Xiaohongshu operation and promotion: user operation model and monetization!

I went to Hong Kong during the May Day holiday. I would like to say that this trip, led by my girlfriend, was almost entirely made up of routes, stores and restaurants recommended by Xiaohongshu. I deeply feel that I am an indirectly operated traffic, and as a product manager, I am very surprised that a platform can have such a profound influence on my life. But according to my observation, most of the traffic eventually goes to offline merchants, and the profit conversion rate of the Xiaohongshu platform is not high, which is a problem.

Founded in 2013, Xiaohongshu has gone through nearly 6 years of development and has now become a grass-seeking platform, social e-commerce, and traffic depression with star VC resources, a valuation of 3 billion US dollars in the D round, and 200 million users.

In 2000 days, the slogan has evolved from "Good things from abroad" to "Mark my life", as if it has expanded from a small space into a big world, a wonderful world supported by UGC content. All this is thanks to user operations.

Excellent user operation

It can be called excellent because it does three things well: entry point, user experience, and growth model.

Accurate traffic entry point

In life, everyone has had times when they need solutions to their needs, but the phrase “Baidu it” that we took for granted in the PC era has long been ignored in the mobile era.

Xiaohongshu seized the opportunity of this era and started to divide the mobile Internet traffic pie. There is a very important decision here. The platform’s positioning is “life”, an accurate entry point. It found an entry point for mobile search and developed into a service platform for the entire path of life search.

Why do users conduct life-related searches?

Because everyone encounters various problems in life, this is a very high-frequency demand, and there are definitely situations that have never been encountered or have not been solved well before. At this time, other people's experiences are just encyclopedias and guides to them. Obtaining search results quickly is the ultimate in efficiency, and the certainty it brings makes the user experience excellent.

How is content generated?

Naturally comes from UGC. The Internet world allows users to downplay their real identities, and everyone has the opportunity to constantly reshape their personality. Users seek a sense of identity by producing content and socializing, which is also the atmosphere of Xiaohongshu.

btw.1 Many people will post pictures and wait for others to post comments like “envy, envy”. This is a typical showing off mentality. The core of showing off is to find an audience to recognize one’s behavior, which is also a sense of identity.

The satisfaction brought by certainty and identity jointly influences a series of behaviors of users, including learning, imitation, production, and sharing.

Xiaohongshu has created a powerful content production engine through content supply and demand + user psychological needs . This is its first success factor in acquiring traffic and a precise traffic entry point.

Excellent product user experience

Acquiring traffic is the first step, and generating high user stickiness is the inseparable second step. Stickiness comes from user experience, which is composed of three aspects: basic product experience, content display strategy and social atmosphere.

1) Basic product experience:

I chose the core content display page in the product as the analysis object.

This is excellent product and interaction design capability. The interaction is simple and easy to use, the content is presented in a carefully designed sequence, the purpose is clear and it is very meaningful for learning.

2) Content display strategy:

Xiaohongshu’s content display strategy is user portrait (long-term) + real-time update (instant) .

Never underestimate every action on Internet products, whether it is clicking, swiping up and down, swiping left and right, or even daydreaming. The data collection model will quantify these actions into data and record them one by one.

User portrait is the comprehensive output of all actions during the user's life cycle, which is a long-term result. Its function is that when users do not have new important behaviors (for example: active search), Xiaohongshu can also present content based on user portraits so that users will not be disappointed with the platform.

In other words, real-time updates are instant responses when users take important actions. For example: When I search for "IG", when I return to the discovery page, e-sports related content will be immediately displayed according to a certain weight ratio.

"It turns out there is so much content that I am interested in here." This is also an important functional design to generate user stickiness.

btw.2 The new dimensions of user portraits generated by important behaviors need to be weighted and deweighted according to portrait iterations and the passage of time. I think there is still room for optimization in this regard.

Example: I have finished the college entrance examination for 8 years. 5 days ago, I searched for "college entrance examination" and until today, I occasionally received a super complete physics review material...

3) Social atmosphere:

This is the usual practice of current content platforms, introducing social networking to promote the generation of new content and transactions. To make a long story short, the reason why the social atmosphere is so good is that there is no obvious hostility within the platform, and the overall experience it gives users is a loving communication scene that makes people willing to stay.

Of course, this has something to do with the management style and methods of the platform.

Xiaohongshu's product experience is indeed excellent. It creates user stickiness through a combination of basic experience + display strategy + social atmosphere , which is worth in-depth study.

A time-tested traffic growth model

After creating a product experience with high user stickiness, the third step is to expand the pie and achieve scale growth. The traffic growth model, which lasted for six years, was the result of Xiaohongshu's full investment of resources.

