Platforms and capital change their minds, PGC videos fall out of favor? Where will content entrepreneurs go in the cold winter?

The success of videos such as "Never Expected" and "Diaosi Man" made PGC popular for a while. However, when the tide receded, it was time to test who was still wearing shorts.

From the end of last year to the beginning of this year, the PGC industry experienced a boom and many companies obtained financing.

In January this year, Entertainment Capital Theory released a white paper on online content, and made a judgment on the PGC field, "PGC is on the cusp of a big trend." It mentioned that the company behind "Care for Gossip Growth Association" completed financing with a valuation of 100 million yuan, and the valuation of "Luoji Siwei" in its B round of financing has reached 1.32 billion yuan; PGC in vertical fields, such as "Mingbai Academy" (gender, mother and baby), "Military Sub-Plane" (military), and "Daily Food Diary" (food) have all obtained financing in 2015.

"Military Sub-Plane"

The industry structure is beginning to emerge, top content is highlighted, and vertical fields and pan-entertainment fields are fighting each other. The situation seems to be very good. However, what was unexpected was that in the second half of the first half of this year, the situation took a sharp turn. Capital dads changed their favorites. With the rise of internet celebrity economy and live streaming, online dramas and online movies are booming, and PGC has become the abandoned "ex-boyfriend".

The boom has passed, and transformation is difficult, but there is no turning back. PGC entrepreneurs are anxious and are trying online dramas, online movies, and online variety shows. Some practitioners who do not want to be named said that although they don’t know what they are anxious about, they have been anxious for several years. Jiang Laodao, the founder of the canning factory in Shanghai, said that "it is normal for a group of people to die" and "the industry needs to be refreshed to eliminate speculators."

Some PGC entrepreneurs even said, "I feel relieved when I see that everyone is anxious."

How can PGC carve out a new path amidst the dilemma of traffic being diverted and being abandoned by platforms?

Traffic declines and platforms no longer pay attention

Wang Cheng is a PGC industry practitioner. Although he has only been in this industry for two years, he has witnessed the process of PGC going from good times to hard times. "PGC has now entered a red ocean moment, and the competition is too fierce now." Wang Cheng said: "There are about 5,000 companies in the market doing PGC, but not many of them are really doing well."

According to Wang Cheng's observation, the generous recommendation benefits that the platform previously gave to major PGCs have begun to be reduced this year, or even disappeared completely.

Rage Comics

According to Wang Cheng, when major platforms began to support PGC last year, it was easy for video platforms to recommend these PGCs. "Before, a program might appear in two recommendation positions at the same time, first on the homepage and then on the channel. Now, it is basically not recommended in several positions at the same time." Now, platforms basically do not recommend PGCs. In addition, Wang Cheng also found that there used to be original content in the obvious recommendation positions, but now they are gone.

In addition to the disappearance of recommendation positions, the platform itself is also decentralizing, and the overall traffic dispersion is quite serious. Now there are more recommendation positions, "whether it is mobile or PC. For example, on the PC, there were 4 positions in a column before, and now there are 6." Wang Cheng said: "Previously, including content creation to post-promotion and distribution, the platform would have maintenance, and the content party and the platform party would sit down and talk about how to make the prospects better. Now there is basically none of this."

All these signs indicate that PGCs have fallen out of favor on video platforms.

When the PGC industry was at its hottest, various video content platforms took frequent actions to support the development of PGC. The news headlines at the time were all like this, "iQiyi invested 500 million to develop PGC", "Sohu Video strategically promotes PGC and supports producers with 200 million in 2016", "LeTV has invested 7 billion to build PGC, how much high-quality content can it attract?" Youku, which started out as its own channel, also launched "Watch and Buy" to explore a new model of combining PGC with e-commerce. Now that the trend has passed, all these "vows of love" seem to have come to nothing.

Daily Eclipse

"The platform has its own strategy, and we don't quite understand it. (We) care, but it's useless," said a content entrepreneur.

In addition to the disappearance of the recommended position, the traffic of PGC is still declining. Although the overall traffic of the video platform is increasing, the traffic allocated to each PGC is decreasing.

Entertainment Capital Theory sought confirmation from all parties, and the relevant person in charge of iQiyi said that "(overall traffic) should increase rather than decrease", "(PGC traffic) accounts for almost 30% of the total platform traffic", and the relevant person in charge of Tencent Video said that "although the radio and television have recently cracked down on online content, the overall PGC traffic is still increasing."

