Four questions about online celebrities selling goods through live streaming!

Suddenly, like a spring breeze, MCN became popular in A-shares. Although I have been studying MCN since 2017, before the end of 2019, the term MCN was basically not paid attention to by the capital market anywhere. However, after Li Jiaqi and Wei Ya became popular, MCN seemed to have become the life-saving straw of the A-share media industry and a guiding light in the minds of investors.

All listed companies claim to be MCNs, and all startups want to go public by being MCNs. It is hard to imagine that just one year ago, investor research for China's largest MCNs was largely unattended.

So, is MCN worth chasing by investors? There is no need to answer this question directly. Some investors just want to speculate on concepts, and they don’t care whether the concepts can be fulfilled; other investors just go with the flow. For those investors who really want to understand the fundamentals, and those companies that really want to operate MCN, they first need to answer a few basic questions about the industry chain of internet celebrities selling goods. When these questions are answered correctly, the answer will be obvious.

Key question 1: Is there a Matthew effect when it comes to live streaming sales by influencers?

Taobao Live pursues efficiency, and the dual giant model of Wei Ya and Li Jiaqi will exist for a long time

In Taobao Live, especially on Double 11, "only the top anchors have traffic, and the traffic of small and medium-sized anchors is almost halved." There is a judgment in the industry that of Taobao Live’s GMV every night, Wei Ya accounts for 30%, Li Jiaqi accounts for 20%, and the remaining 50% is the market that various anchors are vying for.

On Double 11 in 2019, Taobao Live guided transactions of nearly 20 billion yuan, and 17 live broadcast rooms guided transactions of more than 100 million yuan, including 4 live broadcast rooms of internet celebrities (Viya, Li Jiaqi, etc.), 3 live broadcast rooms of Taobao brands (Sydney, Zhang Dayi, etc.), and the rest were dominated by traditional big brands (Xiaomi, Haier, etc.).

The peak live broadcast popularity rankings on Taobao Live during Double 11 also show the dominance of anchors in bringing goods. The popularity of Viya and Li Jiaqi (a comprehensive consideration of indicators such as fan attention and shopping guide transactions) is more than 10 times that of the second echelon. Considering that the transaction amount is also several times more, it is conservatively estimated that the transactions guided by Viya and Li Jiaqi during Double 11 were at least 500 million and 300 million respectively. (Viya guided transactions worth 330 million on Double 11 in 2018, 2.7 billion for the whole year, and more than 500 million for 618 in 2019) Compared with the intertwined pattern of live broadcasts by merchants, the Matthew effect of live broadcasts by internet celebrities is undoubtedly huge.

In Taobao Live, on the one hand, the transaction volume guided by the anchor and the record of continuous live broadcast will affect the recommendation weight of the next day. This places very high requirements on the host and the team. Even for Viya, she has to broadcast 20 or even 25 shows a month.

On the other hand, efficiency is more critical for Taobao. The purpose of allocating traffic to anchors is to promote transactions. However, it is not cost-effective for Taobao to allocate traffic to too many small anchors but fail to sell the goods. Unlike other content platforms, Taobao Live’s daily active users currently do not exceed 20 million. The lack of traffic sources, the pursuit of efficiency and the excessive head effect further squeeze the living space of small anchors.

The centralization of content platforms determines the Matthew effect of influencers in bringing goods

For content platforms, the degree of traffic centralization determines the degree of centralization of live streaming sales by influencers. We have discussed this in detail in our previous report "The Character of Kuaishou: Fast is Slow, Slow is Fast". Douyin is oriented towards "high-quality content" and has a high degree of centralization (3% of videos account for 80% of user playback volume); Kuaishou is oriented towards "creators" and has a high degree of decentralization (the flow of top content is limited to around 30%). Traffic is the basis for live streaming by internet celebrities to sell goods, and the traffic structure also plays a decisive role in the Matthew effect of selling goods.

