How do iQiyi, Youku and Tencent Video monetize advertising?

Most products in the PC era have a clear product life cycle, and many have lacked traffic or have become outdated or eliminated. However, in the mobile Internet era, the only industry that has not shown a clear decline and can still occupy a stable and massive user base is the online video industry, in my opinion.

People need to watch movies, TV series and variety shows online. This is the basic form of entertainment for most people. This allows online video platforms to not only have existing PC and APP users, but also incremental users from China's nearly 400 million OTT smart TV households. This has led to an overall increase in traffic in the online video industry and has given it a scenario-based advantage across multiple terminals.

(Online video APP traffic has 845 million to 908 million monthly active users, with an Internet user penetration rate of over 70%, and the remaining users can actually be covered by other terminals)

The online video industry is basically dominated by the three giants "iQiyi", "Youku" and "Tencent Video" (referred to as "iQiyi, Youku and Tencent Video" in the industry), rather than other smart TV OTT manufacturers such as Haier, Hisense, Skyworth, Changhong, Xiaomi, TCL, etc., nor are they CCTV Video and Mango TV that have self-made content; a very important reason is that in addition to the huge traffic products of BAT in the camp that form a smooth link closed loop, iQiyi, Youku and Tencent Video also undertake advertising business with huge merchant resources.

This means that iQiyi, Youku and Tencent Video have both a to C (membership recharge) profit model and to B (advertising or digital marketing) revenue, forming a stable business model that stands on two legs.

Of course, the prerequisite for membership recharge is a steady supply of massive, high-quality, and fresh film and television content, which leads to the fact that iQiyi, Youku, and Tencent Video all invest hundreds of billions of yuan every year in the purchase or production of IP copyrights. Such high-cost operations have also caused the above-mentioned OTT manufacturers and second-tier online video platforms such as PP Video, LeTV Video, and Sohu Video to lose the capital to fight.

Compared with the "Medicine Can't Stop" model that relies on burning money to drive membership renewals, the advertising model is a business that can generate huge revenue without additional investment; it can also effectively commercialize the traffic brought by members and non-members; therefore, for iQiyi, Youku and Tencent Video, whoever can have a stable number of customers, delivery volume and consumption in the digital advertising business can truly take the initiative in traffic monetization.

1. Digital advertising monetization logic of online video platforms

Axing often sees some corporate marketing personnel asking online how to place advertisements on iQiyi, Youku or Tencent Video? Don’t think this question is naive. It shows that many companies are ready to give money to online video platforms to make money but can’t find a way to do it.

First of all, we must make it clear that the advertising and monetization of Internet content platforms, traffic media or developer apps now basically rely on digital advertising platforms, which is the so-called "DMP" (data management platform).

In Axing's opinion, DMP mainly involves two aspects of digital work:

On the one hand, digital advertising platforms are responsible for converting advertisers' advertising needs into advertising materials, which may be posters, H5, incentive videos, TV commercials, information streams and other advertising formats; and then matching these advertising materials with the users of the platform; during the delivery process, some will first be tested on a sample user group, and some will use different advertising materials for testing until a relatively satisfactory result is achieved. The person responsible for this job is called an "optimizer."

On the other hand, the DMP platform can digitize and visualize the effects and calculation methods of advertising, and can effectively track the user's consumption, clicks, and conversions, and perform digital advertising settlements based on different behaviors, which is the so-called "performance advertising" (for example, many companies settle based on the number of clicks, or CPC). In fact, advertisers can flexibly choose to place ads based on their own budgets, and can also make additional placements based on the results, which can ensure that risks are controllable and that results are achieved.

The three digital advertising platforms responsible for the performance marketing business of iQiyi, Youku and Tencent Video are iQiyi Qilin, Youku Ruishi and Tencent Advertising.

These three platforms actually play roles roughly equivalent to ByteDance's Massive Engine, Baidu's Fengchao System, Kuaishou's Magnetic Engine, etc. They are digital marketing platforms that generate revenue for traffic platforms. Compared with these companies, fewer people know about the business engines of online video platforms. A brief introduction is given below.

2. Differences between iQIYI QiLin, Youku Ruishi and Tencent Advertising

There are some similarities in the advertising formats of iQiyi, Youku and Tencent Video. For example, the advertising formats basically cover splash screen ads, pre-post or post-post ads, pause ads, banner ads, touchpoint ads, information flow ads, focus image ads and other formats; and the operating logic of the corresponding digital advertising DMP platforms is basically the same, but due to different traffic ecosystems, the corresponding functions and features are somewhat different.

