Whoever has the traffic will win the world?

Discussions about traffic have always been a hot topic, especially since Pinduoduo emerged as a dark horse in WeChat and ByteDance became a giant threatening Tencent. Many people have come to the view that "whoever gets the traffic wins the world."

A recent hot article directly pointed out that WeChat’s traffic is threatened by word-jumping. Zitiao is constantly sucking away Tencent's traffic, forcing the latter to fight a desperate battle. Liu Siyi from the friend group also wrote an article titled "Zitiao Kills Taobao", arguing that Zitiao threatens Alibaba's e-commerce territory. The article is very interesting and worth a read.

In the eyes of these friends, Tencent and Alibaba’s status is no longer secure, and the B in BAT will beat AT badly.

More classical Internet friends sneer at this kind of traffic. Some people believe that Pinduoduo is full of counterfeit goods and its activities are gimmicky, while Douyin has low-quality content and information cocoons, etc. In addition to questioning the quality of users in the sinking market, there are more concerns about the sustainability of this type of traffic.

In the eyes of these friends, Zitiao poses no threat to WeChat or Taobao.

So I feel this is a very interesting topic, and I have been observing and thinking about it. Next, let me tell you what I think.

1. Traffic is definitely not everything

Let me first state the most important conclusion: traffic is definitely not everything, this is absolutely certain. There are many dimensions that can be refuted.

First of all, traffic is just a number. It is the user’s mind (user demand) that the traffic occupies that determines the value of the traffic. For example, WeChat and Flashlight APP both have 1.2 billion traffic, and their values ​​are very different.

Professor Yu Jun said that users are the sum of needs, which is also what he meant.

Secondly, traffic is not the source of value, traffic is the result of value. A traffic-based product must first provide value before attracting users. If it does not provide value, users will be lost. In essence, users have no loyalty to any product, only to user value.

The iPhone is easy to use and even the most die-hard mobile phone users will not insist on using Nokia (at most they will keep a spare phone as a souvenir). During the O2O war in 2014-2015, every company had traffic when the tide was rising, and everyone had to withdraw when the tide was falling.

Finally, whether the traffic can be converted into good results also depends on the monetization efficiency (business model). Having good traffic and a high-quality user base is meaningless if you don’t find a good way to monetize it.

2. User needs + user scenarios = traffic

No matter how powerful Didi’s subsidy strategy is, or how outstanding ByteDance’s growth platform is, without a solid foundation of user value, growth is purely burning money.

After the O2O war, giants remained in the two fields of travel and food delivery. It was not because they burned the most money, but because the user value they created was very certain: travel and food delivery became more convenient. The essence was expectation certainty + service stability.

Expected certainty is achieved by relying on a good order distribution and dispatching system after informatization. Traditional taxis and self-delivered takeouts from stores are inefficient and users cannot accurately estimate the time; service stability is achieved by relying on the standardization of services (driving and food delivery). A large number of O2O companies either failed to create efficiency advantages or were unable to provide stable services due to non-standard features, and therefore exited the market.

Looking at ByteDance, its growth is certainly outstanding, but the excellent experience in the kill time scenario brought by content matching (algorithm recommendation) + immersive, short, flat and fast consumption method is the essence of traffic.

If Douyin does not have enough baggage, or if the matching effect is not good enough, it will directly affect the traffic. In this process, excellent organizational construction + growth middle platform is a magnifying glass that can double the value; but it is not the part that creates value.

Similarly, Pinduoduo is really cheap enough, has gaming and entertainment elements, and has made this concept deeply rooted in people's minds, which is why it has the current traffic. Otherwise, no matter how effective social fission is, it will be meaningless if users come and leave.

The traffic value is different in different scenarios. Therefore, whoever is closer to the user has greater traffic value. For example, for the same e-commerce system, we divide it into several steps: consumer decision + transaction + delivery. Obviously, consumption decisions are closer to users, so the traffic value of WeChat/Pinduoduo/Taobao in this regard is very large. The third-party store tools and express delivery companies in the e-commerce ecosystem also have user traffic, but the value is much weaker.

3. Traffic + Monetization Scenario + Cost-Benefit Model = Business Model

Having traffic does not necessarily mean making money, you also need a reasonable business model.

The relevant core elements are:

First, the monetization scenario. Some traffic users have no intention of paying, so it may be difficult to use direct charging methods, and advertising may be appropriate. Some traffic has high-quality users who are disgusted by advertisements and are willing to purchase membership, which is another matter. In short, the monetization scenario represents the user's wishes.