According to the TOP list of off-site influencers for Double 11 in 2019 released by Taobao Alliance, we found that Kuaishou anchors accounted for more than 30%, and the distribution was relatively even (from Simba, who ranked first in Taobao off-site sales, to Bei Yuange, who ranked 39th); Douyin anchors accounted for about 16% (mainly because Kuaishou live broadcasts have more supply and audiences), among which Li Jiaqi Austin took the lead, and the sales capabilities of other anchors were relatively scattered. Li Jiaqi’s ability to sell goods is indeed excellent, but it also benefits from Douyin’s traffic recommendation and centralized mechanism, which is independent of the individual. This is also the dialectical relationship between contingency and necessity.

In terms of algorithms, the core is "matching user tags and content tags, and a layered user pool feedback mechanism." The algorithms of Douyin and Kuaishou are different, mainly in two aspects:

1. Handling of duplicate content. In Douyin’s algorithm system, suspected duplicate content will be recommended with low traffic. In order to ensure that every creator has the right to be seen, Kuaishou will give even similar content the opportunity to be recommended.

2. Dealing with traffic ceiling: There may be content on Douyin that has been watched by hundreds of millions of users, but this is unique on Kuaishou. When the popularity of a video reaches a certain threshold, the exposure opportunity will continue to decrease. This also determines the centralization of Douyin in terms of traffic and the relative decentralization of Kuaishou.

Taken together, the Matthew effect of influencers selling products on Taobao and Douyin will exist for a long time, while Kuaishou is relatively evenly distributed. This is mainly due to the recommendation mechanism of traffic and efficiency. In fact, Kuaishou is a traffic mechanism with artificial intervention and still has a certain centralized tendency in essence. In addition, the Matthew effect of online influencers selling products is neither good nor bad, it is just a trade-off between traffic and efficiency.

It is unlikely that the next Li Jiaqi or Viya will appear on Taobao as the competition has become fierce. Taobao's traffic is extremely valuable and has a clear official orientation. The challenge of growing into the next giant is too great, but Douyin and Kuaishou may still have hope.

Key question two: Which type of anchor has better ability to sell goods?

Traffic is the foundation for top anchors to bring goods, and anchors with low fans also have "spring"

Traffic is the foundation, but the number of fans does not equal sales. According to the annual sales list of e-commerce experts disclosed by Taobao, Simba, Sanda Ge and others who are at the top of the list are all top anchors on platforms such as Kuaishou/Tik Tok, and traffic is the basic base of these anchors.

Among the top 20 sales experts on Douyin, 40% have fewer than one million followers. The number of followers does not determine sales. On the 30th, among the Douyin influencer best-selling accounts, we found content-based accounts such as Li Jiaqi Austin and the Bankrupt Sisters who are the leaders in the sales industry. The number of fans does not determine sales volume. Good content + live broadcast, as well as good product quality, are the key to establishing a "strong trust" bond between KOLs and fans. Among the TOP 20 sales figures, 8 have less than one million followers, but their ability to bring goods is still outstanding. Continue to publish unboxing videos to recommend good products to users in need, increase conversion rate and become the first choice for mid-level anchors and experts.

How can anchors with low fans maintain high conversion rates?

First, in terms of positioning, enter the vertical category and shorten the monetization path. Li Jiaqi is an expert in beauty and makeup, Wei Ya started with clothing, and big anchors also started from the top categories; vertical categories are more likely to demonstrate professionalism and enhance trust.

Second, in terms of character setting, build your own high recognition. Li Jiaqi's positioning as the "Lipstick King" and the father-son combination of Uncle Mana provide a "contrasting cuteness" and recognition, making it easier to stand out.

Third, in terms of methods, live streaming retains fans, especially on Kuaishou, where daily live streaming is an important way to maintain relationships with users.

Key question three: Who are the users who watch online celebrities selling goods through live streaming?

The "She Economy" has taken over the field of vision, and the young groups that have been cultivated have become the main force of consumption

Taobao live streaming users are mainly women aged 25 to 35, while the purchasing power of men on Kuaishou live streaming should not be underestimated. There are no obvious structural gender differences in shopping behavior itself. The difference in consumption preferences between men and women is reflected in differences in product categories. Comparing Douyin Live and Kuaishou, according to Questmobile user portrait data, it can be seen that the proportion of male and female users of Douyin Live is almost the same. However, because the proportion of female users in the basic users of Douyin App is slightly higher, it shows that female users on Douyin prefer the embedded live broadcast.

