Qutoutiao’s Growth Hacker: Decoding 4 User Growth Strategies Before IPO

On June 8, 2016, Qutoutiao 1.0 was launched. On August 18, 2018, Qutoutiao submitted an IPO application, raising a maximum of US$300 million. The previous round of pre-IPO financing had a valuation of US$2.7 billion, and it will remain firmly in the ranks of unicorns after its listing.

Let’s take a look at the data in the IPO prospectus:

• In terms of users: Qutoutiao has 48.8 million monthly active users and 17.1 million daily active users, with each user staying for 55.6 minutes per day. I believe that it won’t be long before Qutoutiao will surpass the 20 million daily active users mark.
• Financials: For the six months ended June 30, 2018, the company had revenue of RMB 717.8 million (US$108.5 million). Revenue in 2017 was RMB 517 million ($78.1 million), compared with RMB 58 million ($8.8 million) in 2016.

Qutoutiao is known as the "Pinduoduo" of the information industry. It was also born in Shanghai, where the Internet gene is weak, and people within the Fifth Ring Road cannot understand it. It took only two years from its establishment to its listing, which was one year faster than Pinduoduo, which took three years to go public. Relying on a user growth strategy centered on social fission and powerful operational routines, these two companies have completed the harvest of users in third- and fourth-tier cities and rural areas.

Seeing the impressive operating data, the author is very interested in this information product that has emerged from the red ocean surrounded by Tencent and Toutiao. The following mainly analyzes Toutiao’s four core user growth strategies.

User growth strategy 1: Sign up and get new users by sending red envelopes

Qutoutiao clearly advertises that you can make money by reading the news.

From the perspective of positioning theory, this quickly occupies the minds of users. There are many apps for reading news and information, but only Toutiao can make money. At the same time, cash red envelopes can easily spread word of mouth and become a topic of conversation among young people in small towns in third- and fourth-tier cities.

If you search on Baidu, you will find tutorials specifically teaching people how to make money through Qutoutiao, as well as forum members personally sharing their money-making routines, which is enough to show how powerful the online earning model of burning money to subsidize users is.

Directly subsidizing users is the simplest and most brutal way to attract new customers. The author downloaded Qutoutiao today, and when he opened the homepage, a pop-up window showed: Red envelope for new members, open it to get 18 yuan (maximum), and there was also a very important line of words: cash can be withdrawn on the same day. Those who are familiar with the Internet know that the maximum amount of 18 yuan is a marketing gimmick. The probability of getting 18 yuan is about the same as winning a prize. In most cases, the red envelopes are of the minimum amount.

Although my new member red packet was only 1 yuan in the end, Qutoutiao made it possible to withdraw the money on the same day without any threshold, so now the 1 yuan is in my Alipay wallet. This is a better experience than I expected, because many of the red envelope marketing tactics I encountered before mostly have withdrawal thresholds, such as 20 yuan for withdrawal. This will result in poor user reputation and cannot satisfy users' immediate sense of gain. Delayed gratification is anti-human.

What's more, the closer you are to the withdrawal threshold, the more difficult it is to get a red envelope. The difficulty curve is extremely steep near the critical point, and most users who receive cash red envelopes are unable to cash them out. From the perspective of corporate marketing, doing so secretly saves marketing costs, but it makes users feel fooled, and it will be difficult for them to come back in the future.

Therefore, Qutoutiao's 1 yuan threshold-free withdrawal is a breath of fresh air in the red envelope withdrawal world. It provides a great user experience and satisfies users' sense of immediate gain, thereby attracting users to continue participating in the cash game system of completing tasks to get red envelopes.

User growth strategy 2: social fission to attract new users

After registering and logging in with your mobile phone number, Qutoutiao popped up a new cash gift window: Newcomer red envelope task, invite 6 friends to get 60 yuan. Invite friends and send red envelopes. Many products have tried this and it is a very common user growth strategy. The battle between thousands of groups in 2011 and the Didi and Kuaidi taxi war in 2015 were both models of burning money to subsidize users, and they were ultimately proven to be feasible.

