Notes on Xiaohongshu’s “commercialization” of promoting products?

Lei Jun, who became a soul singer popular on Bilibili with the song "Are you OK", has made his debut on Xiaohongshu in order to sell mobile phones.

As of July 25, the "newcomer" Lei Jun posted 31 notes in more than a month. His diligence is no less than that of bloggers who make a living by selling goods. In return, he has 18,000 fans and far more than 10 million user interaction data about Xiaomi.

When Lei Jun became popular on Xiaohongshu, we had to pay attention to this controversial platform again.

After the hit shows "Idol Producer" and "Produce 101" in 2018, Xiaohongshu quickly became the successor of Mogujie and Meilishuo, and with its reputation as a "treasure trove of grass-planting", it joined the "two Weibo, one Douyin, and one Hong" and debuted as a standard social media touchpoint.

The official disclosure of 85 million monthly active users and over 250 million users has doubled its value. At the same time, driven by the huge traffic, more and more related marketing around the traffic has come. Some e-commerce startups and R&D teams have added "Little Red Book promotion" to their main business, or directly transformed to Little Red Book marketing.

Before buying something, it has become a habit for many shopaholics to search for "planting notes" on Xiaohongshu. However, the answers to who wrote these notes and how the popular products were created are shocking.

Just as the founder Qu Fang described Xiaohongshu as a "gold mine", "many people want to dig it", the consequences of disorder are the rampant writing of "grass-planting" notes, false orders, data falsification, and rampant rumors... In addition, Xiaohongshu Welfare Club was previously exposed for selling counterfeit goods, and Xiaohongshu, which started out by word of mouth, is now being questioned by users.

Xiaohongshu is in a hurry to restore the trust crisis. On July 17, Xiaohongshu released the community anti-cheating report for the second quarter of 2019: an average of 4,285 fake notes were cleared every day, and an average of 18.6 fake accounts were cleared every 5 minutes...

In view of the various measures taken by Xiaohongshu in the past two months, from the "purge" of KOLs to the "militarized" management of MCN agencies, the outside world is curious about whether Xiaohongshu is eager to harvest traffic through management as the MCN agencies said, and what commercial reference paths Xiaohongshu, which has been upgrading all the way, can provide for community products.

"Perfect" business closed loop

There is a legend circulating in the world that only Maserati can witness how hard the Xiaohongshu bloggers work. If you search for "Maserati" on Xiaohongshu, you will find more than 2,000 notes, but in fact, Maserati's sales in China in 2018 were only more than 10,000 units.

According to a heavy user of Xiaohongshu, after hanging out on Xiaohongshu for a long time, you will see that the daily life of the girls is often like this: waking up from a 300-square-meter single-family villa every morning, enjoying breakfast under the Eiffel Tower, and checking in at popular Internet attractions around the world. Unlike most people who use "kingdom" to refer to their career, their biggest empire is famous shoes, bags and watches.

So, how did these girls reach the pinnacle of life: earning 100,000 yuan as a screenwriter for an online drama in their junior year; earning 20,000 yuan a month as an assistant to the general manager of a financial company in their senior year; earning 8,000 yuan a month as a part-time writer with zero foundation; achieving financial independence at the age of 20 and saving enough for a down payment at the age of 25...

In addition to being rich, they also need to be pretty and have a good figure. Their experience in the field of healthy weight loss is even more miraculous: the "enema weight loss method" and the "rubber band weight loss method" give fat people hope, and the "stretching and height growth method" makes short people crazy. One enema can pull out 8 kilograms of stool, 10 days of rubber bands can easily reduce 5 kilograms, 28 days of yoga stretching can increase height by 5 centimeters, and the freezing weight loss method (staying in a jar filled with liquid nitrogen at minus 190 degrees for 3 minutes) and the 21-day diet to lose 20 kilograms have once again proved that "the bolder the person, the more they dare to make up stories."

Maybe someone will say that this is an aesthetic issue, a problem of world outlook, and values, and it does not only exist on Xiaohongshu. However, if you pay close attention, you will find that the notes on stretching to increase height are linked to underwear, the notes on rubber band acne removal are linked to acne removal essence, and the notes on enema are linked to hemp oil and freeze-dried powder. What a perfect business closed loop.

At this point, someone may ask, are there no normal sharing notes on Xiaohongshu? Of course there are, but no one cares about them because of their mediocre effects. However, exaggerated notes appear in "Discover" because of their high interactions and high likes. There are often traces of advertising below these notes, in the text, and even in the comments.

