Valuation from 500 million to 79 million: How did 56.com decline?

According to the latest news today, 56.com, which has become a hot commodity, will soon be acquired by Sohu from Renren for US$12.9 million, or about RMB 79 million. You should know that Renren spent RMB 500 million to buy this video website four years ago.

From 500 million to 79 million, 56.com has shrunk to less than one-sixth of its original market value. How did 56.com, once one of the three major video websites along with Youku and Tudou, fall to this point step by step? Xiao Nei will now explain to you how it did so.

The fatal 30 days in 2008

Let's go back to six years ago. At that time, 56.com, which had been established for three years, had occupied the second largest video website in China with its leading video technology in the industry and adhered to the concept of UGC/PGC. However, due to the chaos in the industry at that time, one or two hundred similar websites emerged overnight. The country began to centrally rectify the video industry, prepare to issue licenses, and start the industry access system.

However, due to the lack of political sensitivity of the management and the government public relations ability, during that special period, 56.com not only failed to obtain the video license, but was fined and closed for one month due to the error of video review. To what extent was the negligence of 56 management? At that time, the public security and network management departments went to the computer room to unplug the line and left, and no one in the 56 company realized that they were being rectified. The technical team thought they were hacked. After a period of investigation and inquiries, they found that the line had been unplugged in the computer room. At this time, it was too late to dredge the network, and the relevant departments did not provide a timetable for rectification. It was basically a death sentence.

It was this month lost due to its own mistakes that led to a major reversal of 56.com’s fate and even the situation in the video industry:

First, the popularity that had been gathered with great difficulty was dispersed in an instant. According to subsequent analysis, Youku and Tudou divided the majority of the popularity lost by 56.com in a ratio of about 60:40. Since then, Tudou and the rising star Youku have been firmly in the first group, far ahead of 56.com in popularity. For 56.com, which focuses on UGC, without users, there is no content, and without content and users, it is equivalent to losing everything. Although the website has caught up after reopening, the huge gap caused by that month is already "eternal".

Secondly, after the site closure incident, foreign VCs thought there was a "political risk" and dared not make additional investments. As a result, there was no follow-up investment in 56.com for the next four years. Relying on the previous 30 million US dollars, the management had to be frugal and thrifty. In the increasingly fierce "money-burning competition" in the video industry, 56.com had no money to increase bandwidth, no money to buy copyrights, and no money for promotion. It was very natural that it was far surpassed by its competitors.

Renren's acquisition failed to bring it back to life

Since then, 56.com has been trying to recover. With its focus on UGC, its lost popularity has gradually returned. Although it is still a little short of catching up with its former rivals, 56.com has not given up its plans for independent development and listing. In fact, if Tencent Video had not made efforts later, 56.com might have been able to follow its established goals.

May 2011 was another time point that affected the development prospects of 56.com. Tencent announced its own video strategy. The powerful Tencent integrated the video and officially launched it with an independent domain name. Considering that it could not compete head-on with the powerful Tencent in terms of funds or popularity, the management of 56.com began to re-examine its strategy.

As an employee of 56.com said at the time, "in order to survive", 56.com later accepted a full acquisition by Renren for US$80 million. Renren.com obviously wanted to incorporate 56 into its lineup to expand its strength, and with the funds, 56.com seemed to have the possibility of a new life.

At that time, the mobile Internet was still on the verge of an explosion. The rise of smartphones led to a wave of users sharing videos on mobile devices. For a time, it seemed that the explosion of mobile video sharing was about to come, and Renren naturally saw this and decisively took 56 into its arms.

It was precisely because Renren.com only focused on the UGC direction that basically distinguished 56.com from those large video websites that burned money to compete for copyrights in terms of development direction. And that little bit of money was nothing at all in the situation at that time, when hundreds of millions of dollars were involved in the war. 80 million US dollars was just a drop in the bucket for increasing bandwidth and buying copyrights, and 56.com could only rely on this little bit of food to survive. Therefore, at that time, this cooperation, which was not very exciting in terms of the amount, was called a "weak cooperation" and was not very optimistic.

In addition, 56.com itself is still crude. As a video website that focuses on user sharing, they have not designed various functions around personal sharing: first, it is impossible to search and query based on the uploader; second, new users cannot add friends from their personal center, and there is no place to search for friends; third, there is no independent and obvious location for uploaded videos, and the classification is a bit confusing, without a clear concept of channels.

The godfather’s money was not enough, and the company itself was not up to par. 56.com missed the golden period of its second growth, and watched its competitors waving money gradually go away.

56.com is looking for a buyer again

As time went by, the situation of Renren.com, the owner of 56.com, also deteriorated. The former Chinese Facebook was turned into a mess and continued to lose money. Chen Yizhou had to sell Nuomi.com to Baidu. Although he claimed that he was not forced to do so due to the pressure of losses, the facts were there after all.

Next, Renren.com, which needs to cut flesh to save its life, will definitely sell 56. IQiyi, Mango TV, and even Xiang-E Qing, one after another, are rumored to be less and less reliable acquirers, but 56.com has repeatedly denied that it will be acquired. However, anyone with a discerning eye can see that for Renren.com, which needs to increase revenue and cut costs, 56, which no longer has much value, is a hot potato that needs to be sold as soon as possible.

In addition to its main UGC/PGC business, 56.com also launched a reality show live broadcast platform, Woxiu, in 2010. In fact, 56.com has only achieved a certain profit from Woxiu. According to Renren’s second quarter financial report this year, the revenue of Woxiu business was only 3.4 million US dollars, a decrease of 35.0% over the same period last year. According to reports, Woxiu business has actually been operating independently since last year and has recently been officially spun off from 56.com. 56, which has completely lost its hematopoietic ability, is destined to be abandoned by Renren.

Finally, finally, yesterday, a netizen broke the news that 56.com will be sold to Sohu for 12.9 million US dollars. Some media wanted to call 56.com CEO Zhou Juan, but she hung up the phone because she was in a meeting. Sohu has not confirmed the news yet.

Although Zhang Chaoyang once said that Sohu Video would rely on its own adjustments to win the market challenge, rather than relying on acquisitions, Sohu Video is under increasing pressure from rivals such as Youku, iQiyi, and Tencent Video. Acquiring 56.com, which has the ability to generate its own content, at a nearly bargain price is also a good choice to enhance its strength.

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.