Unconsciously, Alipay has transformed from a simple payment tool into a tool product covering all aspects of life. Alipay has developed rapidly in recent years, and its growth experience is worth studying and learning from. This article will share three parts: growth panorama, growth factor description, and summary analysis. I hope it will be helpful to you.

With the listing of Ant Financial, Alipay once again took center stage.

As a tool-type product, Alipay's DAU has gradually climbed from 40 million in 2014 to 290 million today, and has almost been on an upward trend during this period. Its growth experience is very worthy of our study and reference.

This article will use the method of reverse calculation of DAU trends, and try to deduce Alipay's growth process and main driving factors from an external perspective and in a more macro way. Due to time and space limitations, many analyses are limited to this point. If you are interested in a more in-depth analysis of an event, you are welcome to discuss it with me privately.

In addition, due to the limited research time and my own level of understanding, I hope you will forgive me for any incompleteness and inaccuracy.

The article is divided into three parts: Part I: Growth Panorama, which introduces the panoramic view of Alipay's growth trend and briefly describes the various growth factors in the figure; Part II: Description of Growth Factors, which classifies the above growth factors and provides additional explanations; Part III: Summary and Analysis, which summarizes the inspiration gained from the above growth experience.

1. Growth Panorama

How does Alipay achieve sustained growth? What are the important driving factors? We pulled the DAU trend of Alipay from September 2014 to July 2020 to get a glimpse of its overall growth.

Overview of Growth Factors

It can be seen that Alipay's DAU has been rising steadily during this period, and the most obvious peaks are basically caused by the New Year's Eve red envelope activities; for the rest, the author marked the events according to his own understanding.

The following is a brief introduction to the key events marked by category.

1. Blue text part

Alipay/Taobao periodic operational activities include 618 (first initiated by JD.com), Double 11, Double 12, Alipay online annual bill, Spring Festival red envelopes/collecting five blessings, and Alipay offline Double 12.

2. Purple part

Alipay's offline red envelope sharing for in-store consumption is mainly aimed at grabbing the offline market with WeChat Pay. It has been going on since 2016. Initially, random cash red envelopes/instant discounts were issued for in-store consumption. Later, it was changed to sharing a y billion bonus pool for in-store consumption for x days within a month, and there is a step-by-step design.

3. Orange part

Short-term operational activities have a weak ability to continuously drive DAU, taking the Alipay Koi activity as an example.

4. Green text part

I personally think that Ant Forest is of great significance to Alipay, at least in the following three aspects:

1. As a successful case of word-of-mouth and activity productization, it has a huge user base, with a cumulative number of users exceeding 500 million in April 2019;
2. To a certain extent, it is responsible for restoring the reputation of Alipay. Alipay started its socialization journey in July 2015, moved its life circle to the homepage on August 2016, and then the circle incident broke out at the end of 2016. Alipay's reputation has been declining. The public welfare Ant Forest launched in the same year is a major tool for Alipay to rebuild its reputation.
3. As a warm and emotional design, it has a good user retention effect.

5. Red part

Alipay has launched important functions/important transformations, including the launch of the red envelope function, two major social revisions, the announcement to the public that it would abandon social networking and return to finance, the shutdown of the facial recognition payment pilot, the launch of Qingting Payment, the acquisition of Ele.me, the upgrade to a digital life open platform announced in March this year, and the financial management upgrade through live broadcasting, search, and new products that began this year.

6. Black text part

Occasional events, such as the large-scale outage on May 27, 2015, the single-day DAU soared to 97 million (only 67 million on 618 of the same year), the circle incident that broke out at the end of 2016, and this year's epidemic event.

7. Gray text part

Explain peaks, troughs or other events related to Alipay.

The above is a brief introduction to the trend chart. Based on the trend chart, the marked key events can be roughly divided into three categories: activity operation, product function, and strategic layout.

The following will further explain according to the above three categories.