Xiaohongshu’s official website introduces it this way: Xiaohongshu is a lifestyle platform and consumption decision-making portal for young people. However, when Xiaohongshu, which claims to be authentic, becomes a holy place for ignorant girls to seek unique secrets, a venue for "buyers" to show off their wealth, and a back garden for merchants to falsely promote products, and even the platform tries every means to obtain "vulgar traffic", then the platform has also become a promoter of certain aesthetics and values.

While Caishij Media was paying attention to Xiaohongshu, a breast augmentation death incident occurred at Dalian Yixing Medical, and the outside world once again questioned: Is plastic surgery, which has become very common, really safe? At the same time, some media found out that the hospital involved, "Dalian Yixing Medical Cosmetology Hospital", has an official account on Xiaohongshu. The account introduced the surgeon Zhang Jinglei in the incident as a "master craftsman" and a "nose sculptor", and the director of Dalian Yixing Plastic Surgery.

We have no way of verifying why Wang Li (pseudonym) in the incident chose this hospital and this doctor. We can only learn about it from her good friend: "She said...she also checked Yixing online and said Yixing is pretty good."

This cannot help but remind people of the medical incidents caused by paid ranking of advertisements on some search websites in previous years.

Now that the storm has arisen, the account named "Dalian Yixing Medical Beauty Hospital" has quickly disappeared from Xiaohongshu, and no trace of related content can be found.

There is no such thing as easy beauty in this world. Behind every promoted aesthetic concept there is huge commercial potential.

Fight monsters and level up along the way

Xiaohongshu was born in Shanghai in 2013. At that time, the two founders, Mao Wenchao and Qu Fang, found that there were many platforms for sharing outbound travel information on the market, but the field of sharing overseas shopping information was still blank. So they chose to start a business in this field. The first product they created was a PDF file called "Xiaohongshu Overseas Shopping Guide". At that time, it was inevitable that mobile Internet would replace PC Internet. Mao Wenchao and Qu Fang quickly launched an app focusing on overseas shopping UGC sharing at the end of 2013.

In the early stages of development, the platform needed to focus on content and gather brands, and as overseas shopping was on the rise, the two entrepreneurs chose to only share shopping-related content and required that community users must be "real" consumers. To this end, Xiaohongshu also designed a system that simulated the driver's license point deduction system, and any information that was not related to the real shopping experience would be blocked.

Since then, Xiaohongshu's community genes of "sharing beauty" and "truth" have been slowly amplified, and it has grown step by step relying on UGC. One of the contributors is the dozen or so official accounts strategically operated by the platform. These personified accounts will reply to users and even “take the lead” under their notes, thereby guiding users to participate in creation and sharing, creating a good interactive atmosphere.

The platform itself projects consumers’ emotions and desires onto KOLs or internet celebrities through the personalization of e-commerce, achieving the projection effect that the people being followed have similar experiences as themselves, thereby stimulating consumers’ desire to shop. For KOLs with high user stickiness, they can use their own personal charm or share their exquisite lifestyle to make their fans have endless fantasies, so as to attract users and stimulate consumption.

"E-commerce is responsible for making money to support the family, and content is responsible for being beautiful." Qu Fang's implication is that she hopes to monetize the traffic accumulated in the early stages of the platform through e-commerce.

In August 2014, Xiaohongshu launched its e-commerce business, adopting the "cross-border direct mail + bonded warehouse" model and directly cooperating with overseas brands or large traders. However, facing "predecessors" such as Tmall Global, JD Global Shopping, and Ymatou, and repeatedly exposed to problems such as counterfeit goods and information leakage, Xiaohongshu is not competitive in the cross-border e-commerce market. Xiaohongshu's user growth has also gradually entered a slow phase.

Time flies and it is now 2017. Lin Yun, who became famous with the movie "The Mermaid", spontaneously posted her first note on Xiaohongshu. Her fans experienced explosive growth in a short period of time, and she also established the image of a "straightforward and down-to-earth girl." Celebrities followed suit, promoting products while gaining the necessary "personality supplements", until Fan Bingbing joined and brought this wave of operations to a climax.

Xiaohongshu then struck while the iron was hot and received a Series D financing led by Alibaba in early 2018. It sponsored two phenomenal variety shows of that year, "Idol Producer" and "Produce 101", attracting a group of young users who are trendy enough and have strong purchasing power.

Relevant data shows that by June 2017, Xiaohongshu had accumulated 50 million users in four years, and by April 2018, this number had doubled to 100 million. According to official data, Xiaohongshu's current monthly active users have exceeded 85 million, nearly three times that of a year ago, and the total number of users has reached 250 million. People born in the 1990s and 1995s have become the mainstream users of the community.

The ultimate big boss is "commercialization"?

