How does Kuaishou achieve commercialization?

Video applications will be our focus for some time to come, and so will your suggestions, for three reasons:

1. Video applications are transitioning from entertainment products to infrastructure products. In the past six months, many business organizations from the real world have changed their production methods and experiences of the past 10 years or even longer. The reasons are well known.

2. The participants in the industrial chain surrounding video applications are expanding. Specifically, the video content gradually changes from being fun to being useful. "Usefulness" is the prerequisite for human society to carry out commercial activities, and commercial activities are an important force in social construction. If we compare video apps to projections of real society, the increase of “useful” content will enhance the overall vitality of this virtual society and motivate the participants in the production chain behind the content;

3. As the mode of production changes, the way of receiving information is also changing. These two changes will inevitably lead to a change in thinking and are expected to give rise to new types of occupations.

For all companies that hope to leverage the power of video, the past six months and the next period of time are still in a period of exploration. This is why you can see Dong Mingzhu first exploring Douyin, then trying Kuaishou, and finally going to JD.com (live streaming), or the same product/company appearing on different video platforms. Similar to the government's investment promotion to businesses in the real world, companies will always be interested in cities with better business environments.

From the perspective of video apps, buying traffic, placing ads, and relying on pure entertainment content to bring user growth are no longer appropriate today. Creating a platform or even an ecosystem that is attractive to enterprises (platform partners) and using the hands of enterprises to complete user services and growth is considered to be a top priority in the next few years.

It can be said that commercialization capability is the second half of the competition among video apps. Perhaps several years later, when people look back on this past event, they will regard "a certain company took the lead in the commercialization process" as key evidence of its winning a ticket to the next era.

Why talk about Kuaishou?

Among the new generation of video applications, Kuaishou, Douyin, and Bilibili are attracting much attention.

In terms of the timeline, Kuaishou was the first to become popular (2016), followed by Douyin (2018). However, Bilibili, which was established longer, only became completely popular at the beginning of this year. This may be related to its most special user attributes.

User attributes have slowed down the overall pace of B station's commercialization. What is certain is that the current commercialization process of Douyin and Kuaishou is higher than that of Bilibili, but the two sides have different focuses. Before 2019, Douyin was strong in advertising revenue, while Kuaishou was good at earning income from live broadcast rewards.

The situation changed after 2019. Douyin tried to make up for its previously neglected live streaming capabilities, while Kuaishou comprehensively accelerated its exploration of traffic monetization. One signal is that Kuaishou has basically lifted the restrictions on traffic investment. During the period from 2016 to 2018, for various reasons including user experience, Su Hua was only willing to use a small portion of the traffic for testing.

Unlike Douyin, there are two important backgrounds for the implementation of Kuaishou's commercialization: one is the K3 campaign launched by the founding team in mid-2019 (sprinting to 300 million DAU, achieved in January this year), which means that the design of Kuaishou's commercialization must follow the general framework of "serving customers-customers serving users-driving DAU growth" ; the other is that the epidemic forced merchants to relocate their production, which objectively promoted Kuaishou's commercialization process.

Another highlight of the whole thing is how Kuaishou commercializes itself. The product logic of Kuaishou and Douyin is different. So, for the same advertising, why should customers choose Kuaishou (especially considering that there is a certain overlap in users between Kuaishou and Douyin)? Conversely, what value can Kuaishou’s choice bring to users?

In order to answer this question, Kuaishou CEO Su Hua invited his junior at Tsinghua University, Yan Qiang. Yan Qiang was born in 1986 and was a senior algorithm expert at Alibaba before joining Kuaishou.

After joining Kuaishou, Yan Qiang designed a top-level commercial architecture, which aims to integrate Tencent's open ecosystem with Alibaba's traffic operations. The purpose of learning from Tencent and Alibaba is to attract merchants, but the starting points are different.

Simply put, what we need to learn from Tencent is how to build a business ecosystem. Kuaishou officially welcomes merchants to do business here and even accumulate private domain traffic. In this process, Kuaishou's commercialization only serves as a connector; what needs to be solved when learning from Alibaba is how to become a top expert like Alibaba in monetizing traffic, rather than becoming a company that sells traffic.

Based on his experience at Alibaba, Yan Qiang believes that Kuaishou’s direction should be: focus on industry depth and increase the value of individual users.

This article will, through our exclusive interview with Yan Qiang, restore the top-level design and thinking behind Kuaishou's commercialization for the first time, bringing the following highlights to readers:

1. Why Kuaishou can learn from Tencent

2. What are the characteristics of Kuaishou traffic?

3. How does Kuaishou learn from Alibaba’s traffic monetization?

4. Is now the best time to start a content business on Kuaishou?

5. Anonymous case study of Kuaishou commercialization

Traffic is the oil of Internet companies. The more oil they hold, the more options they have for refining. Imagine if an Internet company owned a huge oil field. It had the power to convert the oil into diesel, gasoline, kerosene or liquid hydrocarbons, and then sell it to whom and at what price.