II. Explanation of Growth Factors

1. Event Operation

Alibaba is very good at operating large-scale events. It is worth noting that Alipay cleverly prolongs the effectiveness of events on growth by operating events periodically.

1) Periodic operational activities

I personally believe that periodic operational activities are the core driving force behind Alipay's growth. Through Alipay and Taobao's periodic activities at various time points throughout the year, DAU continues to increase steadily.

Alipay's periodic activities include online word-of-mouth/brand temperature activities - Alipay Spring Festival Five Blessings Collection, social currency/communication activities - Alipay Annual Bill, offline market capture activities - Alipay x word-of-mouth offline Double 12, and offline in-store consumption red envelope sharing activities. The above activities continue to drive DAU growth while seizing online and offline markets.

Alipay, backed by Alibaba, also enjoys the traffic dividend of Alibaba. Alibaba excels in large-scale event operations, and the Taobao system's "festival marketing" holds regular online events on multiple festivals at the beginning, middle, and end of the year, such as Double 11 and Double 12, which also plays a synergistic role in increasing Alipay's DAU.

Taking 2018 as an example, the red circled part in the figure refers to the key periodic operational activities (holiday e-commerce activities, such as Goddess Festival, are not marked).

Periodic operational activities

2) Short-term operational activities

Since short-term activities have limited significance for long-term growth, we will only briefly explain the Alipay Koi activity as an example.

It can be seen from the orange circle that DAU increased during the event, but fell back quickly after the event, indicating that single-point short-term activities are difficult to continuously drive DAU growth.

The growth of DAU during the event was not very obvious and did not fully reflect the influence of the event. This was mainly because the DAU of Alipay generally showed a downward trend during the 11th period, and the main battlefield of this event was Weibo, with the main purpose of expanding the overseas in-store consumption market.

Short-term operational activities

3) Occasional events

Random events can significantly affect DAU in the short term. For example, in the red circle in the figure below, the large-scale Alipay outage in May 2015 and the Circle incident in late November 2016 both saw significant growth in daily DAU, but soon fell back.

Incident 1

During the epidemic, Alipay's DAU also fell sharply. After reaching its peak on the New Year's Eve red envelope activity on the 24th, it quickly fell to the bottom on the 27th. I personally speculate that this is related to the late follow-up of the epidemic topic. Previously, Dingxiangyuan and Baidu APP launched epidemic special topics on January 21, and WeChat and Toutiao also followed up on January 23, but Alipay did not go online until the 28th. Fortunately, after the 28th, DAU began to slowly recover.

Incident 2

2. Product Features

Among the many functional iterations of Alipay, we have selected 5 functions that are more relevant to growth for introduction and explanation.

1) Payment related: Red envelope function (2015)

The red envelope function was initially developed by the WeChat payment team and launched in 2014. After 500 million red envelopes were distributed during the 2015 Spring Festival Gala, it grew exponentially and began to divide the mobile payment market of Alipay, which dominated the market before 2014 (see the figure below). This behavior aroused Alipay's vigilance, so it launched the Alipay red envelope function in 2015 to compete with it, and distributed 800 million red envelopes during the 2016 Spring Festival Gala. Later, it added the "collect five blessings" gameplay, solidifying it into a periodic activity that continues to this day.

Payment related: Red envelope function

2) Word of mouth function: Ant Forest (2016)

Since its launch in 2016, Ant Forest has been working with its parent company Alipay to boost activity and retention, positively influencing the continued increase in DAU.

Word of mouth function: Ant Forest

3) Offline hardware: Dragonfly Payment (2018)

Dragonfly Payment is Alipay's offline facial recognition payment hardware product, and is also an important hardware product for future payment and new retail . WeChat has also followed suit and launched Frog Payment.

