Why watch live broadcasts on Xiaohongshu?

Xiaohongshu needs to break out of its niche.

For content communities, only by breaking out of the original niche circle and breaking through the user ceiling can they seek greater development space.

As of the end of December 2020, Xiaohongshu had more than 100 million monthly active young users, of which 70% were born after 1990 and more than 50% were born after 1995, with 100 million searches generated daily.

In comparison, by the end of 2020, Bilibili's monthly active users had exceeded 202 million, Weibo's monthly active users were 500 million, and Zhihu's monthly active users were 75.7 million. Its benchmark Instagram has always had monthly active users of over 1 billion, and Xiaohongshu's 100 million monthly active users are far from enough.

The ceiling on the number of users, the lack of improvement in user activity, the single revenue channel, and the weak content moat are all the problems faced by other content communities, and Xiaohongshu is facing all of them.

1. After the new platform bonus

Planting grass is not an emerging business.

From the fashion bloggers and street photography experts of the "blog era" to today's beauty influencers, they have different names but the same model.

Brand marketing has evolved from hard advertising to soft advertising, and traffic has been connected from small Taobao stores to major e-commerce platforms. Brands are aware of the traffic dividends of new platforms first.

From professionals to amateurs, the trust that users originally gave to professional media has shifted to amateurs.

Beauty, skin care, and fashion are also the three top streams. The content is bright and beautiful, and the threshold for creation is low. Through a large number of exquisite pictures, users' beautiful yearning for an exquisite life is fulfilled.

It’s no different for a brand to start marketing on Xiaohongshu or develop operations on Weibo, Weibo and Douyin, and enter Zhihu and Bilibili.

Content platforms have entered the era of inventory, and major brands are eager to follow the trend of new traffic platforms. The rise of a new platform will inevitably attract many brands to join.

But then what? Instagram, which Xiaohongshu has always been benchmarking against, has created a content platform centered on picture sharing. It also uses pictures to show a beautiful life with heavy filters, achieving a shift from stimulating consumption to creating consumption.

Instagram's success is not only due to its pioneering model, but also due to the strong traffic support from Facebook, which is almost a monopoly.

After occupying a large proportion of the market size, the platform empowers itself to achieve accelerated growth.

Among similar models, has Xiaohongshu really created a business model, or is it just a new platform bonus? This is what Xiaohongshu needs to prove.

After 8 years in business, it achieved its first breakthrough during the epidemic, with monthly active users exceeding 100 million, but the user scale is difficult to support a higher valuation.

Xiaohongshu has always emphasized the "grass-planting" attribute of the platform and its advantages of high conversion and high repurchase rate.

Platform data shows that more than 80% of users are female consumers, of which consumers in first- and second-tier cities account for as much as 60%. This group of people prefer the grass-roots method and have strong purchasing power and high consumption willingness.

However, promoting products can bring in goods but it cannot build a brand.

Perfect Diary, a brand made famous by Xiaohongshu, has surpassed L'Oréal in marketing performance in the past three years. However, even with three times the marketing cost, it is still not as good as the slogan "L'Oréal Paris, you deserve it."

In 2020, Perfect Diary suffered a loss of 2.688 billion yuan. In 2021, Perfect Diary's investment efforts and sales performance also took a sharp turn for the worse and were not as good as expected.

Due to the huge losses caused by high marketing costs, Perfect Diary can hardly be said to be a success story in the marketing industry.

The mid-level influencers that Xiaohongshu is proud of are more like beauty salesgirls hidden on the Internet or early Meituan sales representatives.

The human cost of sales using the human wave tactic naturally far exceeds the brand’s own traffic.

On Xiaohongshu, the most successful brand is the world-renowned brand, Estee Lauder.

After the so-called domestic product craze, how many domestic brands actually remain? Putting aside the benefits of the new platform, Xiaohongshu’s ability to sell products is even more questionable.

2. Does the content community have a moat?

Another impressive data of Xiaohongshu comes from the massive amount of notes.

Data shows that about 90% of Xiaohongshu users search Xiaohongshu for research before purchasing beauty products, using it as a shopping decision-making tool.

Supported by high-quality content, the platform is pushed forward to transform from a simple content platform to a search tool.

Zhihu has built its content barrier by outputting a large amount of professional knowledge.

According to CIC's survey, Zhihu is considered the most trustworthy online content community and is widely regarded as providing the highest quality content in China.

Hupu, a vertical content community, has accumulated professional content to form a content barrier, but it has also created a community atmosphere of "no outsiders allowed".

Content can form a barrier, but the operating model forms the company's moat.

The user scale of a platform depends on the number of users and the duration of their use. After the user scale of content platforms has slowed down, increasing user usage time by improving content quality has become the focus of competition among various platforms.