360, which was a big name in the PC era, is often mistaken for an anti-virus software company, but its nature as an Internet company cannot be concealed. 360 generates revenue by selling the traffic attracted by its security assistant and software manager with free strategies to advertisers through the navigation and search functions of the 360 ​​browser.

Internet companies that hold more wealth often stand on the traffic iceberg hidden under the sea. This has not changed in the past 20 years.

For example, in the first half of 2019, Alibaba generated the No. 1 advertising revenue in the domestic Internet, exceeding the sum of Baidu (second place) and Tencent (third place). The reason is simple: Alibaba has the largest base of e-commerce traffic in the country with extremely high purity. It can not only sell it, but also kill two birds with one stone.

So, where does the traffic come from? According to Zhang Guoping, former head of traffic growth at Alibaba International Station, traffic has always had only two carriers: keywords (text) and relationship chains (social). Traffic transmission in many channels is one of the above basic carriers, or a variation or mixture.

Zhang Guoping's views are quite universal. By distinguishing traffic types in this way, the products of Baidu, Alibaba, Meituan, Ctrip, and ByteDance can all be classified into the keyword (text) driven field.

It is worth noting that among the above-mentioned representative companies, ByteDance is a variant that uses keywords (text) as traffic carriers, but the essence remains unchanged. The reason is as Zhang Guoping said, "When pictures, texts, and videos are disseminated, they still need to be indexed with keywords. The algorithm of Douyin is to label each video and each person. The labels are keywords, and then match the keywords of the person with the keywords of the video."

Su Hua's expression in public a few years ago also revealed similar meanings. He said that he did not quite understand the terms "short video entrepreneurship" and "short video track" used by the outside world. In his opinion, video is "the text of the new era" and is ultimately a carrier of information.

Su Hua also believes that the core capability of Kuaishou's algorithm is to adapt resources based on understanding content (video) and users.

The second carrier of traffic is relationship chain (social). The representative company that is good at using social to produce traffic is Tencent. Whether it is the articles and advertisements we see in the circle of friends, or the links thrown in the WeChat group, they are all traffic transmission channels presented in the form of relationship chains. At the same time, relationship chain traffic has a certain degree of privacy and closedness - that is, "private domain traffic" compared to public domain traffic.

Interestingly, we can still see Kuaishou among companies that use relationship chains as traffic carriers. This is closely related to Kuaishou's product design ideas. On the one hand, they have the technical ability to combine recommendation algorithms with interests (the "keywords" mentioned above) to greatly improve the efficiency of content distribution. On the other hand, they have always insisted on the "Follow" column appearing in a prominent position on the APP homepage for many years. This design has laid the groundwork for Kuaishou's social attributes today (in addition, Kuaishou APP also has a series of product functions that encourage users to interact, which will not be elaborated here).

In this way, Kuaishou's traffic has both "keywords" and "relationship chains" propagation characteristics, and the two characteristics represent the public domain traffic determined by the recommendation algorithm and the people-oriented private domain traffic.

In terms of its friendliness to creators, Kuaishou may be similar to WeChat. In terms of development path, WeChat first had social interaction and then content (public accounts); Kuaishou first had content and then social interaction, and the content distribution efficiency of recommendation + social interaction is higher than that of pure social interaction, thus reducing the hidden danger of traffic dividends (user time occupation) being concentrated on top creators.

Yan Qiang further explained, "Kuaishou is characterized by semi-public + semi-private. Its advantage is that we have a large amount of public and private traffic that can be connected and converted (for example, Kuaishou has a large number of public traffic entrances that are not related to the relationship chain). For example, Kuaishou has more opportunities than most platforms to develop (merchant account) mini programs."

Yan Qiang called the growth since K3 a spiral. Creators gather private traffic through content. The more creators there are, the more private traffic there is, and the public traffic will expand accordingly. Afterwards, these public domain traffic can be converted into different private domain traffic and fed back to each creator, helping them to further enhance their desire to create.

The only problem is how to make this system run smoothly, and this is where Kuaishou’s commercialization mission lies. "We need to solve the problem of creators' monetization. On the surface, this is a problem, but there are countless problems behind it." Yan Qiang said, "Only when this link is established can the entire cycle run smoothly and private domain traffic can generate commercial value."

Learn traffic monetization from Alibaba

Yan Qiang has experienced the entire wireless strategic transformation of Taobao Mobile and led the team responsible for the personalized algorithm of Double Eleven in 2015.

"Ali's greatest influence on me is that it taught me how to think about business design," Yan Qiang told Huxiu Pro.