Traffic = number of content categories × number of authors × number of works × number of views

1) Content categories:

The breadth of content categories covered is the result of the joint efforts of the platform and users. Xiaohongshu has always maintained a tolerant attitude in content construction. As long as the categories do not cross the red line, they can be allowed to grow, as can be seen from the slogan.

As for valuable categories, resources will be invested as positive catalysts to enable them to respond quickly and become traffic strongholds. Content categories interact with each other in three dimensions, and the growth plans corresponding to categories with different dimensional weights are different.

The significance of a hot-selling item that becomes popular overnight lies in attracting traffic; the value of a common item that lasts for a long time lies in retaining customers. Of course, there are commercial factors involved. Adding e-commerce functions from the original content platform means that Xiaohongshu must find profitable vertical services in the category.

2) Author:

Similar to product categories, the platform also has clear classification operations for user operations.

User stratification is based on the ability to produce and disseminate value. From this analytical perspective, social identity and platform identity have a high degree of overlap. The breadth and depth of their influence determines the value of their influence on the platform.

How strong is the ability of celebrity users to bring products?

Fan Bingbing once promoted a product to the public, which then caused the product to be out of stock worldwide, and even she herself couldn’t buy it. The potential value and profit prospects behind this make the platform's excitement hard to suppress.

The value of KOLs is to connect the upper and lower levels. In addition to their role in promoting content, they also lay the foundation for the atmosphere of the content platform. KOLs with similar category attributes can attract each other, allowing ordinary users who follow them to stay in the scenes they create and become high-quality traffic. As for ordinary users, you know.

3) Works & Views:

The work is the final output of the content on the Xiaohongshu platform, a carrier for the output of diverse value combinations, and an important component of the author's personality. Views mean exposure, and Xiaohongshu’s positioning gives it unlimited possibilities in terms of exposure channels.

Valuable works and multi-channel exposure are a standard combination that allows brands to gradually capture the minds of users and become the first choice for lifestyle searches.

The growth is profound and extensive. Xiaohongshu's model is extremely vital and scalable . It combines entry points and user experience to create an excellent user operation case.

Inefficient profit model

Every CEO of an Internet company will say something to their investors, partners, and employees:

“When we have traffic, we can make money.”

Similarly, the founder of Xiaohongshu said something

"Content is responsible for being beautiful, and e-commerce is responsible for making money to support the family."

Even the audience may have become numb to such routines, let alone investors. If a healthy business closed loop cannot be formed, it will inevitably become a failure case in future business analysis.

Business closed loop

In my opinion, the characteristic of an excellent business closed loop is that the platform can control the overall flow.

Although Xiaohongshu has a formed business closed loop, its ideal is full of hope but the reality is skinny. It has not established an absolute advantage and has been severely used as a promotion tool by capital.

1) Traffic construction costs are too high

In the previous session, behind every analysis I made lies an objective fact: cost.

Xiaohongshu’s operating pressure comes from excessively high costs. If a company fails to find an operating method that reduces costs while maintaining results, it is very likely that it will end up being acquired at a low price or even exiting the market.

2) Relatively weak profitability

The platform has spent huge costs to build traffic, but there is no good profit conversion rate, which is an even more terrible dilemma. Ultimately, the reason for inefficient conversion is still the lack of profitability, and sponsors have many alternative options.

Just as the closed loop formed by the red business flow in the above figure, the sponsor uses the hybrid model of over-the-counter brokers + Xiaohongshu to carry out commercial promotion, which has lower costs; and the profit is higher through the e-commerce revenue sharing of other platforms. This is how Xiaohongshu looks in the eyes of commercial brand marketers: low ROI.

Why are there alternative options?

1. Xiaohongshu itself has high operating costs and requires sponsors to pay for traffic. When the offer is above the market threshold, the psychology of looking for alternatives naturally arises.
2. There is little profit margin for stakeholders, which specifically refers to the authors of the output content. When hard work leads to low returns, it's natural for people to come up with a plan.
3. This is an objective competitor. There are thousands of e-commerce platforms. As long as they can make profits by diverting traffic from the value production chain, there will naturally be people doing such business.

The above content uses three "natural"s because for the market, this is like a story that has been written long ago. The daily development is clearly arranged, but the character Xiaohongshu does not accept its fate.

3) Trust endorsement needs to be built

This is a problem that every e-commerce platform must face and solve: credibility and authenticity.

Xiaohongshu once put forward some business rules that touched users and made sponsors laugh, such as: "The lowest price on the entire network."