It is worth mentioning that the invitation copy of Qutoutiao is very interesting. It does not say that you will get 10 yuan for inviting one user, but emphasizes that you will get 60 yuan for inviting 6 friends. An anchor is planted in the user's mind: this is a 60-yuan business, and a small goal of 6 people is set, which will give the user a psychological hint to continue inviting friends. If you only write that you can get 10 yuan for inviting a friend, first of all, the reward amount is not as attractive as 60 yuan. Secondly, the task ends when the user invites a friend to get 10 yuan, and there is no psychological hint to continue the task.

Finally, from the perspective of behavioral economics, the third principle of prospect theory: loss aversion , users are more sensitive to losses. The anchored income that Qutoutiao gives to users is 60 yuan. If you invite one friend, you will get 10 yuan. If you don’t continue to invite friends, you will lose 50 yuan, which will give you a sense of loss. Therefore, many users will spare no effort to continue inviting users until they truly obtain the 60 yuan that has already belonged to them psychologically.

Qutoutiao has many specific ways to attract new users through social fission, covering the two major social relationship chains of WeChat and QQ. Many WeChat groups, Moments and QQ spaces have been occupied.

In addition to the new customer acquisition strategy of taking advantage of Tencent, Qutoutiao has also launched traditional face-to-face QR code scanning and invitation code acquisition methods, truly taking social fission acquisition to the extreme. Registered old users can also receive cash red envelopes. By entering the invitation code or mobile phone number of other friends, they can receive a 50-cent red envelope, which is a way to give money to users.

The above two belong to the new user acquisition strategy in user growth. The next step is activation and retention, so that new users can be active and retained to become loyal users.

User growth strategy 3: Gold coin task system promotes activation and retention

By receiving red envelopes, Qutoutiao not only acquired new users, but also took the opportunity to establish a user account system. Because you need a user account to receive red envelopes, the trinity of downloading-registering-receiving red envelopes is seamlessly connected.

Qutoutiao took a different path and built a powerful user account system. In an interview with a senior executive of Qutoutiao by Tencent News, a set of data was revealed: "Qutoutiao's user login rate is as high as over 90%, which increases user stickiness." This is the cornerstone of Qutoutiao's subsequent user growth strategy.

Traditional news and information content applications, like Baidu Search, are weak account system products. Users are not very willing to register and log in. Users can read news and search without relying on an account system to complete the operation loop. This makes it difficult to portray user portraits and to tap into greater user value through user behavior. In addition, without a complete account system, it is difficult to reach users again through precision marketing after they leave. I have used Baidu Search for so many years, but I don’t remember ever receiving a message about awakening dormant users about Baidu Search.

Qutoutiao's powerful gold coin (exchange for cash) reward task system:

1. Sign in to get coins;
2. Invite friends to send cash red envelopes (a new customer acquisition strategy);
3. Open the treasure chest;
4. Show your income;
5. Wake up your friends and get 1,000 gold coins as reward;
6. Quality reviews;
7. Questionnaires;
8. Follow Qutoutiao on WeChat;
9. Lucky draw.

The above 9 tasks are quite common, but the more interesting ones are opening treasure chests and awakening friends.

The essence of the Wake-up Friends Plan is to use social relationship chains to get friends to participate in Qutoutiao’s cash incentive plan. If activation messages are sent by the system, they are likely to be considered harassing spam messages. However, if a friend sends me a link to Toutiao via WeChat or text message, I will still be willing to take a look.

If this feature is targeted at users in first- and second-tier cities, it would be a rather useless feature. It may not be sent out more than a few times, as friends with a monthly salary of 20,000 yuan would have already blocked it. After all, white-collar workers on the front lines work overtime so much that they don’t have the time to download an APP and receive red envelopes for a few gold coins.

However, for users in third- and fourth-tier cities, and even in cities, the pressure from work and life is not that great, and they have plenty of free time for entertainment. This social fission awakening strategy has become a better activation tool.

Opening a treasure chest is similar to a slot machine draw, and it opens every 4 hours, giving users clear expectations. These are all relatively common operating routines. In addition to the relatively reasonable design of the gold coin system itself, this strategy also wins in terms of user group positioning.