In other words, the scale of platform users depends on the quality of content, and the quality of content requires the expansion of user scale.

Breaking the circle has become a necessity.

For a long time, Xiaohongshu’s image has been closely associated with “Internet celebrities”, which has limited the expansion of content types. Xiaohongshu is trying to change this.

The slogan changed from "Good Life All Over the World" to "Mark My Life", from the filtered life of internet celebrities to my real life.

The influx of young users is also changing the community atmosphere and injecting new vitality through their own lives.

Starting from advantageous content such as beauty, fashion, and skin care, we will enter other vertical content tracks with higher scale and traffic, and transform from a vertical community to a pan-category community.

At present, the category with the highest proportion of content on Xiaohongshu is "knowledge", followed by fashion, food, materials, travel, beauty, home, film and television, health, digital, etc.

• B station broke through the circle, on the one hand, relying on high-quality content to dominate the hot search, bringing traffic to B station;
• On the other hand, in terms of content, we need to break through the single "two-dimensional" and anime style and turn to video services that include all UGC content, that is, to broaden the content.

The success or failure of content expansion will determine the future of Xiaohongshu. From this perspective, Xiaohongshu’s biggest competitor is still themselves.

3. Why watch live broadcasts on Xiaohongshu?

Starting from August 2, Xiaohongshu will close the external link permission of products in the sales notes.

Including Xiaohongshu Mall and Taobao Tmall product links, the external link function of live streaming sales remains unchanged.

Xiaohongshu has chosen a more direct way to monetize, live streaming e-commerce.

In 2020, Xiaohongshu’s live streaming business was opened for public beta testing. In April 2021, the Xiaohongshu platform proposed to support anchors with traffic.

Let those who promote products be responsible for promoting products, and try to find a balance between user experience and profitability.

From innovative models to following the trend, change lanes in time before being abandoned by target users.

Live streaming has become an important way of e-commerce sales.

According to data from iiMediaResearch, the scale of China's live e-commerce market reached 961 billion yuan in 2020, a significant year-on-year increase of 121.5%. It is expected that the overall scale of live e-commerce will continue to maintain a relatively high growth rate in 2021, and the scale will be close to 1.2012 trillion yuan.

ByteDance started with short videos, connected e-commerce and payment, and created a new e-commerce platform through live streaming.

In October 2020, after Douyin cut off external links from Taobao, JD.com and other platforms for its live broadcast rooms, it forced merchants to build their own stores.

Public data from Douyin e-commerce shows that from January to December 2020, the GMV of Douyin stores increased 46 times, and the number of new stores increased 17.6 times.

Compared with live streaming e-commerce, content communities are far inferior in terms of both user ceiling and profit model.

Douyin’s success in the live streaming e-commerce field has made Xiaohongshu eager to try.

However, due to the lack of user scale support, the live streaming e-commerce business is not easy to do.

Douyin relies on the platform recommendation mechanism and user scale to strongly control the platform traffic distribution.

No matter whether they are top anchors or mid-level anchors, they all have to spend money to buy "traffic".

On the Alibaba platform, anchors are divided into two categories: Li Jiaqi, Wei Ya and others.

Alibaba’s huge traffic is the big tree that supports live streaming e-commerce.

Even Kuaishou’s 300 million daily active users find it difficult to support massive live broadcasts.

On Kuaishou, the Simba family contributes one-third to Kuaishou's live e-commerce business, and Kuaishou's monetization dividends are divided among the top Internet celebrities.

A live streaming e-commerce platform not only needs traffic, but also needs to control the balance of power between the anchors and the platform.

In 2020, Clour released the "2020 Visible Fan Value: Four Major Platforms KOL Fan Analysis Research Report" showing:

• Weibo and TikTok KOLs have between 1 and 10 million followers;
• Kuaishou KOLs have between 100,000 and 1 million followers;
• As for Xiaohongshu, 71% of KOLs have fans between 10,000 and 100,000, and the proportion of mid-level and low-level bloggers is as high as over 90%.

Compared with other types of KOLs, let’s look at the distribution of influencers invested by beauty brands.

Unlike the Douyin platform, the Xiaohongshu platform focuses on mid-level and tail-end influencers and pays less attention to top-level influencers.

This seems to be good for Xiaohongshu, as it will be easier to control the distribution of platform traffic and the traffic dividend will not be divided among the anchors.

But how big is the scale of traffic that Xiaohongshu has, so that it can take a commission like Douyin and not be abandoned by the top anchors?

More importantly, do users come to Xiaohongshu to buy things? Users use Xiaohongshu to make consumption decisions, but will they use it to shop?

Author: Blueberry

Source: Blueberry Finance