Li Hao, CEO of Mars Culture, believes that the reason for the decline in PGC traffic is, on the one hand, because there are more (short video) programs. According to statistics, the number of PGC programs has doubled compared to last year, which has diverted traffic to PGC programs; on the other hand, a large amount of promotional resources of video websites have been diverted to online movies, online dramas, online variety shows, live broadcasts, etc.

Never expected

As the cold wind blows, top content is not immune. According to industry insiders, even for top content like Baozou Comics, although the overall traffic has not decreased, it is because they distribute their videos to emerging channels such as Miaopai, Meipai, and Weibo, so the overall traffic has increased, but the increase mainly comes from emerging channels, and the traffic of traditional video platforms has actually decreased.

In addition, an entrepreneur revealed that "the platform has limited traffic, the number of clicks in the previous period was too low, and it has been rectified recently. Now Taobao orders can no longer be placed."

Not only has the policy been tightened, but the focus of traditional video platforms has also changed.

An investor has observed that various video platforms "are focusing more on supporting online dramas, online movies and other member-paid content this year" because "this year is the time for several major platforms to compete for members," but PGC cannot bring them members.

Compared with various PGC contents, the self-made part of video websites began to exert its strength, and the power of video websites began to tilt towards their own production.

Chen Wei, senior vice president of iQiyi, said, "For iQiyi, we will pay more attention to self-produced content compared to PGC content." This part of content is more effective in attracting members than PGC content because of the large investment and heavy weight. Chen Wei said that iQiyi currently pays more attention to PPC (Professionally-produced Content), which is more professional self-produced. PPC will have a stronger member conversion power, more commercial value, and more favored by advertisers.

This part of self-production is mainly invested by the video platform itself or in cooperation with external teams, and the threshold is getting higher and higher. Many professional producers have flocked into PGC, squeezing out the living space of the grassroots who had poured in earlier.

The first wave of PGC content entrepreneurship has been harvested and investment enthusiasm has declined

Just in June this year, a PGC company called He Xiangufu announced the completion of its Series A financing. In addition, various short video projects such as Xingxing Buqiuren, Durian Entertainment, Star Wars TV, VSmedia, Jike, and Ergeng also received financing in the first half of this year.

The founder of He Xiangufu told Entertainment Capital at the time that in his opinion, the first wave of short video teams that were established together had basically entered the harvest period. "Those who changed their careers have changed their careers, and those who persisted and deserved financing have also obtained financing."

He said that the PGC field is about to enter a period of reshuffle, and the "BAT" in the PGC field will emerge in the near future. However, some entrepreneurs also said that the so-called "BAT" in this industry has actually appeared.

There are many small circles in the big PGC circle, such as the "media circle", "Zhongguancun" circle, "print media circle", etc. The so-called media circle refers to entrepreneurs who graduated from Communication University of China and are engaged in short video content entrepreneurship, such as Qingteng Culture, Jingmeng Culture, and the recently established Qiyuji, etc. There are also some others who are better at playing, such as "Hexiangufu" Liu Fei, who often hangs out with "Guanba Chairman" Ma Rui, "Crash King Nima" Ren Jian, "a group of good friends", and there are also content entrepreneurs who came from video websites and print media.

This group of video content entrepreneurs grew together and eventually formed the current landscape of the industry, but what is worrying is that the next wave of PGC entrepreneurs has not yet appeared.

However, as the landscape of video platforms changes, the next wave of PGC startups will no longer be limited to traditional video platforms, but may rise on short video platforms or live broadcast platforms.

After the honeymoon period, investors' general attitude towards PGC is now cautious, "reflected in the fact that the valuation center of high-quality PGC companies has fallen back and is not as hot as in the second half of last year."

Zheng Yi, partner of Qianshi Venture Capital, which invested in "Daily Food Diary", said, "The market is declining, but we are still relatively positive," "The angel stage may be more difficult, but it is still quite hot after the A round," and "Because the popularity of WeChat has been exhausted, the top content in each segment is safer and more likely to dominate." He believes that the vertical fields are basically saturated.

However, Mars Culture CEO Li Hao has a different view on vertical fields. "PGC companies in vertical fields emerge too slowly, and there are not enough high-quality companies." For example, why are there no content companies doing vertical short videos like "fishing" or "Go"?