User growth strategy 4: Earn coins by reading news to boost activity and retention

Qutoutiao’s original online earning model: using money given by advertisers to ask users to watch ads.

As shown in the figure below: Users are rewarded with gold coins when watching news and videos on Qutoutiao. After watching for 30 seconds and completing the red envelope progress bar, 10 gold coins will be issued. There are also extra rewards. If you watch for 60 minutes on the same day, you will get an extra 150 gold coins. The prospectus mentions that the average daily usage time per person is 55.6 minutes, which exceeds most domestic applications with over 100 million users. Perhaps only WeChat and Toutiao can compare with it.

As mentioned above, Jiedaibao also initially acquired new users through an online earning model, where users would receive a 20 yuan cash red envelope when they invited a friend, and the cash could be withdrawn at any time. However, the final retention effect is not as good as Qutoutiao. A very important reason is that information reading is inherently a user retention container, and the product itself can attract users to stay.

• First of all, regardless of whether users receive red envelopes or not, they will be attracted by various titles and information content and stay in the APP.
• Secondly, for products like Jiedaibao, users may leave after receiving the red envelopes, but on Qutoutiao, users can continue to read information after receiving the red envelopes. With the support of artificial intelligence recommendations, it can always find content that users like to attract users.
• Finally, even if users do not receive red envelopes, as long as there is content that users are interested in, after being addicted to it for the first time, they will always like to open the information APP to check the news and see hot topics when they are bored later.

In the income list, the highest weekly ranking is 17,600 yuan, with a monthly income of more than 60,000 yuan. The total income of the first place is more than 230,000 yuan, and the top 9 have monthly incomes of more than 10,000 yuan. This kind of ranking increases users' desire to compete with each other to make money.

The more popular user growth model now is: AARRR model. The above analysis is not strictly based on the five dimensions. In practice, after acquiring users, it is not necessary to complete the previous activation, retention and revenue increase before viral transmission. For example, when a new user registers to receive gold coins, a pop-up window will appear immediately after login to ask friends to receive a cash red envelope of up to 60 yuan. Viral transmission can be carried out immediately after user acquisition is completed.

This article analyzes the four routes of Qutoutiao's user growth strategy based on usage scenarios. Each strategy is not strictly independent and has overlapping parts. For example, inviting friends to send red envelopes can help acquire users and is also a form of viral transmission, which generates social fission when attracting new users.

Qutoutiao is so successful, are there any bad experiences with it?

The following interactive experience bug is worth reflecting on:

When a new user registers, click to receive the new user red envelope and enter the registration and login process. The default login method is username/password. However, new users of Qutoutiao do not have accounts. At this time, the default page is directed to the login page, which has a logical flaw. The default page should be the mobile phone number verification code registration page.

On the other hand, the numeric keypad on this login page completely blocks the entrance to switch to quick registration, and the keyboard switch cannot be folded up. You must enter the username and password until an error message is displayed before you can enter the quick registration login stage.

After I registered and logged in using the mobile phone number verification code, I did not set a password. After logging out and logging in again to the Qutoutiao APP, the default interface is still the username and password. You need to enter the wrong number keypad before you can close it and switch to the mobile phone verification code login. This gives a very bad user experience. As a unicorn valued at billions of dollars, this kind of logical bug should not occur.

In addition, the mobile verification code from Qutoutiao cannot be received in time. I tried it 3 times today. The first time I waited for 2 hours before receiving the verification code. Of course, it had expired and could not be used. I waited half an hour for the second time to receive the verification code, but it still couldn’t be used. I received the verification code the third time and the registration was successful.

Finally, I would like to add a paragraph from the prospectus. Qutoutiao's prospectus clearly states the target users and market positioning, and analyzes the user characteristics of groups below the third- and fourth-tier cities from a product perspective, from which we can see the shadow of Pinduoduo users. The IPO prospectus of a fast-growing company is the best product document and deserves careful reading by product managers. The following is a supplementary paragraph on the prospectus, products and users. Please download and read the complete prospectus from the Internet.