When the number of users accumulated to a certain level, Xiaohongshu, which was established six years ago, began to enter the commercialization stage.

Xiaohongshu’s content ecosystem is naturally close to brands and products, and e-commerce is the closest way to monetize. However, the high-investment model of building one's own logistics and warehousing did not bring equal returns. According to Caixin magazine, Xiaohongshu's self-operated e-commerce business failed to meet its 2018 GMV KPI of 10 billion yuan. Although Xiaohongshu's commission rate is several times that of Taobao, it did not make a profit until 2018. Later, Xiaohongshu opened up to third-party merchants in addition to its own operations, and the problem of counterfeit goods arose again.

Since being invested in by Alibaba last year, Xiaohongshu has gradually torn off the label of cross-border e-commerce and turned to focus on community operations.

First, at the end of 2018, after receiving investment from Alibaba, Xiaohongshu quickly connected with Taobao Mobile. In order to attract new customers, merchants needed to present richer content through the Xiaohongshu platform. For Xiaohongshu, this expands the DAU and facilitates the monetization of information flow.

Short videos + live streaming + e-commerce have become the mainstream trend in selling goods. This is the case with Douyin and Kuaishou, and of course Xiaohongshu must keep up.

In March this year, Xiaohongshu tried out the short video hey, and in June it began internal testing of the live broadcast function, inviting some experts to experience it, but it is still in the testing phase.

Like all content platforms, Xiaohongshu is also facing the phenomenon of bad money driving out good money due to the gray industrial chain of inflating traffic and counterfeiting that existed on Facebook and Weibo in the past. It is impossible for the platform to always "make wedding dresses for others", and it is even less likely to condone "black industry" to affect the commercial value of the platform. This can be seen from a series of tough measures taken by the platform in the past two months.

The first step is to target KOLs.

In May, Xiaohongshu upgraded its brand partner rules, raised the entry threshold for KOLs, and required brand partners to sign MCN contracts. KOLs who do not have brand partner certification and have not signed a contract with MCN will not be able to post advertisements. According to media reports, 15,000 celebrities were forced to downgrade to amateurs on the day the new regulations came into effect.

Another aspect brought by the brand partner platform is the quantification and transparency of data. It is conceivable that this is a fatal blow to "black intermediaries" and "watered" bloggers. At the same time, the Matthew effect in the industry has intensified, and the value of top KOLs has skyrocketed.

Next is the organizational management of MCN agencies: MCN agencies are required to pay a deposit of 200,000 yuan and set up a 12-point elimination system. Once an artist under an MCN takes orders privately, falsifies a cooperative relationship with a blogger, or falsifies data, his deposit will be deducted and the cooperation will be terminated for one year.

At this point, the relationship between the platform and the MCN agency became tense. MCN's dissatisfaction lies in that, on the one hand, Xiaohongshu's 200,000 yuan deposit is relatively high compared to the 100,000 yuan deposit of Taobao Live and JD.com platforms; on the other hand, the risk factor of the agency is too high. Some agencies are still in the stage of running-in with their artists. Once the details are released, MCN agencies may face huge losses due to the uncontrollable behavior of artists or brand clients.

Xiaohongshu’s official response to this is that the 200,000 yuan deposit was set to ensure that institutions can be honest and compliant when undertaking business, avoid skirting the rules, and improve the platform ecology.

At present, the partner trading platform has not yet been officially launched. According to China Business News, the brand partner platform MCN agreement shows that advertisers place orders through Xiaohongshu's brand partner platform, and the project is completed after the MCN agency uploads the brand customer's advertising notes. Xiaohongshu pays the MCN agency the project service fee on a monthly basis. The contract does not specify how Xiaohongshu will obtain income, but it does not rule out the possibility that it will participate in the profit sharing according to a fixed service fee ratio in the future. It is rumored that the service fee ratio will be around 10%.

In early July, some media reported that Xiaohongshu was negotiating a new round of financing of US$500 million, and its post-investment valuation would reach US$6 billion. This is not the first time that Xiaohongshu has been rumored to be raising funds in the short term. Earlier in late April, media reported that Xiaohongshu was negotiating financing at a pre-investment price of US$5 billion, and its post-investment valuation was between US$6 billion and US$8 billion.

If tearing off the e-commerce label is the keyword for Xiaohongshu in 2018, then accelerating the pace of commercialization is Xiaohongshu’s core strategy in 2019. However, for Xiaohongshu at this stage, compared with commercialization itself, finding a balance between ecological health and commercial monetization, and how to support its own valuation of up to US$6 billion are more urgent issues to consider.

Author: Ahe

Source: Caishi Media