Taking Xigua Video as an example, how do short video platforms monetize?

Each platform produces excellent content to attract user clicks, with the ultimate goal of monetization. The author of this article takes Xigua Video as an example to analyze the monetization situation of current short video platforms.

I am not a commercial product manager , and I am new to many concepts and formula breakdowns. I am learning and applying them immediately after research. I wrote this article because I like the native advertising done by Toutiao Video .

(Note: The Xigua Video mentioned in this article can be understood as an independent app, or as the "Xigua Video" channel in the Toutiao app.)

1. What are the key issues to be solved in monetization?

Why monetize?

Xigua Video is a content distribution platform that does not have the ability to produce short videos. The core point of user growth and retention of content products lies in the continuous supply and accumulation of large amounts of fresh content, and the high content barriers formed thereby.

This is also the reason why major video websites produce their own movies , TV series, and entertainment programs and purchase exclusive video copyrights.

Therefore, I personally believe that if Xigua Video wants to solve the problem of content supply, it must have strong monetization capabilities so as to inject and accumulate a large number of Toutiao accounts , stimulate them to upload videos, and establish a content barrier for Xigua Video.

After all, short video products such as Volcano and Douyin produce content with sufficient vertical depth but lack richness.

2. Analysis of Payment Business Logic

It is important to understand the business logic when making products, and this is even more true when it comes to commercial monetization.

Based on the monetization functions of Xigua Video on Toutiao app and Xigua app, plus the 3X plan proposed by Toutiao, the monetization business logic is drawn as shown below:

Based on the above picture and the current monetization functions, we can analyze Xigua Video’s current or future monetization methods as follows:

• The platform's revenue mainly comes from advertising: including information flow advertising , patch advertising, and fixed-position advertising (for example: related recommendations on the opening screen/video details page, etc.); the second is value-added services for users or Toutiao accounts, which may include content payment and live broadcast rewards for users in the future; for Toutiao accounts, these may be paid tools , Toutiao account promotion , video pinning and other services.
• Toutiao’s self-monetization: mainly based on platform traffic subsidies, revenue sharing, and e-commerce traffic /shopping (the 3X plan includes buy while you watch, and Toutiao already has this function, but it can only divert traffic, not shopping).

3. Pricing Model Analysis

According to the official statement of Toutiao Advertising, Toutiao currently adopts four pricing models: CPT, CPD, bidding CPM/CPC/OCPC, and GD advertising using CPM pricing.

Headline ads are mainly based on CPC and CPM. Based on the calculation formulas of the two and the characteristics of personalized recommendations of headline ads, it is speculated that information flow ads are currently the first-promoted and highest-profit advertising business type of headline.

What needs to be specially mentioned is OCPC simulation: this is an advertising service model that aims at precision marketing and uses personalized recommendations as a technical means.

The principle is: first use a part of the test delivery to explore the core audience portrait of the advertisement; then carry out vertical delivery to the core audience, which has a higher conversion effect. It is estimated that this is why the advertisement adopts the CPC pricing model.

Pricing formula:

CPM billing = refresh * asr * asn * cpm

CPC billing = refresh * asr * asn * acp * ctr

(Refresh: refresh times; asr: probability of refreshing with ads; asn: number of items displayed per refresh; acp: click price; cpm: price per thousand impressions; ctr: number of clicks per thousand)

4. Advertising Position Analysis

1. Watermelon Video’s current advertising formats:

1). Screen on/lock screen/wake up screen on:

• Type: Rotating display, picture display for 3 seconds (clickable), video display for 4 seconds (not clickable)
• Pricing: CPT, CPC, CPM
• Delivery: You can choose to deliver by region

2). Detail page ads:

• Position: No. 1 in related recommendations, between the comment list and related recommendations
• Type: Picture display (clickable)
• Pricing: CPC, CPM
• Delivery: You can choose to deliver by city, district, county, or interest

3). Post-video ads:

• Type: Pictures, videos (both clickable) of unlimited duration
• Pricing: CPD/CPC/CPM
• Delivery: You can choose to deliver by city, district, county, or interest

The above three methods all support jumping to the landing page and app download page.

2. Information flow advertising

Based on the reasons why I like Xigua Video information flow ads very much, this section explains video information flow ads in detail:

1. Type: Video native ads, image ads
2. Pricing: Bidding CPC/OCPC/CPM/CPA, GD
3. Jump: video playback page, landing page, application download page (download app), phone call
4. Targeting: By city, district, or interest
5. Interaction: share, collect, comment
6. asr: 100%, Xigua has a display limit for users/if the user chooses not to be interested, the plan will not be displayed
7. asn: Headlines, 1/8 is displayed each time refresh, fixed at position 2 in the list.

