Taking Qutoutiao as an example, let’s look at the traffic value of the sinking market

Before the concept of "sinking" appeared, the market was more concerned about "high net worth individuals".

But in fact, the Internet traffic entrances in first- and second-tier cities are approaching saturation, and various giants are focusing their attention on the sinking market.

● In 2017, Huawei announced that it would cover 2,000 counties in China that year, following in the footsteps of OPPO and Vivo to expand physical sales networks in small and medium-sized cities.

● Last year, Suning opened more than 4,600 retail cloud franchise stores across the country, covering 1,500 districts and counties and 3,100 townships, and sold 7.61 million home appliances and 3C products to township and rural residents.

● This year on June 18th, Alibaba restarted Juhuasuan and laid out its strategy for the lower-tier markets; Kuaishou cooperated with JD.com, bringing together 700 million old friends and tens of millions of influencers to help JD.com tap into the lower-tier markets.

All these trends indicate that the value of downstream traffic, which was not valued in the past, has now become valuable. What is the value of sinking traffic? How to reach this group of people efficiently?

"Sinking Value"

The sinking market first corresponds to the 80% of the population and 97% of the country's land area that have been ignored by Internet companies for a long time.

Outside the first-tier and new first-tier cities such as Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, and Nanjing, are what the "mainstream voice" calls the "five bad outsides". This vast land area accounts for more than 97% of the country's total area and more than 80% of the population. There are nearly 300 prefecture-level cities, 3,000 county towns, 40,000 townships, and 660,000 villages, which constitute the sinking market that gave birth to Pinduoduo, Qutoutiao, and Kuaishou.

As the "last mile" of network infrastructure in poor and remote areas is opened up, the "digital divide" is eliminated, and the number of Internet users in the sinking market continues to expand. iResearch data shows that the average person in the sinking market has 0.5 mobile devices, and the size of Internet users accounts for more than half of the total size.

The fertility rate is also a clear advantage that the sinking market has compared to first- and second-tier cities. The fertility rates in third- and fourth-tier cities are mostly higher than the average level, and the proportion of responses to the two-child policy exceeds 65%, while the fertility rates in most first- and second-tier cities are below the average level, which will affect the future consumption power structure to a certain extent.

Mobile Internet users in third- and fourth-tier cities account for a high proportion and grow rapidly

Image source: Cool Goose User Research Institute

Although the sinking market is vast and has a large population, its nickname "outside the Fifth Ring Road" has a vague meaning of "contempt". However, contrary to previous stereotypes, the “five bad people” are not synonymous with low income and low consumption.

Although their income is not high in absolute terms, their spending power and willingness are far beyond imagination. A report released by the Chinese Academy of Social Sciences shows that 66.14% of netizens in the sinking market are willing to consume within their means, a figure even higher than the 61.87% in first-tier cities.

Let's look at the comparison between urban and rural residents. According to the data from the National Bureau of Statistics, after excluding price factors, the growth rate of disposable income of rural residents has been higher than that of urban residents in recent years. The actual year-on-year growth rate of per capita consumer expenditure of rural residents is higher than that of urban residents, and the gap is widening.

The “scissors gap” between urban and rural residents’ consumption growth rates is emerging

The reason for this is that people in third- and fourth-tier cities and below and in rural areas have less work pressure than people in first- and second-tier cities, and thus a slower pace of life and more free time. With various Internet applications competing for users' time, the sinking market is undoubtedly an excellent target.

In addition, housing prices are also a decisive factor. Tan Siliang of Qutoutiao once told "Shen Xiang" (click on the text to read the original text) that there are many misunderstandings about the sinking market. People think that first-tier cities are richer and more willing to buy things. Frankly speaking, no. Users in second- and third-tier cities actually have a lot of disposable income. The vast majority of people in first-tier cities are under pressure to buy houses, and the pressure on disposable income is relatively high. However, residents in second- and third-tier cities have little pressure on housing.

Image source: New Economy 100

Low housing prices are a sufficient condition for consumption prosperity. In a comparison of several cities with large differences in housing prices between new first-tier and second-tier cities such as Changsha, Wuhan, Chengdu, and Xi'an, Changsha, with its low housing prices, has the highest ratio of per capita consumption expenditure to disposable income of urban residents, while Nanjing, with its highest housing prices, has the lowest ratio.

Tan Siliang also pointed out in an interview with Shen Xiang (click on the text to read the original text) that people in first-tier cities are well-informed, so their sensitivity to advertising is very low. In addition, there are too many choices of cultural and entertainment activities, making it difficult for advertisers to reach them. On the contrary, users in third-tier cities and below are more easily influenced online because they have very little offline entertainment, and have fewer offline options and products to choose from.

This is indeed the case. The sinking market is becoming a new growth engine for Internet companies. For example, Alibaba’s financial report in May mentioned that more than 77% of the 100 million new users of Taobao and Tmall in the past fiscal year came from third-tier cities and below. As consumption concepts become more mature, users in the sinking market are no longer only concerned with low-priced hot items. The "9.9 yuan with free shipping" that does not require quality is no longer a hot item. The increased attention to quality and reputation has prompted the sinking market to upgrade consumption, resulting in the influx of more mainstream platforms.