The unique feature of TikTok is that advertising is content (this was proposed as early as the Toutiao era). Advertisements and regular content are not separated, which Baidu and Google have also tried, but in TikTok they are completely integrated, and sometimes users are even unaware of it. This is the ideal monetization scenario for the advertising model.

WeChat’s life scenarios for small payments are better and have a higher conversion rate; Ant’s financial management scenarios are better and have a higher conversion rate. These are old stuff, so I won’t go into details.

Second, the cost-benefit model is reasonable. It is easy to understand that the cost of building a business model must bring sufficient benefits. The best business model is to find the model with the lowest cost and highest profit.

For example, if a platform has traffic that can be converted into e-commerce users, should it build its own e-commerce or cooperate with an e-commerce platform? In addition to future strategic considerations, the main thing to look at is the ROI of self-construction and cooperation, and which one makes more money. This is the reasonable way for businessmen to think.

Having said that, I just want to refute the common argument: ByteDance can do everything as long as it has traffic. Social networking has swept away Tencent, and e-commerce has eaten up Taobao.

This is a novel-like thrill that will delight the reader. But entrepreneurs do not make decisions for the sake of excitement. They think about more realistic issues: if the cost of rebuilding the platform is too high, or the cost of user migration is too high, then why not sell it for money but do it all over again?

Not to mention social networking, there is no point in competing with WeChat; as for e-commerce, it is still very difficult to quickly surpass the barriers of trading platform services established by Alibaba, and this is not something that can be solved by hiring a few high-level people.

Now that Douyin and Kuaishou are trying to build their own e-commerce platforms, they will face resistance from Taobao and Pinduoduo, which will cut off their support. After all, this is cutting off the other party's lifeline.

So in the final analysis, it is still a cost calculation and capital game. Capital never sleeps 🙂

4. Traffic A + Transfer Scenario = Traffic B

The self-built e-commerce just mentioned leads to an interesting topic: Can the traffic be converted smoothly? In other words, can a product with high traffic definitely bring about another product with high traffic?

Many years ago, there was a popular saying: high frequency beats low frequency. In fact, it is whether traffic A can drive traffic B. This question itself is not very meaningful because we need to consider the transfer scenario.

I work in the travel industry and I feel this deeply.

Express trains are large in size and high in frequency, while ride-sharing trains are low in frequency. Can express trains drive ride-sharing trains? Can.

Shared bicycles are large in scale and are high-frequency, while ride-sharing is low-frequency. Can bicycles drive ride-sharing? Can't.

Both answers are easy to understand if you consider the transfer scenario. There are already a large number of potential users of hitchhiking among the users of Kuaiche, who are all passengers. When the users of Kuaiche find the hitchhiking function when taking a taxi, they will think that "there is no cost to place an order, after all, it is more than half the price", and they will easily accept hitchhiking.

It is very likely that users of shared bicycles do not take taxis on a daily basis, and the overlap of user groups is low. From a scenario perspective, bicycle users scan codes on the roadside, and they are ready to go to a place within 1-3 km. Hitchhiking is mainly for long orders (drivers will not accept short orders), and the matching time is often very long. Users will not even try, so the conversion rate will be particularly low.

In fact, there is no good transfer scenario. It is just opening a brand advertising space for traffic B in the product of traffic A.

WeChat’s traffic is enormous, but looking back over the years, Pinduoduo is still the one that makes the best use of WeChat’s traffic. It is to grasp the best transfer scenario.

(I mentioned several core values ​​of WeChat in Let’s Talk About Pinduoduo’s Pinxiaoquan. Most of the traffic B products on the entrance are only recognized at the level of advertising space)

Pinduoduo's transfer scenario advantages are:

1) Marketing methods such as group buying and bargaining are very suitable for spreading among acquaintances on WeChat;

2) For low-priced products, the trial cost is very low;

3) For low-priced daily necessities, the decision-making mentality behind placing an order is: "The toilet paper is so cheap, I should stock up on some" or "The fruit looks good, I should buy some." You can compare it to group-buying for a ride-sharing service: "I don't know when I'll use a ride-sharing service next time." The scene conversion rates vary greatly.