4) Financial management upgrade: live broadcast, search upgrade, gold selection area (2020)

In 2020, as users' financial management awareness was awakened during the epidemic, Alipay once again made efforts in the direction of financial management. In March, it connected nearly 100 popular financial management products from multiple financial institutions, opened up live broadcast capabilities in May and started financial management live broadcasts. In June, the search was upgraded to add 10w+ financial queries, and a financial management live broadcast festival was held in late June and early July. In July, the Gold Selection Zone (financial management products selected by a team of experts) was launched. Personally, I think this is a typical case of financial instrument products growing through new business (Golden Selection Zone) + new media (live broadcast).

5) Three-scenario user & application toolbox

If the above functions mainly look at the past, then based on Alipay’s current application classification, we may be able to see the present and the future.

In 2017, the Alipay operations team discovered that if users used more than three functions on Alipay, the retention rate would exceed 95%. Based on this, Alipay proposed the concept of "three-scenario users" and began to enrich the application toolbox.

From the current application classification, we can see the functional layout of Alipay products - payment and financial management as core functions; increasing user usage frequency through convenient life, shopping and entertainment; expanding the service scope through third-party services; strengthening the brand image and enhancing users' sense of mission through education and charity.

Details are as follows:

• Convenient life: daily high-frequency/practical functions; let users think of Alipay when they need convenient services, and steadily increase the frequency of use;
• Wealth management: financial management function; helping users manage their finances and make money, reducing user churn rate;
• Funds flow: payment tool; meet users' financial and derivative needs, and continuously expand usage scenarios to increase user usage rate;
• Shopping and entertainment: overseas offline/global shopping/local life; seize high-frequency online/offline payment scenarios and increase user usage rate;
• Educational charity: word-of-mouth functions/activities; strengthening brand image, enhancing users’ sense of mission, maintaining user emotions, and improving user retention rate;
• Third-party services: Mini Program ecological layout; become a super APP, meet all user transaction-related needs as much as possible, and expand the scope of services.

It can be seen that through the above functional layout, Alipay has covered almost every growth segment, including expanding business scope, increasing user usage rate/frequency, improving user retention, and reducing user churn.

Three-Scenario User & Application Toolbox

3. Strategic layout

In terms of strategic transformation, Alipay has also had at least three growth-related events that are worth noting.

1) Give up social networking and return to finance

Alipay began to try to become social since version 9.0 in July 2015. It copied WeChat's friend module almost pixel by pixel, and cancelled the gesture password function in order to enhance the social attributes, which caused security issues. In August 2016, version 9.9 moved the life circle to the homepage. At the end of November, two circles represented by "Campus Diary" and "White-collar Diary" were filled with many large-scale photos, which caused heated discussions. Alipay responded quickly, quickly took the function offline and conducted self-inspection and reflection.

The above attempts expose the problems caused by the tool-type products’ eager transformation into social networks: first, due to different product positioning and functions, the transformation requires a large number of high-cost trade-offs, which may damage the interests of the original products and users if not handled with care; second, for non-content products, when adding content modules, it is easy to ignore the control of content operation and review risks, and the control is relatively weak. In March 2017, Alipay officially announced that it would abandon social networking and return to finance to do what it is good at.

2) Acquired Ele.me and focused on local life

On April 3, 2018, Alipay acquired Ele.me. On October 12 of the same year, it announced that the two major businesses of Ele.me and Koubei would be merged to form a new company - Alibaba Local Life Service Company.

As a high-frequency local life area, Ele.me is an effective means for Alipay to continuously expand upstream scenarios and seize traffic entrances. According to statistics, as of March 2020, there are still 80% of merchants in the local life field that have not been digitized. Alipay has huge room to play. It can continuously enhance its control over the B-side ecosystem through offline digitization, and lay the foundation for connecting data, empowering other businesses, and integrating BC dual-end credit systems, cash flow, supply chains and other links.

In addition, in order to accelerate the development of word-of-mouth Ele.me, Alipay has strengthened the traffic diversion to Ele.me and added an Ele.me entrance to the homepage. Alibaba’s financial report shows that 48% of Ele.me’s new users in 2019 came from Alipay. In addition, Alibaba's ecosystem is also directing traffic to Ele.me, such as 88 Membership.