Qutoutiao said in its prospectus:

(1) User groups

Our strategic target is the user groups in China's third-tier and lower cities, as this underserved market holds huge opportunities. According to a report by Analysys International: As of the end of 2017, the population of third-tier and lower cities was 1.027 billion, with an average of 0.5 mobile devices per person (in comparison, the population of first- and second-tier cities was 363 million, with an average of 1.3 mobile devices per person).

This shows that it has great potential for further mobile application penetration. Due to limited offline entertainment venues, mobile phone users in third-tier and lower cities tend to have a slower pace of life and spend more time online.

In addition, due to lower housing costs and the rapid increase in disposable income, their financial pressure is also lower, allowing them to enjoy life to the fullest. These factors have led to huge demand for mobile entertainment content among mobile phone users in third-tier cities and below, while also creating strong profit potential.

Users in third-tier and lower cities have different interests and hobbies than those in first-tier and second-tier cities. Qutoutiao is oriented towards light entertainment and provides easy-to-digest content. These product designs are more likely to resonate with users and provide us with an important advantage in occupying this underserved market.

(2) Business Model

Qutoutiao covers a wide range of topics, focusing on humor, stories and other light-hearted entertainment content that entertains and inspires people. Our content often comes from professional media under licensing agreements or is uploaded by more than 230,000 freelancers registered on the platform.

In June 2018, Qutoutiao added approximately 5.9 million new pieces of content, including approximately 2.9 million videos. We also released a standalone mobile app in May 2017 that allows users to create and upload videos. In addition to articles and short videos, we plan to further diversify our content to cover literature, casual games, live broadcasts, animation and many other categories to create a comprehensive light entertainment content ecosystem.

We currently generate revenue mainly by providing advertising services. We plan to explore more profit opportunities by introducing more content formats, such as literature, casual games, and live streaming, while expanding our user base.

(3) Growth Hacking

Our rapid growth can be largely attributed to our innovative user account system and gamified user loyalty program. We believe we are pioneers in this type of loyalty program in the mobile content industry. Registered users can earn loyalty points by recommending new users to register for the Qutoutiao app, consume content, or participate in interactions.

Although the monetary value redeemable for loyalty points is very limited, we believe that it can cultivate users' loyalty and emotional connection with Qutoutiao compared to other platforms.

The loyalty program generates a powerful viral effect, which we believe enables us to enjoy lower user acquisition costs than would otherwise be possible. Since all of Qutoutiao’s daily active users are logged-in users, the gamified loyalty points system not only increases user engagement and enhances user stickiness, but also tracks users’ long-term behavior and optimizes content recommendations.

(4) Competitive advantages

We believe that our success to date is primarily due to the following key competitive advantages:

1. Leading mobile content aggregator;
2. Social-based user loyalty programs promote effective user acquisition;
3. A strong account system drives increased user engagement;
4. Provide personalized and extensive content;
5. Intelligent content push supported by artificial intelligence and data capabilities;
6. Visionary and experienced management team with a track record of success.

(5) Corporate strategy

Our long-term goal is to build a leading global online content ecosystem. To achieve this vision, we plan to implement the following growth strategies:

1. Expand the user base;
2. Enrich content products;
3. Add social functions and improve the quantity and quality of user-generated content;
4. investing in technology and innovation;
5. Improve profitability;
6. Selectively seeks acquisition and investment opportunities.

(6) Our Challenges

The successful execution of our business and strategy is subject to certain challenges, risks and uncertainties, including:

1. We have a shorter operating period;
2. our ability to acquire users, retain users and maintain high levels of user engagement;
3. our ability to increase the strength of our brands;
4. the attractiveness of our mobile applications to users, including any new content formats and other products and services we may introduce in the future;
5. our ability to compete effectively in the industries in which we operate;
6. our ability to continue to generate profitability, including from the advertising solutions and other products and services we intend to offer in the future;
7. We did not complete the registration of the “Qutoutiao” trademark due to an objection filed by a competitor claiming that “Qutoutiao” was similar to a trademark registered by the competitor;
8. Whether content providers continue to contribute content to our platform.

In addition, we face other risks and uncertainties. These risks and uncertainties could have a significant impact on our business, financial condition, operating results and growth prospects.