• Watermelon: 1/5 is displayed each time the list is refreshed, fixed at position 2 in the list
• Xigua short video: 1/20 is displayed each time the video is refreshed, and it is fixed at position 3 in the list

Interaction style:

Dial-up Ads

Landing page advertising

Download Ads

3. Personalized recommendation strategy

The Toutiao advertising backend has a strategy of first estimating the delivery effect and then selecting the delivery target. The main process is as follows:

My personal understanding: This strategy can effectively improve the accuracy of advertising distribution, distribute advertisements with higher recommendation value to users who have higher reception value for them, increase the CTR value of advertisements, and increase the CPC advertising value.

Secondly, in order not to affect the browsing experience of C-end users, Toutiao has also formulated the following strategies:

1. New users will not see any ads within 7 days (IPAD version, IOS paid version has no ads for life)
2. A user can see large image ads up to 7 times a day. So there is a reason why large images sometimes cannot run. Either increase the price, improve the CTR , or wait until the next day - these are the only three solutions.
3. A user can see app download ads up to 20 times a day. If the download ad is in the form of a landing page, it will not be affected by this frequency control. If a very high download volume is required, you may wish to place more landing page ads.
4. When a user clicks the "Dislike" button of an ad (click the X in the lower right corner of the creative), even if only one of the ad plans in the ad account is clicked, all ad plans of the ad account will no longer be displayed to the user within one week.
5. Each advertising plan will only be displayed to one user once within 12 hours.
6. Ads with too low ECPM will not be displayed and will not even have a chance to queue.

After testing, rules 2, 3, and 4 were also applied to the information flow ads on the Xigua Video list page.

4. If you are the commercial product manager of Xigua Video, how do you improve its monetization capabilities?

1. Target decomposition

Advertising revenue = number of advertising spaces , selling price ( cpt / cpc /cpm…) sales rate * traffic inventory

The number of Xigua video ad positions = the number of patch ads + the number of information flow ad pages asn asr + the number of fixed position ads

2. Market background

It is understood that the top products in the current short video market have basically been finalized, and future opportunities lie in vertical content mining and community relationship building, so I believe that improving monetization capabilities can also start from these two directions.

3. Solution

Based on the target formula and the characteristics of Toutiao Ads, which are good at "personalized recommendation and intelligent distribution", we can start from the following directions:

1. Utilize user operation process to explore advertising space
2. Optimize pricing methods. Assuming that the refresh data remains unchanged, with the help of portraits and channels, the advertising distribution scenarios are segmented, and the value of the three pricing methods, CPC, OCPC, and CPA, is optimized by improving the CTR value; the display rules and proportion of ASR are adjusted, the display density of ASN is adjusted, and the value of CPM pricing is optimized.
3. Leverage the relationship between Toutiao and its users and use e-commerce to explore opportunities for UGC monetization
4. You can also use the extended relationship between long and short video content to explore content payment scenarios

(1) Explore advertising space - personalized pre-roll ads

Use the underlying tag library of Toutiao to add tags to the patch ads. For example, celebrity tags such as Lu Han and Wu Yifan; content tags such as games , movies, and NBA.

1. Based on user portraits , pre-roll ads with highly relevant attributes are distributed to users, with a duration controlled at 3 to 5 seconds, which has the lowest impact on users. The reason is: In fact, whether the pre-roll ads will affect the user experience is not the essential problem with the ads, but the high or low replacement cost of the video for users; although users may hate pre-roll ads, if the replacement cost of the video for users is high, then users will definitely choose to watch the ads. Personally, I think such ads are also suitable for search scenarios.
2. Browsing scenario: Wang is an NBA fan who often watches NBA videos on Xigua Video. When he opens a popular video like "This Week's Slam Dunk Highlights", he will definitely not mind the 3-5 second pre-roll advertisement.
3. Search scenario: After watching several NBA videos, Wang uses the search function to find NBA-related videos. At this moment, his demand for content must be very high, and the video he opens at this moment must be very irreplaceable. At this point, he will definitely be able to accept 3 to 5 seconds of patch ads.

Of course, the adaptation scenarios of this type of advertising rely on portraits as well as the content volume and content characteristics of the advertising business, so whether this idea is really feasible also needs to be verified by data. Please allow me to speculate here.

(2) UGC direction - refine game download ads and improve conversion effects through operations

Post a video of a game host playing a specific game on the game channel, along with a download link for the game. The page displays download ads in the same style as the current native video format. This advertising business can be provided to Toutiao in the form of revenue sharing.

(3) Other forms

1. Search ads : refine search scenarios and add search ads; adopt list-native or search-term-guided approaches.
2. Toutiao personal center information flow advertising: I don’t know whether the number of visits to Toutiao personal homepage is high. If it is high, I think you can add native information ads in the content list of Toutiao homepage. If this advertising space can be operated by sharing profits with big accounts, perhaps a new model for UGC monetization can be discovered.
3. Toutiao recommendation ads: When users click to follow on the list page or Toutiao homepage, a related recommendation column will be displayed. This position can be used to recommend headlines or add small image ads. As shown below:

The author of this article @于言某 is compiled and published by (Qinggua Media). Please indicate the author information and source when reprinting!

Product promotion services: APP promotion services, advertising platform, Longyou Games