(1) iQIYI QiLin

Strictly speaking, the Qilin system, a digital advertising platform responsible for iQiyi's performance advertising (the entire platform has now been upgraded to Qilin 2.0), is not all of iQiyi Qilin; iQiyi Qilin is actually also responsible for iQiyi's regional brands, advertising alliances, and large-screen e-commerce businesses. However, the importance of digital advertising business can be seen from the fact that Qilin is the name of iQiyi's entire marketing business department.

(The main business of iQiyi Qilin, official account: Reliable Axing Drawings)

In fact, iQiyi is the leader in the online video industry and has a greater traffic advantage than other companies. The advertising platform Qilin actually wants to label user portraits in multiple dimensions, so that the platform can match advertising materials more intelligently. Qilin itself makes targeted adjustments to changes in user interests and usage scenarios (ie RTA) to ensure more accurate targeting of advertising material packages; at the same time, it optimizes the settlement method (oCPX) according to the requirements of different advertisers.

(labeled dimension)

In addition, Qilin has also integrated the iQiyi Express Edition on the front end for incentivized video advertising, which is suitable for acquiring lower-tier users; it can build mobile websites or run mini-program ads on the iQiyi front end, which is suitable for brand malls, local life services, and sales conversion.

(2) Youku Vision

Ruishi introduces itself as "a programmatic marketing platform focused on the independent delivery of video advertisements for Youku and Tudou." Since Youku Tudou itself belongs to the large entertainment sector of Alibaba, its DMP data includes not only user data generated on the product side, but also Alibaba's e-commerce and user portraits of products connected through Taobao or Alipay accounts.

(Youku Ruishi DMP)

The characteristic of Youku Ruishi actually relies on the technology of Alibaba's data middle platform. It labels the attributes of cookies and online consumption behavior according to the user's ID and data management platform to match the corresponding advertisements. Although this can bring certain advertisers to Youku Tudou, for example, users can often see brand advertisements related to Tmall or Taobao on Youku; but the disadvantage is that it is difficult to develop a truly intelligent advertising recommendation system suitable for content platforms independently of Alibaba.

(Example of Tmall Double 11 advertising before the launch of the pre-roll ads on Youku)

(3) Tencent Advertising

Tencent Advertising is not just the digital advertising for Tencent Video, but also the platform responsible for monetizing the advertising traffic of all Tencent’s main products.

In fact, many people think of Guangdiantong when they mention Tencent Advertising monetization. Guangdiantong is actually based on the Tencent Advertising system and is mainly responsible for the monetization of social and content traffic products, and constitutes the main product of Tencent Advertising. In addition, Tencent Advertising also has external advertising alliances such as Youlianghui. The characteristics of Tencent Advertising's DMP provide advertising with relatively rich product delivery options and a variety of delivery auxiliary tools.

(Tencent Advertising DMP auxiliary tool)

Compared with other digital advertising platforms, advertisers on Tencent Ads can not only promote brands, products or applications, but also public accounts, mini-programs and other private WeChat account carriers; specifically, Tencent Video Ads are presented in an entertaining video format, and advertisers can place APP splash screen ads, patches or landing payment ad pages on Tencent Video.

(Advertisers choose Tencent advertising promotion purpose)

According to Tencent's Q2 2021 financial report, advertising revenue in the second quarter was 22.83 billion yuan, a year-on-year increase of 23%, of which social advertising was 19.5 billion yuan and media advertising was 3.3 billion yuan; Tencent's online advertising revenue in fiscal year 2020 was 82.3 billion yuan. Compared with ByteDance's advertising revenue of more than 180 billion yuan last year, Tencent appears to be more restrained in monetizing advertising traffic.

In addition, because Tencent’s own products have been pursuing internal horse racing competition for many years, many links have not been opened up, so it has not formed a huge "middle-office" engine similar to ByteDance; but Tencent Advertising is still a unique global marketing platform in the online video industry.

3. iQiyi, Youku and Tencent Video face fierce competition from short video platforms in terms of advertising revenue

According to QM data, the online video industry's advertising spending in the first half of 2021 reached 14.29 billion yuan, mainly from Tencent Video, iQiyi, Youku, etc.; lagging behind the 50.37 billion yuan spent on short videos in the first half of the year and the 25.54 billion yuan spent on news and information.