At the same time, as Internet companies begin to explore the sinking market, new consumption is also becoming popular. Many consumer markets such as travel, food delivery, tourism, hotels, movies, and marriage are sinking. In the tourism market, the Fliggy report shows that the number of trips by users in third- and fourth-tier cities increased by more than 30% in 2018, and the growth in both domestic and outbound tourism was higher than that in first- and second-tier cities.

"Take Qutoutiao as an example to see the traffic value of the sinking market"

70% of Qutoutiao’s users come from lower-tier markets. Let’s take Qutoutiao as an example to see the “power” of the lower-tier markets and the efficient ways to reach this group of people.

Before Qutoutiao came into view, for a long time, because of the firm belief in the "80/20 rule": 80% of the value will be generated by 20% of the population, companies and investors ignored the "value" of the sinking market and focused the development plans of the Internet around the "core" groups such as first- and second-tier cities. This cognition did not change until the "Four Heavenly Kings of the Sinking Market" appeared one after another.

In 2016, although he knew it was too late to start developing information apps, Tan Siliang still decided to enter this field. At that time, similar products such as Toutiao and Yidian Zixun were already on the market. He then chose to enter the market from a bottom-up perspective. Different from the traffic distribution sales model of the above two apps, he focused on the sinking market and adopted a social relationship chain-based dissemination model that was easier to reach a large number of users.

Tan Siliang is well aware that the core of traditional information flow products is recommendation. However, the weak membership system will make most products become reading tools for users, making it difficult to further tap into user value. Ultimately, they will only fall into the dilemma of buying volume from channels and then distributing it. Most of Qutoutiao's users are acquired through social relationship recommendations and split-type dissemination, plus gold coin rewards, and good content to enhance stickiness. This solves the drawbacks of the traditional model and is in line with the characteristics of the sinking population.

At that time, the WeChat dividend was exploding, and Internet users in third-tier and lower cities began to access mobile Internet through smartphones, which led to Qutoutiao's initial leap in users.

According to the first quarter financial report of 2019 released by Qutoutiao in May this year:

● Its quarterly average monthly active users exceeded 100 million, reaching 110 million, a year-on-year increase of 297.4% and a month-on-month increase of 18.7%.

● The average number of daily active users for the quarter was 37.5 million, a year-on-year increase of 231.5% and a month-on-month increase of 21.4%.

● The average daily usage time of daily active users was 62.1 minutes, an increase of 91.1% compared to 32.5 minutes in the same period of 2018.

In this way, after acquiring a large number of sinking users, Qutoutiao has become a reliable entry point for brand owners to reach the sinking market.

The cooperation between Redmi and Qutoutiao is an example.

In mid-March, following Douyin, Redmi and Qutoutiao launched a new product, Redmi7. This collaboration is the joint launch event with the largest number of mobile phones given away in Xiaomi's history, with a total of 777 Redmi7s given away.

In the cooperation with Redmi7, Qutoutiao used a three-pronged approach of precise content push + group-buying fission activities + advertising placement. Within a week, it brought 7.34 million reservations for Redmi7 and more than 500 million brand exposures, successfully achieving brand and effect integration.

There are not many cases like Qutoutiao that can help brand owners successfully reach low-end users. Internet players who are doing well in first- and second-tier cities will inevitably encounter problems of acclimatization when they want to acquire low-end users.

Alibaba has been trying to expand into rural areas to operate Taobao since 2014. Five years later, the Village Taobao Station was transformed into a brand store, marking Alibaba's first failure in expanding into rural areas. In 2015, JD.com launched an agricultural supplies channel, and in 2017, it announced a million convenience store plan. As a result, in 2018, Du Shuang, head of JD.com's million convenience store plan and vice president of JD.com's new channel, announced his resignation, and JD.com's expansion route was temporarily interrupted at that time.

Many companies have spent a lot of effort in the sinking market, but users are as elusive as the moon in a well in the water.

At this time, it is extremely important to choose a first-tier sinking entrance.

In June this year, Qutoutiao launched a joint sinking plan, jointly investing with brands and sharing media resources in order to achieve wider coverage and more precise reach. At present, Qutoutiao has joined forces with 11 first-tier brands such as AutoNavi Maps and JD.com to test the "joint sinking plan."

What is worth mentioning recently is that during the 618 period, Qutoutiao and Tmall carried out in-depth collaboration in brand placement and content topic planning.

This is a joint content collection activity with the theme of "Ideal Life, Casual Fashion".

Different from the "rough buying volume" method previously adopted by brands in the sinking market, this activity starts from the demands of the sinking population and builds a stage on Qutoutiao for expressing aesthetic preferences, making fashion more "down-to-earth" and inspiring users to express their own fashion concepts freely.

This sense of "participation" and "closeness" is real and reliable. It is understood that the activity has attracted more than 500 original creators on the Toutiao content platform to participate in just 5 days of its launch. Big Vs such as Mr. Xu from Shenyefawu, Fashionweek official, and TOPWOMEN Fashion Notes have all contributed to the content. Through precise content push, we ultimately achieved the effect of over 2,000 entries, a total content exposure of 50 million, and a total reading volume of 10 million.

From this, we can see that the powerful demographic dividend of the sinking market, the production of high-quality content by UGC/PGC, and the fission propagation based on social interaction among acquaintances have jointly created the huge marketing value and potential of Toutiao.

This kind of value and potential is also an important help in helping companies tap into the commercial value of the sinking market in the second half of the Internet.

Author: Xiaotian

Source: Sound ( deep-echo )