window will be used to remind the user to collect cash and gold coin rewards, activate the user to enter the task center, attract new users and complete daily tasks, and a large number of users who have been trained by such rewards will use their activation codes for natural fission propagation.

(Strong pop-up reminder for the first time entering Qimao Novels)

Moreover, from a marketing perspective, the free reading model is also a direct stimulus to users who have long "paid for everything they read", and it provides a natural channel for dissemination.

It is worth noting that, unlike Qutoutiao, Qimao’s gold coins and cash are not connected. Simply put, cash is only a reward for attracting new users, giving users intuitive stimulation, while gold coin rewards are more of a means to activate and retain users. This practice of not connecting the two, coupled with the fact that gold coins must reach a certain amount before they can be withdrawn, has also reduced the cost of attracting new customers to a certain extent.

(Gold Coin & Cash Withdrawal Page in Qimao Novels)

2.1.2 Business Model

Qimao conducts channel placement and gold coin gameplay, and recovers to a certain extent through in-site advertising.

There are two ways to advertise on the site:

First, it is achieved through fixed ads at the bottom of the reader and full-page ads displayed every 8 pages; second, gold coins are obtained by watching video ads/or reader ads are exempted.

Compared to other free reading apps that pop up ads after reading 3 or 4 pages, Qimao's approach of fixed ads at the bottom of the page + less frequent display of global ads is obviously more suitable for users' reading experience.

(Reader Ad)

（Watch video ad & task center）

So to sum up, Qimao's business model is as follows:

Through refined channel delivery and gold coin-based gameplay, we continue to acquire new users, maintain higher ad viewing traffic, generate revenue and continue to invest, in an endless cycle.

However, Qimao's approach will lead to a problem. That is, as it continues to develop, more users may not only not want to pay (this is the existing user psychology of free reading), but also want to make money while reading novels (this is the new gold coin gameplay added by Qimao).

Users will flow to where the profits are greater. When models and contents are converging, users can only be attracted by distributing more money.

From the data, we can see that Qimao now has 300,000 new users per day, which puts it behind other free reading platforms with a similar volume of tens of millions. Qutoutiao’s gold coin system is a good way to play, but from the perspective of user growth, the ROI may not be as cost-effective as more refined delivery channels. Refined delivery will be further discussed in the following Midu analysis.

(Data from questmobile)

2.2 Tomato Novel

2.2.1 User Growth

(Data from Qimai Data)

Tomato Novel belongs to ByteDance. On the eve of the Spring Festival, it had an intensive channel placement following Toutiao's full-family bucket, and its ranking soared. Then it continued to place ads since March this year. As of now, there are about 500,000 new additions every day, and both the new additions and ranking have surpassed Qimao.

Although we haven’t seen Tomato’s advertisements on the Toutiao App yet, as a child of Toutiao, Tomato has made careful placements on Douyin. Taking the current Douyin theme called “2019 Must-Read Novels Here” as an example, the top-ranked videos are all soft advertisements for Tomato novels. Such advertisements also exist on Kuaishou, which shows the accuracy of Tomato’s target users for online placements.

(Tomato’s video promotion on TikTok)

Although no direct evidence of offline channel placement was found, referring to Toutiao’s previous placement of Watermelon, Volcano and other titles in third- and fourth-tier cities and trains, Tomato Novel was able to reach such a scale in a short period of time, which is inseparable from the promotion of these offline channels.

2.2.2 Business Model

Currently, Tomato Novel's advertisements are inserted between the text every 3 pages in the reader, and appear at the end of each chapter.

Currently, the "My Bookshelf" in the Toutiao Express App does not specify that it is a Tomato novel, but through the Toutiao account system login method, it can be guessed that if Tomato can help ByteDance further acquire more incremental users in the sinking market, and the product retention and new user acquisition costs are lower than the user value, then in the future the product may connect all its internal data to promote it.