At Alibaba, business design requires answering three questions:

1. Who are the customers you need to serve?

2. What value can you bring to your customers?

3. Why can you bring value to customers?

"These three questions seem very simple, but they can be used to design many business models. For example, live streaming and e-commerce can actually be done with the same logic." Yan Qiang introduced, "My business design at Kuaishou is basically based on this logic, and it has been proven to be feasible."

Until K3 last year, Yan Qiang believed that Kuaishou's commercial service targets were advertisers and creators who needed exposure for their works when using this model. Under this premise, they launched a series of commercial products: such as information flow ads on the homepage of the APP, Quick Enjoy, which adds patch ads based on the type of video (creators can get corresponding income after activation), and Fans Headlines (i.e. "buying volume") to help creators increase their exposure...

One day, Yan Qiang suddenly realized that the value of doing so was limited: "You can't just count the immediate benefits, which are the stock." He said, "What's more important is the incremental benefits and marginal benefits, which are actually the points where value is truly created."

If the service objects were set as before, Kuaishou’s commercialization would probably be no different from those companies selling traffic on the market, even if the efficiency of selling traffic was maximized - which they were doing at the time. A service called Quick Order could correct the matching relationship between brand, KOL/KOC and user based on actual conversion efficiency - it was still selling traffic.

"For example, when selling traffic in the beginning, we could just go with CPM (a method of advertising pricing: cost per thousand impressions). Later, it was like this: I am responsible for your conversion results, which is a step further than the original traffic logic." But in Yan Qiang's eyes, it is still not the optimal solution. " The real value of traffic comes from the value generated by your in-depth understanding of the industrial chain. That value is the incremental value. It is far greater than me selling you one click or helping you sell one product. For example, can the traffic from Kuaishou bring you growth in private domain traffic, or optimize your production methods? This is what we should think about. "

After K3, Kuaishou’s commercialization department decided to abandon its previous advertiser-centric approach and instead focus on building a business ecosystem. In fact, this is also due to Alibaba’s contribution.

According to Yan Qiang's recollection, there are usually two analysis paths in Alibaba's processing of data information:

One is consumer transaction behavior, including page dwell time, browsed product types, bounce rate, etc.

One is the merchant system, including inventory, turnover efficiency, production capacity, etc.

The operational strategy that is finally presented on the front end is the result of Alibaba's analysis and matching of two sets of data.

"In addition to C-end traffic, its system can also penetrate the entire upstream and downstream of the industrial chain. You see, it first transformed the payment system, then logistics, then finance, and now the supply chain (such as C2M). In this way, when Alibaba matches people and goods, the efficiency is very high. The value of its traffic will be multiplied. This is the difference between ecological products and traffic products we see."

Back to Kuaishou, Yan Qiang and his team established a new strategy called "one center + three paths" in the hope that Kuaishou can develop an ideal business ecosystem.

The so-called "one center" means "building Kuaishou's commercial product system with merchants and industries as the center." The general principle is to split the product into two parts, most of which are standardized middle-office products and a small part are customized products. "Middle-office products are committed to becoming universal solutions for the industry," Yan Qiang explained. "Creators in various industries (including brand owners) may need to buy traffic, and Fans Headlines is a middle-office product." In addition, a series of middle-office products can also form a combined solution to serve customers.

Looking further down, in order to achieve "building a Kuaishou business product system centered on merchants and industries", Yan Qiang formulated three paths:

The first path is to clearly connect all aspects of the ecosystem through advertising. However, as mentioned at the beginning, advertising is seen as a means, not an end.

The second path is to reach users through the creator’s private traffic. Apart from the quick enjoyment and quick order acceptance mentioned above, they also have other ways to play, such as using a product called National Mission, which allows creators to spontaneously choose the tasks they want to complete like in a game and obtain corresponding benefits. “Suppose Estee Lauder puts its products on Kuaishou, then anyone on Kuaishou can sell them. This is a task, and it can be sold by producing interesting content or through live broadcasting.”

The third path is to help merchants accumulate private domain traffic. When Yan Qiang bought duck necks before, his boss pulled him into a WeChat group. The boss sent out red envelopes in the group every day, and whoever grabbed the biggest red envelope would get a 20% discount. This made Yan Qiang realize that even small businesses are consciously using the Internet to retain their customer base, and he believes that this trend is irreversible.

Kuaishou version connects everything

Currently, Kuaishou has more than 300 million daily active users (it was just over 200 million before K3), and its traffic comes from many fields including clothing, catering, cosmetics, home furnishings, automobile transportation, agriculture, forestry, animal husbandry and fishery, machinery and equipment, beauty and hairdressing. If Kuaishou continues to follow Alibaba's idea of ​​​​ecological layout, then its 1,000-person commercialization team will not be enough in any case.

"In terms of how to build a business ecosystem, we chose to learn from Tencent," Yan Qiang told Huxiu Pro. "WeChat has almost no extra actions other than connecting. It attracts ecosystem partners to join through official accounts, service accounts, and mini-programs to help it (referring to WeChat) build an ecosystem."