Kuaishou is different. Male users account for 53.3% of Kuaishou's live broadcast users, and they prefer the live broadcast format more than the basic users. However, in addition to personal consumption, women often also take on the role of household consumption decision-makers, so the consumption potential appears to be stronger. The main consumer categories on Taobao Live include clothing, jewelry, beauty and personal care, fresh food, mother and child clothing, and home furnishings. For consumption in categories that prefer brand products (beauty, personal care, and maternal and child products), Taobao and Tmall have a natural advantage in attracting female consumers compared to Douyin and Kuaishou.

From the perspective of age structure, the proportion of people aged 25 to 35 on Douyin and Kuaishou is 47.7% and 48.1% respectively. We speculate that compared with the attributes of App users, the age structure of users watching Douyin and Kuaishou live broadcasts may be slightly higher than that of people aged 25 to 35. This group of people has sufficient purchasing willingness and high purchasing power, and makes relatively greater contribution to live streaming sales.

According to the "Tmall 618 Taobao Live Consumer Portrait" released by Taobangdan and Taobao Live in 2019, those born in the 1990s have become the main consumers in the live broadcast room, and those born in the 2000s have emerged as a new force and also have strong purchasing power. Live streaming sales by internet celebrities is an emerging shopping model. Those born after 1995 and 2000 grew up in a period of rapid development of live streaming sales by internet celebrities. They are a generation that is being cultivated and have initially demonstrated certain consumption potential and a preference for migrating to future shopping channels.

Having money and free time, living conditions determine mental state

It is not accurate to describe the live streaming sales of goods by internet celebrities as “sinking”, but rather they are first emerging from low-tier cities. The highest user penetration rate of Taobao Live is in second-tier cities, followed by sixth-tier cities, while first-tier cities have the lowest penetration rate. Users from third-tier cities and below also account for a relatively large proportion of Douyin and Kuaishou live broadcasts, with Kuaishou live broadcast accounting for 60.4%, 4.5pct higher than Douyin live broadcast.

Compared with the basic user attributes of Douyin and Kuaishou App, the relative positive deviation of Kuaishou live broadcast in third-tier cities and below is larger, which also shows that Kuaishou users in low-tier cities are more accepting of and prefer the form of live broadcast. The urban structure distribution of internet celebrity fans also has a unified linkage. The proportion of people in third-tier and below cities is higher than that in first- and second-tier cities, which is 15.6pct higher.

It can be said that the base camp of live streaming by internet celebrities selling goods is in low-tier cities, but now there are signs of "attacking" high-tier cities. Unlike traditional shopping channels that sink from top to bottom, live streaming by internet celebrities selling goods has expanded with the spread of social media. The popularity of top internet celebrities has continued to rise, and there is also a slight trend of "surrounding the cities from the countryside."

Understand first and then define. The user's psychological state is often portrayed by their external living conditions. It is precisely because of sufficient time, relatively small economic pressure, and unmet needs of offline shopping that users in low-tier cities can continue to stand out from the "high growth" story. In an economic downturn, new growth points often arise from major supply-demand mismatch gaps that have not yet been noticed. Users in lower-tier cities have relatively ample time, and many emerging brands (especially international brands) are no longer actively building offline channels. Only live streaming by internet celebrities will emerge first at this level.

According to the "2019 6.18 E-commerce Report" released by QuestMobile, the average usage time and frequency of live online shopping users are higher than the overall data of mobile e-commerce. Nearly 80% of live online shopping users have a medium-to-high level of consumption capacity. Compared with the high housing costs (rental or mortgage pressure), high work pressure (less leisure and entertainment time), and high childcare pressure (education costs) of users in first- and second-tier cities, it is only a matter of time before the consumption capacity of users in lower-tier cities is stimulated.

Key Question 4: What is the evolution and outlook of the live streaming sales model of internet celebrities?

Comprehensive coverage of people, goods and places, "live broadcast organization + MCN + merchants + supply chain" four-in-one

The evolution of the live streaming sales model of internet celebrities is to get closer and closer to the source of goods.

In the 1.0 era, not only did anchors lack stable traffic, they even had to purchase samples themselves for live broadcasts, including Viya in the early days. When Viya first started live streaming, in order to build brand appeal, she did not ask for link fees or commissions, and instead paid for the lowest price on the entire network.