(Tomato Novel Reader Advertisement)

In a Tomato Reading QQ group, I found that the Android version had a gameplay similar to Qutoutiao, but it has never been launched, perhaps based on revenue output considerations. Qutoutiao’s model will only increase costs, but for a product, it is better to achieve steady growth while ensuring the viability of the business model.

2.3 LianShang

(Note: The Android version has two apps, "Lianshang Free Reading" and "Lianshang Reading". The former has less content that requires coupons to purchase, and it is also the new app that Lianshang is currently promoting. Therefore, the following analysis will focus on Lianshang Free Reading)

2.3.1 User Growth

With 23 million monthly active users, LianShang Free Reading is the leader in the current free reading market and the first free reading product. Backed by the LianShang Group, the user growth of LianShang App is mainly composed of the following three parts:

(1) Wi-Fi Master Key Traffic Diversion

Wi-Fi Master Key, which also belongs to the LianShang Group, currently has 900 million users and has a very obvious traffic diversion effect. According to an interview with Wang Xiaoshu, CEO of LianShang Literature, 30% of the traffic comes from Wi-Fi Master Key. Wi-Fi Master Key has an entire tab to support it, and it has also run a promotion where you can get cash for downloading. In the early days, it was a strong source of user activation for LianShang Free Reading.

(App Annie 2018 global app analysis, Wifi Master Key ranked 9th in terms of monthly active users)

(Wi-Fi Master Key reading portal & new customer incentives)

(2) Multiple matrix products guide each other

LianShang's multi-matrix, its main product LianShang Reading, and its sub-products LianShang Free Reading and LianShang Reading Girls Edition have all achieved good results.

(3) Channel placement

The LianShang team includes core members who were previously responsible for the commercialization and user growth of Wi-Fi Master Key. The previous channel delivery model can be reused to a certain extent in the promotion of LianShang Literature. In addition, Wang Xiaoshu, CEO of LianShang Literature, said that they are now increasing their efforts in channel investment.

2.3.2 Business Model

Unlike other companies that adopt a completely free model, even Lianshang Free Reading has a small amount of paid content that requires users to have enough points to unlock.

LianShang adopts the "free + paid" model. For example, LianShang purchased 100 books, of which only 20 were frequently browsed by users. These were paid for and the remaining 80 books that were not profitable were given to LianShang for free and monetized through advertising. LianShang Literature is good at machine distribution and can better promote the conversion of paid content by exploring user preferences for free:

2.4 MiDu Novels

2.4.1 User Growth

(Ranking data comes from Qimai Data)

MiDou was launched in July 2018 and began to be promoted in early August, with a significant leap in its ranking on the AppStore. The current average daily new downloads can be maintained at around 650,000. One particularly interesting point is that the user-added product mechanism that was proven to be very effective on Qutoutiao did not appear on Midu. Please think about why this is the case?

The first thing is to consider the interests. Qutoutiao’s gold coin master-apprentice system uses real money to “purchase” users, and the entrance to the master-apprentice system is placed in various locations in the product, which takes up advertising space.

In the consideration of Tan Siliang, the founder of Qutoutiao, Midu's advertising space can be used for other purposes. In addition, they have their own mature channel delivery measurement mechanism, so investing in channels will bring more new revenue than putting a master-apprentice gold coin system in the product.

Secondly, the tones of Midu and Qutoutiao are different. Each innovation point is applicable to different products. For example, for reading short content like Qutoutiao, it is acceptable to make gold coins as a game-like gameplay, but we do not want to interfere with immersive reading such as long reading.

In addition, a consideration of user psychology is this: when information is free to read, subsidizing users is an effective way to attract low-end users, but when reading novels requires payment, free has become a kind of welfare and subsidy, which has subverted the industry. "Completely free" is already attractive enough to users.

Based on the above considerations, Midu did not adopt the model of Qutoutiao. And because it does not rely on the power of Qutoutiao, the user overlap between Midu and Qutoutiao is only 5%.