Moreover, considering that among the news information platforms such as Toutiao and Baidu, in addition to the text and image information flow, there are actually a lot of short (medium) video content, among which Toutiao is Xigua Video, and Baidu APP is Haokan Video, both of which are post-roll ads; this means that the emergence of short videos has indeed caused a substantial impact and a significant compression on the advertising revenue of online videos.

Although the advertising revenue of these three companies is still relatively growing and they are mainly benefiting from the growth dividend of China's digital advertising business, they have fallen behind Douyin and Kuaishou in terms of market share and have lost a large number of potential incremental customers.

In fact, the three apps of iQiyi, Youku and Tencent Video are all focusing on promoting short videos or small video content, and have also matched corresponding information flow advertisements to attract application delivery, but have not fundamentally impacted the advertising share of short video platforms.

The main reason is that the user scale of short video platforms has exceeded 944 million, accounting for 93.4% of the total Internet user data, and netizens spend more than 2 hours watching short videos, which is actually getting closer and closer to the length of time spent by online video users; and because short videos themselves are more fragmented, users' daily active data on short video light entertainment is higher, which is conducive to the digestion of advertising.

Another major reason is that the specialized digital advertising management platform created by the short video platform can fully focus on the traffic of the product itself and can provide relatively refined customer service follow-up.

Douyin's information flow is a big money-maker. Douyin's advertising revenue target this year is 150 billion yuan, which actually exceeds the total advertising revenue of iQiyi, Youku and Tencent Video. In addition, ByteDance also has Pangolin to compete with BAT's advertising alliance. From this, we can see that Douyin itself has become ByteDance's traffic and content integrator, and has also seen the opportunity of digital advertising where the traffic of BAT products is relatively scattered and cannot be focused on serving specific companies.

The strength of Kuaishou should not be underestimated. Some media expressed doubts when Kuaishou was engaged in information flow advertising business in 2017. However, after several years of commercialization and Kuaishou's brand upgrade, Kuaishou's online marketing business (mainly advertising revenue) reached 21.9 billion yuan in 2020, with a growth rate of 19.5 billion yuan. In Q4 last year, advertising revenue exceeded live broadcast revenue. In 2021, Kuaishou's Q2 advertising revenue reached 9.962 billion yuan, a year-on-year increase of 156.2%, accounting for 52.1% of revenue. It can be seen that more and more brand merchants have realized the marketing value and advertising conversion potential of Kuaishou, which is inseparable from the promotion of the magnetic engine behind it.

How to increase online video advertising revenue has become a top priority for the three major platforms.

How to break out

In my opinion, in terms of advertising revenue, iQiyi, Youku and Tencent Video need to strengthen the following three aspects in order to form differentiated competition among short video platforms and give full play to their own advantages:

(1) Highlight the creativity of IP-integrated advertising works. Online video platforms have many original IPs and purchased many IP versions. They can fully integrate and operate IP and corporate advertising in a commercial way, and transform huge expenses into important marketing assets.

This requires iQiyi, Youku and Tencent Video themselves to work hard on the originality of advertising materials, and strive to form an advertising company team that specifically matches online video apps. This is especially true since native advertising in variety shows has always been a direction with both high reputation and high effectiveness, and this should be strengthened. The corresponding advertisements can form exclusive delivery agreements to avoid the entire network delivery of one material.

(2) Digital advertising management platforms focus on refined enterprise services. There are still many small and medium-sized merchants, local merchants, and medium and long-tail high-quality content in China that need traffic promotion. It is crucial to teach them how to place advertisements and have dedicated personnel to follow up and optimize. For advertisers, as long as the ROI (return on investment) is high, they will continue to reinvest, which is actually an increase in value for customers. How to integrate customers' businesses into advertisements, such as encouraging users to use mini-programs, stores, or even open self-operated advertisements, are all very pragmatic choices. For example, iQiyi Qilin has launched the Aixiangyao large-screen e-commerce platform.

(3) Expand advertising service providers and investment promotion teams. In fact, both Bytedance and Baidu Promotion have large marketing teams across the country to promote corresponding platform traffic resources to serve local brands and advertisers. Axing browsed various online video apps and found that there were many advertisements from competitors. In fact, if the short video traffic is independently subcontracted to partners for development, combined with the corresponding cost-effectiveness advantages and the precise matching effect of DMP, it is possible to take away some advertisers from the short video market share. Similar product innovations can continuously open up new traffic channels, which can be operated in depth by service providers, thereby continuously strengthening the strength of the service provider team and making the pie bigger together.

above.

Author: Reliable Axing

Source: Reliable Axing (ID: qq1598145405)