Overvalued Toutiao may not be worth $10 billion

There have been a lot of debates about Toutiao's "values" recently, and most of the comments are judged from a moral standpoint, which is almost harmless to a commercial society. Guo Jingming has been plagiarizing for so many years and has no apology. He cried bitterly when "Jade Dynasty" failed at the box office. In the final analysis, it is always commercial value that matters.

The valuation of Toutiao has continued to rise in recent years, and it is said that it has now reached 10 billion US dollars. It is hailed as a new force to challenge BAT. As a former user of Toutiao, I am shocked. Is a platform that has no original content and only aggregates and distributes information really worth so much money?

Don’t talk about values, talk about value first

The essence of Toutiao is that it is a platform for gathering and redistributing information, and the platform itself does not produce content. This is indeed similar to Baidu, so people often compare Toutiao and Baidu, but the two are essentially different.

Baidu controls the traditional Internet information portal. In the PC era, it was the only way for most users to access the Internet. After Google left, it maintained a near-monopoly for a long time, thus maintaining a high market value. However, since the rise of mobile Internet, Baidu's market value has continued to decline, because the portal to mobile Internet is no longer search.

Toutiao is not irreplaceable, nor does it have a monopoly, let alone a portal to the mobile Internet. Both traditional portals and other information aggregation platforms are making plans, some of which are aimed at seizing the market, but traditional portals are more defensive, because the value of this market is still under discussion.

From my personal understanding, Toutiao is closer to Kuaibo, and Zhang Yiming's opinions are also similar to Wang Xin's. The difference is that Wang Xin is a lesson learned from the past, and was imprisoned for being involved in "pornography and obscenity", while the latter carefully avoided risks, but still fell into the accusation of "vulgarity", and was recently administratively punished by the National Office for Combating Pornography and Illegal Publications.

Of course, this problem is unavoidable for any information aggregation platform, but Toutiao’s principle for vulgar content is “not to actively push vulgar content.” In the Internet circle that likes to pretend to be a “clean stream,” Zhang Yiming is willing to become a “mudslide,” partly because of his straightforward nature and partly because of his close relationship with Toutiao’s user base.

According to third-party data, 58.7% of Toutiao users have a high school education or below, with high school/vocational school/technical school/technical school accounting for the highest proportion. The situation is better than I expected, so I will trust this data for now.

Occupation and income: Freelancers/self-employed individuals/private business owners account for 37.8% of the total, and users’ income is mainly concentrated below 4,000 yuan, with low-income groups accounting for the majority.

The most popular content areas on Toutiao are basically concentrated in "entertainment, emotions, society, history" and so on. The "100,000+" that WeChat public accounts crave are everywhere on Toutiao, but who cares? In fact, the notorious army of micro-businesses would rather stay on WeChat than on Toutiao. Why is that?

It’s simply that the traffic generated by Toutiao is not of great value.

Value is not something that can be exaggerated.

At a forum two months ago, Zhang Yiming announced that Toutiao had achieved its annual advertising target of 6 billion yuan.

Correspondingly, "As of the end of September 2016, Toutiao had 580 million users, with more than 63 million daily active users, and the average daily usage time of a single user was more than 76 minutes."

It can be seen that after four years, Toutiao has reached its ceiling in terms of user growth. After all, the latest statistical report shows that there are only about 680 million Internet users in China.

However, the biggest problem we can see from the data is that the advertising value of Toutiao is not high. It is hard to imagine that a platform with 580 million users only contributed 6 billion in advertising fees. This was achieved even though users complained about too many ads.

The data shows the reasons: 1. The quality and income of Toutiao users are too low; 2. The user activity is not high; 3. The value of the information data generated is too low. Take advertising as an example. With the same "100,000+" reading volume, WeChat public accounts far exceed Toutiao in terms of display and conversion rate.

Therefore, the top priority is for Toutiao to deeply tap the potential of the platform and increase the value of users and information data.

So Toutiao has done three main things in the past two years: first, opening a Toutiao account to improve content quality; second, supporting video authors; and third, actually setting up a Toutiao Q&A. Let’s analyze them one by one.

First, Toutiao has been embroiled in content copyright disputes since its inception. Although the launch of Toutiao accounts has made up for the lack of original content to a certain extent, high-quality original content is still scarce.