Because some short video teams are filtered out due to whether they can realize good monetization, investors are relatively cautious about the PGC field mainly because "it is not so easy to increase volume now". Good content is the entrance of traffic, but new content that can attract traffic has not yet appeared.

New channels emerge, and PGC begins to find a way out

After the predicament, various PGCs began to look for new ways out. In fact, with the differentiation of video platforms and the emergence of new platforms, traditional video platforms are no longer the only channel for content entrepreneurs, and under the full network strategy of content entrepreneurs, falling out of favor on a certain platform does not cause life-or-death impact.

Traditional video platforms are bound to lose out on the dividends brought by the next wave of growth of small and medium-sized PGCs because of their platform strategy of placing more emphasis on top content, but the person in charge of iQiyi said, "After all, maximizing commercial value is our focus."

PGCs can adjust platform strategies based on the tone of the content to reduce the threat posed by a relative decline in traffic.

Taking Qingteng Culture, which focuses on vertical fields, as an example, several of their programs have the characteristics of adapting to different platforms. Mingbai School's popular science knowledge and Mingbai Kan Shijie's travel-oriented programs are more entertaining and topical, and their performance on platforms such as Weibo and Miaopai is better than traditional platforms. The maternal and child program Mingbai Ma performs better on traditional platforms because of its professionalism and its audience is parents who have already formed families. Its other two-dimensional program "Aotujun Shuo" also performs well mainly on Bilibili and Weibo because of its two-dimensional attributes and entertainment.

Jiang Xuan said, "The focus now is on the mobile platform, and Bilibili is also good now." Li Jia, founder of Huobao Hutong, also said that their content performs better on "Miaopai, Meipai, and Toutiao."

There are even PGC entrepreneurs who bluntly say that "platforms such as iQiyi, Tencent, and Youku are not good." The relevant person in charge of iQiyi also admitted that "vertical platforms have more advantages when starting out. As for fermentation and expansion, iQiyi has more advantages." "iQiyi's PGC is currently not driven by strong exposure. It is relatively balanced in terms of resource promotion, subscription conversion, personalized recommendations, search and other sources."

However, non-traditional video platforms also have their own "disadvantages". As the relevant person in charge of Bilibili said, "Bilibili can accumulate word-of-mouth, but cannot achieve volume." Although platforms such as Miaopai and Meipai have large traffic, they currently have no profit-sharing mechanism.

Yin Xingliang, the founder of Xinpianchang, said that many of Xinpianchang’s videos were mainly posted on Weibo, because Weibo not only has fans, but also after Weibo and Taobao are connected, it can directly generate purchasing power, making video monetization much easier.

According to multiple entrepreneurs, although the relative decrease in traffic has "somewhat" impact on the revenue share from hard advertising, the impact is not significant. Some PGC entrepreneurs do not think much of the decline in advertising revenue share: "In fact, it is not much to begin with, and I don't pay attention to it at all." Another entrepreneur also said, "Let me put it this way, if everyone was waiting for revenue share to live, they would have died long ago."

A purely high click-through rate means far less than a high-quality fan conversion rate.

Jiang Xuan, founder of Rishiji, said, "In fact, traffic is not that important anymore. The key is how many active users your content can eventually attract." Especially for top content, they have already accumulated their own fans on WeChat official accounts or other platforms.

According to Entertainment Capital Theory, platforms like Toutiao have begun to support short video content with profit-sharing policies. Many PGCs get a higher share from Toutiao than from video platforms, and some platforms are planning even more ambitious short video support policies.

Instead of relying on advertising revenue sharing with the platform, PGC's main profit-making methods are advertising placement and customized content. In addition, e-commerce also accounts for a certain proportion. Depending on the different attributes of PGC content, the revenue brought by the e-commerce part also varies.

However, even though the reduction in the platform's hard advertising revenue share does not have much impact on PGCs, Xiaoyu has learned that the platform has begun to eye the soft advertising placement of PGCs.

In the past, in order to support PGC, the platform was highly tolerant of the soft advertising implantation of PGC content and basically did not interfere with their content implantation. However, according to people familiar with the matter, as the pressure on the internal marketing departments of video websites increases, they also want to get a piece of the pie from the soft advertising implantation of PGC content, squeezing PGC's profit margins.