3) Finance + digital life platform, search + mini program

In 2020, Alipay continued to make efforts in the financial direction through live financial management, gold selection areas, and other means.

The digital life platform includes at least two major parts: local life and mini programs. Mini programs serve as the carrier and local life serves as the direction and means. Together, they promote the digitization of offline merchants, which is of great strategic significance.

In terms of search + mini program, a typical entry + ecological layout, it can be seen that Alipay has been continuously strengthening and cultivating the awareness and habits of searching within the user end. In June, hundreds of thousands of financial queries were added, and in August, direct search for brands was launched, continuously upgrading search services.

3. Summary and Analysis

Finally, we can draw the following insights from the above-mentioned key events.

1. Activities

• By designing regular activities with a sense of participation at key points throughout the year, users can be reminded of the product in specific scenarios. This not only captures the user's mind, but also helps to continuously increase the annual DAU (see Periodic Operation Activities - Festival Marketing).
• Creating a sense of surprise through short-term activities can deepen the brand impression and play a role in brand promotion, but it has little effect on continuously driving DAU (see short-term operation activities - Alipay Koi);
• In the face of emergencies, we must respond promptly and take corresponding actions, otherwise we may cause irreparable losses (see the cliff-like drop in DAU during the epidemic).

2. Product

• Innovative features can be used as a growth driver, but they require keen judgment and good luck, and are often difficult to replicate (see Alipay/WeChat red envelopes);
• Gamification can be used as a growth driver. When designing activities/products, you can refer to the octagonal model to stimulate different emotions of users, enhance participation, and achieve the effect of improving retention rate and reducing churn rate (see Ant Forest);
• You can refer to the concept of "three-scenario users" to find the "x-scenario users" of your own product, and promote implementation in the product and channel activation guidance to improve retention (see Alipay application);
• In terms of matrix traffic diversion, in addition to diverting traffic through resource positions combined with scenarios, you can also try to follow Alibaba’s example and divert traffic through joint memberships (see 88 members diverting traffic to Ele.me);
• When new media emerge, more thought should be given to how to promote existing businesses or expand businesses through new media, rather than blindly following the trend (see financial live streaming vs live streaming with goods);
• Increasing DAU is an intermediate means to achieve business/commercial goals, not the ultimate goal. Directly promoting business growth will drive DAU growth in a more long-term and healthy way (see offline hardware Dragonfly Payment).

3. Strategic aspects

• When new challenges arise, companies should still focus on their core businesses, give full play to their own advantages, and not be led by competitors (see Alipay's abandonment of social networking and return to finance);
• Tool products can further expand their business scope and advantages and raise the ceiling by extending core business scenarios (see Alipay digital life platform, convenient life applications, etc.);
• Global growth can be achieved by integrating upstream and downstream and extending the industrial chain. For example, payment, as a downstream link, can continue to expand upstream and control the traffic entrance through local services with a wide audience and high frequency. Similarly, search, information distribution and other businesses as upstream links can also continue to expand downstream, strengthen monetization capabilities, and build a more complete ecosystem. Search + mini program ecology is a powerful entrance + ecological layout. Currently, major manufacturers and manufacturers are making arrangements. They can consider trying to continuously extend to competitive fields while giving full play to their own advantages, such as focusing on search, competing with Baidu in distribution efficiency, extending to financial management and e-commerce, and competing with Alibaba for the market; extending to the vertical content direction, competing with ByteDance; and considering adding social factors to distribution.

The above is the complete analysis of Alipay’s growth. The purpose is to understand the overall picture of Alipay’s growth from a more macro perspective. Due to time and space limitations, many analyses are brief. If you are interested in a more in-depth analysis of an event, you are welcome to discuss it with me privately. Thanks everyone for your time.

Author: Zhou Zhang Jiawen

Source: Zhou Zhang Jiawen