Now, Midu's growth rate has surpassed that of Qutoutiao. With almost no traffic from the Qutoutiao App and relying mainly on its own customer acquisition, it has acquired 40 million new activated users in the past six months. It took 154 days for its DAU to exceed 2 million, and it took 180 days for Qutoutiao. After half a year, Midu's DAU has exceeded 5 million.

How did Midu achieve this result? In the early days of its launch, Midu directly began to purchase traffic for promotion in lower-tier channels. Everyone is always talking about channel sinking, how does it work? We can see this from the example of Midu promotion:

It is already a standard feature to place ads in national-level short video apps such as Douyin and Kuaishou.

Later, Midu also placed advertisements on trains.

Words like free and save money are naturally a sweet arrow piercing the heart of users.

Furthermore, according to feedback from a classmate on Zhihu, he, who lives in an 18th-tier city in Shaanxi, also saw the Midu advertisement on the local TV station. Behind the channel expansion to buy traffic is a very important task that Qutoutiao did in 2018: optimizing their growth engine.

Qutoutiao's growth engine has two parts. The first part is to establish a complete set of data and algorithm-driven mechanisms. Starting from the source of customer acquisition, they connect all the data, and then provide real-time feedback and adjustments, including a series of processes such as advertising materials and subsequent landing pages. Finally, technical means are used to optimize Midu's customer acquisition costs. This mature mechanism is also the main driving force behind Midu's growth.

The second part of Qutoutiao’s growth engine is their “viral channel”, which is the way to spread viral fission through social media - that is, Qutoutiao’s gold coins + mentor-apprentice system.

2.4.2 Business Model

Although Midu has not achieved the same fission as Qutoutiao, it has gone a step further and created the "ad-free" gameplay and user appeal based on the currently popular "free reading" product model and user appeal.

There are two ways to avoid ads on Midu. First, you can avoid ads by purchasing membership services:

The second method is to earn points by completing tasks, and use the points to enjoy ad-free viewing for a corresponding period of time.

This type of task-based gameplay essentially avoids the direct costs brought about by the gold coin system. By taking advantage of the ad-free privilege, we can also learn from it and see if we can use this type of incentive as a communication method.

Recently, many people have pointed out that Midu's growth momentum is not as strong as before. Indeed, Midu has been ranked outside the top 30 in the AppStore rankings recently. In March this year, the number of new users increased by only 6% month-on-month:

(Data from iResearch Index)

In fact, this situation is the result of Midu’s product strategy decision. In an interview with Shen Xiang, Qutoutiao CEO Tan Siliang said: "Our basic algorithm is to recover the money within 6 months, an average of 6 months. I look at the single economic model. For example, if a user acquires 7 yuan, we look at his daily ARPU (average revenue per user) value of 40 to 50 cents, but he may not come every day, so I look at his retention decay. Then I look at the average advertising revenue contributed by a new user within 6 months to see if it can offset the new costs, content costs and all other costs."

For Midu, revenue consists of the following components:

Currently, Midu’s comprehensive customer acquisition cost is 6.5 yuan. In order to maintain a basic situation, the current customer acquisition cost must be earned back from the long-term user ARPU value. Therefore, controlling channel delivery costs and refining delivery, while optimizing in-App advertising recommendations and membership mechanisms are Midu’s main strategies now.

2.4.3 Qutoutiao Model

This allows us to summarize the four-stage product theory of Qutoutiao:

• The first stage is to propose a concept;
• The second stage is product verification, which is the idea of ​​lean entrepreneurship;
• In the third stage, if the model is verified, efforts will be made to achieve growth quickly;
• In the fourth stage, the product is launched and commercialized.

Observing the product iterations of Midu over the past six months, it is basically following this rhythm.

The free reading model has long been proven. In the early stages, Midu improved the basic experience and put up advertisements, and then gradually put up a large number of books to enrich the content library. In addition, it quickly increased the number of new users from the beginning to drive advertising.