However, although the platform's attitude is not as friendly as before, for PGCs, such a situation "will test our company's versatility from fan operations to business operations to distribution capabilities."

In the future, e-commerce and scenario-based consumption will also be the operational focus of small and medium-sized PGCs. "We can no longer rely on platforms, we must make money directly from the C-end," said Ding Yu, CEO of Red Dragon Entertainment.

Xinpianchang has a video product called "Zhaowuji" that relies on video to become an e-commerce product. The creators of "Zhaowuji" are a young couple from Tianjin. One of them makes handmade products, and the other is responsible for filming them. "Zhaowuji" now has its own e-commerce platform, which sold more than 100,000 units on the first day of its launch.

Perhaps the most important thing for PGCs is not to be led by the platform, but to gather and retain fans, and let fans follow the content, so that PGCs will have greater voice.

For PGC, whether the platform is dependent on it depends on the content of the PGC. Some PGC content is generated by fans, such as the Gossip Lovers Association. Many of their revelations come from their fans, and a fan base has been formed. Whether the platform recommends them has little impact on them. This part of PGC has become a powerful head content, and their dependence on the platform is gradually decreasing.

Anxiety strikes but I can only run all the way

The boom has passed and transformation is difficult, but there is no turning back. Entrepreneurs in Beijing can’t sleep at night. The practitioner who did not want to be named said that although he did not know what he was anxious about, he had been “anxious for several years”. In addition, he was approaching middle age and was experiencing a midlife crisis, but he could not show it. “If I appear to be anxious and depressed every day, the team will lose confidence.”

"Even companies that used to specialize in MCNs now find it difficult not to be involved in online dramas and online movies," but they don't make much of a splash, and not many can actually succeed.

There are 5,000 companies in this industry, and content entrepreneurs are dying every day.

Jiang Laodao, who is in Shanghai, said, "It is normal for a group of people to die," and "the industry needs to be refreshed to eliminate speculators."

He said, "Many professional teams have worked for decades, preparing for this for a long time, and polishing the content until now, which is reasonable. But most teams just shoot a few demos, build some relationships, get some money, brush up some data, do some PR, and then openly start to platformize and IP. Being in it, it really feels ridiculous."

The Douban Entertainment Investment official account of Entertainment Capital Theory has reported on many PGC entrepreneurial teams. These entrepreneurs have more or less mentioned their Disney dreams or the dream of becoming "the light in the PGC field", or they have the dream of "entering the movie hall", but they also clearly know that they have to survive first.

A good content team is not built in a day. Not long ago, Qingteng Culture held a party to commemorate the fifth anniversary of the team. It is not easy to support a team of 80 people in five years. In the fifth anniversary thank-you letter, Qingteng Culture CEO Ji Fangyuan said, "The previous traffic dividends are gradually disappearing, content competitors are beginning to increase, and the capital winter is also cold... Here are all the processes and stories of our fight with the world, our dialogue with the world, and our reconciliation with the world."

Ding Yu, founder of Red Dragon Entertainment, said, "We cannot say that (the trend) is gone. We can only say that the wave has passed and everyone has come ashore. Now we have to look at the real situation. It is necessary to look at the cash flow and profits."

Li Guobin, one of the partners of "Flying Saucer Talk", also felt the decline in traffic. He told Entertainment Capital Theory that "the traffic of the entire content market has declined", "what users liked before may not last long", "entering a period of fatigue". Although users always have a demand for entertainment, they will also feel tired of fixed program formats and routine content. As Jiang Laodao, CEO of Canned Food Field, said, "The rapid and crazy expansion and replication of content like Internet products is itself a illogical thing."

If before this, whether the content is replicable and whether it can be produced on an assembly line was an important criterion for investors to evaluate whether a PGC company is profitable, then now, for these content entrepreneurs, how to innovate the program format and break through the audience's fatigue period is probably a difficult problem facing everyone.

Content entrepreneurship is like the process of Yugong moving mountains. There is no end, but you can only keep running all the way; it is like Sisyphus who keeps pushing stones up the mountain, without stopping, but that stone is the source of their misery and also the stepping stone to regain happiness.

The bonus period for short video entrepreneurship has indeed passed. As more people enter the market, the competition will become more intense. PGCs in the industry are already looking forward to the industry threshold being raised so that they will receive better treatment.

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.