"Kuaishou is currently building its entire ecosystem around video and live streaming content. We call it short video live streaming plus industry depth." Yan Qiang analyzed, "WeChat was mainly a communication tool at the beginning. Its usage scenarios and values ​​determine its ecological attributes."

In addition, Yan Qiang also said that the similarity between Kuaishou and WeChat in traffic production methods is one of the reasons why Kuaishou learned from the latter. "Alibaba lacks traffic to some extent. Of course, its advantage is that content and marketing are basically integrated and difficult to distinguish." Yan Qiang said, " Kuaishou's merchant accounts plus mini-programs are very similar to WeChat. But in the future, such as cars and ticketing businesses that may be done in the future, we will not go too deep, but let more people come in and participate in the construction of your ecological content. In this way, your ecosystem will become simpler and more accommodating to more people ."

Over the past six months, Kuaishou has invested real money and traffic, and has successively announced support plans for different groups such as media, game creators, MCN, etc. Not only that, they have also empowered the above groups by connecting roles such as official certified instructors and operations instructors through more than just technical means. Everything seems to have the embryonic form of an ecosystem.

When we asked whether this meant that now was the best time to make money on Kuaishou, Yan Qiang did not comment.

The subsequent response he described as a personal opinion rather than a conclusion. "What we really advocate is that no matter whether it is Kuaishou or merchants, I hope that what we get is the additional value created. As I said just now, that value is called incremental value or marginal value. Before our team decides to do something, we must first determine what the stock value is."

What exactly is considered stock value and what is considered incremental value? Yan Qiang took entertainment short dramas as an example. This type of online drama directed and performed by celebrities or even ordinary people has been popular on major short video software in recent years. "Today, the value of short dramas is not about what content you bring in, or who you let shoot the short dramas. These are all existing values ​​(in the market)." He explained, "Incremental value refers to whether the business model behind the shooting of such online short dramas can be established, and how much closed-end revenue these business models bring, and whether my ROI behind the revenue can be positive?"

He went on to say, "When this model can be generalized well enough, I can introduce a large number of such creators at the front end. The business model that supports it at the back end is easily overlooked by the outside world. Of course, the success of this business model depends on Kuaishou's business ecosystem."

From fun to useful, what is Kuaishou thinking?

The business ecosystem built by Kuaishou is essentially about creating incremental social value. From a micro perspective, it requires the continuous maximization of the value of individual users.

"Currently, the content on Kuaishou is more entertainment-oriented, which meets the entertainment needs of users. In fact, we believe that the entertainment needs are shallow in exploring the user value, so this year Kuaishou has made relatively large adjustments as a whole, from an entertainment to a product, and gradually becoming a useful product. The usefulness lies in the fact that the user value you provide is actually higher." Yan Qiang told Huxiu Pro.

From this perspective, it makes sense for Kuaishou to enter the education market. But the question is, what makes Kuaishou able to attract talented people from all walks of life who are accustomed to creating value through non-video methods to join Kuaishou?

In this regard, Yan Qiang broke it down into two questions:

1. Is the other party willing to do this?

2. Does the other party have the ability to do this?

He believes that willingness is more important than ability. "If you told the sales manager of a 4S store to come over for live streaming or to post a short video to sell cars before, it would be absolutely impossible." He believes that the turning point has come. "This year, there was a particularly far-reaching event, which was the epidemic. The epidemic forced everyone to realize that onlineization and digitalization are very important."

Over the past few months, more and more people who have never used short videos have begun to appear in front of a few-inch electronic screen, including some big names. For Yan Qiang, as long as these people are willing, the task is half done.

"Leave the matter of ability to us." He said that shooting videos or live streaming does have barriers to entry for most individuals, and the purpose of Kuaishou's commercialization is to eliminate these barriers as much as possible. "We have designed some scenarios. For example, if I am a salesperson at a 4S store, I can open my mobile phone for live broadcasting at work. I don't even need to speak to warm up the audience. If a user wants to see a car, he can just go to my live broadcast room first. If he is particularly interested in a certain car, he can remind me and I can explain it on the spot and provide point-to-point service, right? For 4S stores, the service radius will be greatly improved."

"Still using the same scenario, can my explanation of a certain car be edited into a single video through AI? In this way, the content will come out. In this way, I can digitize most of the products in the world, and the value of this is very high. So we think that another very important thing here is the product. What kind of products can we use to help him complete the live broadcast?" Yan Qiang said.

At least Yan Qiang is optimistic. "Maybe our cycle will be shorter than that of early Internet companies, such as Taobao and WeChat. It is estimated that we will be able to build a relatively good ecosystem in two to three years at the earliest."

Author: Liu Yuhao

Source: Huxiu Pro

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