This seemingly simple question indeed constitutes the core of Pinduoduo's customer acquisition. On the other hand, many so-called fission activities and WeChat ecological products that superficially imitate Pinduoduo may not have such smooth conversion scenarios, such as category coverage (there are not many friends around me who can use this, and sharing conversion is difficult, like some online courses), purchase scenarios (I don’t know when I will need it next time), and decision types and difficulty (to see whether this training class is good, I still have to go offline to see).

In fact, the formula mentioned here is the same as the cost-benefit calculation in the previous article. A good transfer scenario is one that can reduce costs and create synergy effects; a bad transfer scenario is one that uses advertising space. However, it is better to sell the advertising space to more suitable advertisers than to sell it to one’s own products .

We can also talk about the model where content products such as short videos, long videos, and live broadcasts serve as traffic A, and e-commerce serves as traffic B.

I previously talked about entrepreneurial opportunities in new consumer products with Huang Hai of Crazy Investment Circle. Short videos are suitable for displaying products that would have a good effect, such as beauty products, but because the content itself provides limited information, user conversion is poor when making more important decisions. On the other hand, long video reviews of some digital products have a better effect in bringing goods, but at the same time, it takes a long time to accumulate word-of-mouth and build a professional brand.

It is also very interesting to see the sales effects of different e-commerce live broadcasts.

1) Kuaishou Live Broadcast:

The long-tail effect is obvious, and under the Kuaishou culture of "old iron", users have extremely high trust in the broadcasters and the conversion effect is extremely good. In addition, it is itself a part of content consumption. Shopping is entertainment, which is a bit like Pinduoduo’s gamification of e-commerce. From the perspective of product categories, most of them are low-priced and low-end products.

What’s interesting is that although they share the same father, Kuaishou and Pinduoduo are bound to test each other’s boundaries. Content consumption and shopping decisions that focus on killing time are all in the sinking market, and they are probably trying to capture the same user time and minds.

2) Tik Tok Live:

The Matthew effect is obvious, the effect of bringing goods is extremely poor, and it is more of a brand effect. The most recent failure in live streaming sales was the case of well-known comedian Xu Juncong, who had 20 million fans, received 4 million in sales fees, but only sold less than 700,000 worth of goods. Lao Luo’s live broadcast also forcibly changed the CPS model into the CPM model.

In the scenario of huge exposure + celebrity effect + poor sales effect, live streaming on Douyin is more like "dynamic advertising" rather than "user consumption decision-making content" or "shopping guide".

3) Taobao Live:

It can be divided into two parts. One is the live broadcasts of Li Jiaqi and Wei Ya, who have a very strong Matthew effect. Their sales effect is very good, but it is difficult for ordinary internet celebrities to get a share of the pie. The other is the particularly long-tail store live broadcasts, which are more used in the scenario of "want to buy this product to see the effect/function", which is essentially an upgrade of picture and text details.

So to sum up, Kuaishou's live broadcast is more like a good transfer scenario, allowing traffic A to empower traffic B, creating a 1+1>2 blessing effect; Douyin is more like advertising traffic B on traffic A; Taobao's store live broadcast has a good transfer scenario, and internet celebrity live broadcast actually feels more like an independently developed new traffic A.

Kuaishou and Douyin, which were just mentioned, are both trying to create a closed loop of e-commerce, but the value they generate is actually completely different.

5. Brief summary

The simple summary is: whoever gets the traffic may not necessarily win the world. It depends not only on the quality and sustainability of the traffic itself, but also on whether the traffic has a good conversion path and conversion efficiency.

Tencent's traffic base (WeChat + QQ) is as solid as a rock and is unlikely to be shaken. However, it is possible that traffic in some scenarios will be cut off, but it will not be permanent. If there is no qualitative change in the level of science and technology, mobile phones will remain a basic tool, and WeChat will also remain a basic tool.

It is also unlikely that Ali would be killed by Zitiao. Although the emergence of each new type of content consumption platform, especially those involving shopping decisions, will make Alibaba nervous, but looking back at all the traffic platforms in the past that wanted to build supply chains and self-built e-commerce, none of them succeeded. In the end, they still had to work upstream and sell user shopping conversions to Alibaba.

Advertising, e-commerce, and games are the irrefutable commercial triathlon, and every traffic platform must give it a try. The result is often that advertising is successful, but e-commerce and games rarely have any effect. In essence, the latter two products have complex product logic and are both time-consuming and expensive. After weighing the pros and cons, it is indeed more cost-effective to sell to downstream companies.

Author: Liu Yanfei

Source: Liu Yanfei Notes