Many sponsors expressed regret about this, saying that even if the platform does not make money, they still have to make money, so the final result is a low brand participation rate. This has given many counterfeit brands the opportunity to infiltrate the market. Cracking down on counterfeit and shoddy products is a persistent and costly risk control investment, and this has become one of the straws that broke the camel's back.

btw.3 If you really buy the "lowest price on the entire network", the first thing to consider is whether it is authentic. At the same time, I want to clarify that I am not criticizing Xiaohongshu. I am just pointing out the problem. If it is offensive, I am willing to apologize.

Excessive operating costs not only create a traffic depression but also put operating pressure on the business. In addition, the immaturity of monetization makes it unable to make ends meet, and there is also the need to build credit endorsement. This is the dilemma of Xiaohongshu.

A elusive solution

From Xiaohongshu's perspective, the reason why it is difficult to break through is because of the platform's complex business nature. It wants to create content and do e-commerce, but the two are easy to separate but difficult to combine. It is beyond Xiaohongshu's ability to conquer the entire empire on its own.

Development process

Xiaohongshu has gone through the development process from pure content to main e-commerce to content e-commerce. I believe it has explored many directions, but ultimately it has not seen the smooth road to success.

When you are simply creating content, you are in the stage of acquiring traffic. This process is successful, and one of the important reasons is that the content is free to users. Later, when doing e-commerce, it is the stage of trying to monetize. This process is probably impossible to achieve because the basic cost of building an e-commerce platform is difficult to cover.

Now, when doing content e-commerce and trying the "TT" model, the content must be made bigger and more comprehensive, and it is bound to become an indispensable media channel; e-commerce must be done in depth and thoroughly, and it must become a trading platform with continuously breaking through GMV and ROI. But to reach the day of success, the cost may be far higher than anyone imagines.

Business Essence

The commercial essence of content is timeliness, and users need to pay for the value of time. The platform helps users save time costs, and users need to pay a corresponding price. The most common models are paying for knowledge and watching advertisements.

The commercial essence of e-commerce is transaction, and users need to pay for the value of goods. The platform helps users save transaction costs, but users also need to pay a price, it just depends on how the remaining transaction profits are shared.

The content of Xiaohongshu is free, but ultimately its profits still come from advertising and e-commerce. As long as the essence is the same, then the competitors are the same. Content e-commerce is equivalent to creating a trading platform with symmetric information, which is an ideal model that can be imagined.

Then why don’t the giants do it?

Recognize the value

To run a good business, you must identify your high-value-added links and build them to the extreme, then find cost-effective solutions for the low-value-added links, and then combine the two to complete the business loop. The high-value-added part of Xiaohongshu is content, which is the carrier of commercial information. If you want to make stable profits through content, you must have a stable model.

I think the best model is cooperation. Xiaohongshu does a good job in the content, which is the link of information carrying and dissemination, and then entrusts the two links of information source and e-commerce service to partners with solid foundation and strong strength, and charges service fees from the transactions.

This has another benefit: it greatly reduces the concerns about losses and traffic interception caused by gray industries in the entire chain of its own business, and leaves the problem to professional partners.

Speaking of this, let’s take a look at the capital giants behind Xiaohongshu.

Um? It feels like a prophet.

It’s not that the giants don’t want to do it, it’s just that they know very well that someone else is already doing it, so in the end they just need to take over and do it, without having to do everything themselves. But as to who will be the final collaborator (jie) (guan), it’s hard to say.

The business world is always so cruel, and a practical product like Xiaohongshu has a precarious future. To save yourself, you must give up in order to gain, recognize the value, create high-value-added links, find good partners, and do a good business.

If you think about it carefully, if your ambition is not too big, there will be no difficult situation to break. But think about it again, if it didn’t have such ambition, there might not be Xiaohongshu today. Perhaps this is why the business world is so addictive.

Related reading:

1. Do you know the operation and promotion strategy of Xiaohongshu?

2. There are 7 ways to promote on Xiaohongshu. Have you ever made a mistake?

3. For promotion on Xiaohongshu, just read this article.

4. Xiaohongshu promotion: Xiaohongshu user growth methodology!

5.How to promote on Xiaohongshu? 2 program steps!

6.4 major strategies + 7 major skills, a comprehensive interpretation of Xiaohongshu promotion strategy!

7. It only takes 3 steps to attract traffic and promote Xiaohongshu!

8. Xiaohongshu promotion: Xiaohongshu’s growth path from 0 to 100-200 million users!

9. Xiaohongshu promotion method: How to promote effectively?

Author: XinG Zhenyu

Source: XinG Zhenyu