It is difficult for a product to change its positioning and tone after it has come to this day, and of course Toutiao has no intention of changing it. Whether it is the user's active choice or the self-media catering to the user, in the end on the Toutiao platform, there can only be one result: the truly high-quality content will be eliminated.

This is also the fundamental reason why Toutiao cannot get rid of “vulgarity”.

Second, support video creators. This is a very money-burning field, and the competition is very fierce. For example, a short video platform recently received $500 million in financing, and Toutiao cannot afford the cost of this money-burning.

Moreover, the spread of videos is closely related to social interaction, while Toutiao is only a distribution platform, and has little stickiness with users. Users cannot just browse information on Toutiao, and will not build up their own relationship chain, nor will they form a relationship between big Vs and fans.

Third, regarding Toutiao Q&A, there are Zhihu and Guokr before, but Toutiao can’t create any value. There is another reason, which is determined by the attributes of users. The Q&A field relies heavily on high-quality users and content.

The reason why Zhihu and Guokr have come this far is due to their high-quality users and content in the early stages. Compared with Guokr, Zhihu is more commercialized, but even if Zhihu becomes more commercialized and watered down, it is still several levels higher than Toutiao.

The value of Toutiao is indeed overestimated

Zhang Yiming admitted in an interview that Toutiao's revenue almost all comes from advertising. This is the single nature of its revenue.

In addition, the biggest problem Toutiao is currently facing is that it does not have a strong relationship with its users, which was also what Baidu was most worried about back then.

Zhang Yiming has always advocated the so-called "non-intervention", which I think is wrong. This is the same as the "evil" in a person's heart. If a person is not guided and allowed to grow freely, what kind of person will this person become?

Especially for a content platform, even though Zhang Yiming has repeatedly emphasized that Toutiao is a technology company and technology is neutral, considering Toutiao's development history, it is actually related to taking advantage of human nature, and technology is secondary.

Don't forget that Qvod's market share was also among the best in the past. Technological innovation is one aspect, but is it technology that really determines Qvod's position? It is nothing more than satisfying the most basic needs of the majority of users.

Whether a product is good or not, whether it meets user needs or not, and its final value are not directly proportional.

After Qvod “died”, it did not hinder the general public’s demand to continue to “watch movies” because Qvod was always a platform that did not produce content, did not generate user relationship accumulation, and did not generate information value.

To put it bluntly, Toutiao is just a text version of Qvod. Do you think it is appropriate to give it a valuation of 10 billion US dollars?

Of course, some people will say that Toutiao has great potential. So let's analyze what potential Toutiao has.

First of all, the user base and value determine the upper limit of the advertising revenue of the Toutiao platform.

As we have analyzed before, Toutiao’s traffic value is not high, and its advertising cost-effectiveness is average. It is impossible to increase users, and the competitive pressure it faces will become increasingly greater. As an information integration platform, what determines user retention and activity is nothing more than content.

The biggest feature of mobile Internet is that group divisions are becoming more and more serious, and people are living more and more in their own small circles. Take the circle of friends as an example, you will find that the so-called "popularity" is only limited to one's own circle.

It can be said that the process of content and users is a process of mutual selection. This process of mutual selection cannot be left uninterrupted. Therefore, there will not be a situation where one information aggregation and distribution platform dominates the market. There will only be some overlaps, but differentiated information aggregation and distribution platforms.

The content produced by Toutiao has no value except for being monetized by advertising. Now we are catching up with the trend of IPization. High-quality content can be turned into TV series, movies, and games, but can the content of Toutiao be transformed?

The answer is no, this trend has nothing to do with Toutiao.

Secondly, Toutiao’s weak connections have led to its inability to make inroads in areas such as video and live streaming.

Zhang Yiming likes to make comparisons with Facebook’s ads, but he forgot one thing: Facebook is a social platform where users will leave their relationship chains, interests and hobbies, and generate information data value. But what can users leave on the Toutiao platform?

Why Weibo can enjoy a second spring with short videos and a substantial increase in advertising revenue is self-evident. Can Toutiao do the same? Can it rely on users to habitually spend dozens of minutes browsing various gossip information every day and then leave without any regrets?

Then we can give Toutiao another definition: a pure tool. Is a pure tool worth $10 billion?

Of course, I did not say that Toutiao has no value in existence. This is wrong. I just think that the value of Toutiao is obviously overestimated, far higher than the value of an information aggregation and distribution platform. A reasonable valuation should be between 2 billion and 3 billion US dollars.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.