After the model is verified, new additions become a secondary consideration, and how to maintain revenue balance becomes the main goal. Therefore, Midu started to provide members with ad-free functions and earn Mi Beans by completing tasks to exchange for ad-free coupons. Midu, which has been online for 9 months, has now begun commercialization.

III. Research Summary

To sum up, this survey on the growth of free reading users mainly answered three questions:

Question 1: Is the free reading model feasible?

From the user's perspective, for too long, people have tried to read a novel and then paid for the subsequent chapters. The eternal truth is: spending money is unpleasant, and free is pleasant. So even though there are a lot of advertisements, the fact that it is all free is extremely attractive to users, especially those in third- and fourth-tier cities.

In addition, we have reason to believe that there are still tens of thousands of users who are blocked by charges and who can use innovative ways to change the business model. Before the rise of free reading, there was a trend of games with some lag, and the whole set being purchased becoming free. Valuable things have the value of lowering the threshold, such as digital reading.

(Who wouldn’t be tempted by such publicity?)

In addition, the free reading apps now mainly focus on online novels. This type of article can be mass-produced and has low content quality, but it can still give users a sense of pleasure when reading. During the immersive reading in the reader, a highlighted advertisement is inserted every few pages, which is a first-class advertisement in terms of browsing effect.

The balance between customer acquisition costs and advertising revenue is the main problem facing free reading. Behind the rapid growth of apps like Qimao is huge capital investment, and in this regard, Qutoutiao's Midu is clearly moving faster than other free reading apps.

Question 2: How do free reading products grow so quickly?

Although we are reluctant to admit it, we can see from the above that the main reason why free reading apps have achieved such high user growth is not due to the product gameplay and functions. For a long time, we relied on spending money to place orders through channels. Qutoutiao has previously established an advertising technology company, and Lianshang has also promoted national-level products such as Wi-Fi Master Key. They are well versed in or have close relationships with channel networks in various places, and their cost accounting is also extremely detailed.

So we always talk about the sinking of channels. Aren’t you curious about the sinking of channels and how the channels sink?

Channels such as third- and fourth-tier hospitals, taxis, trains, Douyin and Kuaishou have always been there, and the users who interact with these scenarios have always been there. The so-called channel sinking is that Internet companies are now increasingly aware of the process of using these existing channels to deliver products and using various benefits to encourage consumers to download and use apps.

Of course, free word-of-mouth spread of the product among users outside third- and fourth-tier cities is also a driving force. In terms of product mechanism, the Qutoutiao model is a proven and very effective method for fission, but it is not a panacea for user growth. For example, it is now basically dead.

The Qutoutiao model is not a panacea - for example, Chatbao, which died miserably, was briefly on the list when it was released in January this year, but has been declining ever since. It has now fallen outside the top 300 on the social list. Therefore, compared to directly giving users benefits to share and invite friends, the exposure efficiency is indeed lower than channel delivery.

(Data from Qimai Data)

When it comes to free reading products, each company is competing on the efficiency of their channel distribution and monetization model.

Question 3: What can we learn from this?

For free reading products, activating users to quickly enter the reading state is an important process. Taking Midu as an example, the top ten authors account for less than 5% of the traffic. Relatively speaking, most users are not particularly picky about text and would rather choose to read content that suits their taste. For this reason, in content guidance, you can simplify the tags and directly put them into the content:

(Left is Tomato Reading, right is QQ Reading)

(Category comparison - reprinted from the Bird Uncle Notes website)

In addition, I do not recommend using a cash-based gold coin system like Qimao, as it is not cost-effective. In fact, based on the existing in-site advertising system that is as flexible as possible, we establish privileges such as ad-free membership, and then use membership benefits to attract users through methods such as sharing lottery draws.

Or we can replace the concept of cash with ad-free benefits, where users can earn points by completing tasks such as sharing and attracting new users, and redeem points for benefits.

Author: Dylan Li Bo

Source: Dylan Li Bo