In the 2.0 era, institutions have moved in on a large scale, and new ways of playing have emerged, such as "walking broadcast" and "jade base".

In the 3.0 era, top anchors have begun to go deep into the supply chain and connect the middle-office system to other small and medium-sized anchors. Qianxun, owned by Wei Ya, has a team of more than 80 people to attract investment and select products. On this basis, it has developed a middle-office system called "Link", which opens big-brand products and its own clothing to Taobao anchors.

But in fact, even for a top anchor like Viya who owns many self-made Taobao stores and has full control over everything from quality control to pricing, her profit margin is surprisingly low, and her inventory also needs to be resold in the live broadcast room. From this perspective, live streaming by internet celebrities is more like a detonator for new brands, and also promotes new opportunities for more domestic brands, ODMs, and OEM manufacturers. However, it will take time to verify how to go further and truly shape domestic brands.

The live broadcast modes of 1.0 mainly include store live broadcast mode, flash sale mode, and expert mode. The store live broadcast model is that the host introduces the products on sale one by one, and its core competitiveness comes from the products being broadcast.

The flash sale model is the most common. The anchor cooperates with brands to help them increase sales. The Matthew effect is significant. The stronger the anchor's ability to sell goods, the more favored he is by merchants, and the lower the discount. The anchor's ability to render the value of goods is the core.

The expert model is recommended by consumer opinion leaders with very deep professional knowledge in the field. Fans have high trust in the anchor, and often even though the number of fans is small, the conversion rate is very high.

The 1.0 internet celebrity sales model is the basic model. Its importance is self-evident and it has a very high universality. Since then, many models have evolved from it and are more suitable for more subdivided categories.

The live broadcast modes of 2.0 mainly include overseas purchasing mode, base broadcast mode, origin live broadcast mode, bargaining mode and gambling mode. Among them, the more interesting ones are the base broadcast, production place live broadcast and bargaining model, which are very effective for goods and fields that traditional e-commerce cannot reach. The base live broadcast is composed of a supply chain base. The live broadcast is carried out at various live broadcast bases and the on-site broadcast may easily cause impulse orders and have a certain return rate risk.

Currently, the better base models are brand bases and industrial belt live broadcasts. The bargaining model is very suitable for products such as jewelry and antiques, which are the top-ranked categories on Kuaishou. After the anchor gets the jade, he analyzes the pros and cons of the product to his fans and consults fans who are interested in buying it. The anchor then bargains for it, and after reaching an agreement, the anchor charges a certain purchasing fee and commission.

The 2.0 live broadcast model has solved the problem of supply and product selection to a certain extent. The bases and production areas have sufficient supply of goods, and it has further extended to categories such as jewelry, jade and even tractors.

The live broadcast mode of 3.0 is C2M. Based on the needs of fans, the anchor uses OEM or ODM to launch unique styles while also ensuring quality. It brings together the production capacity of various factories such as clothing, beauty, and food, empowers its anchors based on the C2M production model, gradually increases the proportion of live broadcasts of its own goods, and further improves the profit margin of the live broadcast room. For Li Jiaqi, who only promotes products for brands, building his own supply chain seems to be an option that is not cost-effective enough for the time being. For Wei Ya’s team, which has accumulated its own clothing supply chain, the importance of goods is self-evident.

Traffic flow, supply chain, and fulfillment capabilities are huge challenges that e-commerce cannot avoid. As the person in charge of Taobao Live has deduced, what will Taobao Live be like in five years? A new species may emerge in the live broadcast room, called a super live broadcast organization, which will maximize the three elements of "people-goods-place".

On the content side, the anchor system is complete, combining advertising companies + MCN + celebrity brokerage;

On the goods side, we have independent supply chains, independent factories, self-made brands, and the ability to self-produce, replenish, and distribute goods;

On the field side, we have extremely rich experience in both e-commerce and offline. Early Taobao brands, such as celebrity stores like Zhang Dayi and Xue Li, have dual identities as celebrities and stores. In the future, there may be more super live streaming organizations that combine "live streaming organization + MCN + merchants + supply chain".

Author: Pei Pei

Source: Internet and Entertainment Phantom Thieves (ID: TMTphantom)