Three types of product diversification: Qutoutiao, Chizicheng and ByteDance

Diversification strategy refers to the company's choice to enter new business areas in order to occupy more markets and open up new markets in order to avoid the risks of operating a single business. This strategy has been fully implemented in the Internet industry. Taking Qutoutiao, Chizicheng and ByteDance as examples, this article introduces three types of diversified Internet products and shares them with you.

In traditional industries, after a company becomes the leader in a certain field, in order to find subsequent growth directions, it will generally consider expanding in that direction, hoping to replicate its successful experience in other fields, occupy the market in other fields, and lay a more solid foundation for the company. A tree can easily fall down in a storm, but a forest is not so easily destroyed.

The same is true for Internet companies. I have recently looked at some companies that have been relatively successful in diversifying their product matrices, trying to find their ideas and steps for product diversification. The companies I examined and analyzed are those that have just started to diversify or have not been diversified for long. Their trajectories are relatively simple and clear, and are more in line with the current environmental situation. Although BAT, which is a bit older, has some reference value, the times are different and its successful methods are not easy to learn from, so we will not discuss them for now.

Category 1: Diversification attempts within existing products

Try diversifying existing products and then spin them off once they have proven to have the potential to succeed. Typical representatives: Qutoutiao and WPS.

It can be considered the safest path to product diversification to first conduct diversification attempts for existing users within existing successful products, use existing traffic to explore directions, and meet more user needs.

Take Qutoutiao as an example. Qutoutiao has added games, short videos, live broadcasts and other content to its main APP. According to the third quarter financial report of 2019, the average daily PV of short videos on its main APP reached 227 million, with an average daily production of 42,500 videos and 7 million interactions, which doubled the data in Q1. The user penetration rate of mini games in the main APP is 30%, and the estimated daily active users have reached 10 million. These extensions have been proven to be effective in the main APP. Therefore, Qutoutiao is also secretly incubating independent related products, and subsequently directing traffic to these products through Qutoutiao.

The first impression of WPS is that it is a domestic Office product, but in fact WPS has many functions, such as paper duplication checking, image design, resumes, PDF tools, etc. Some of these functions have been proven to be effective.

WPS started its splitting journey in 2018, with the first tool to be split being the WPS PDF tool. After its listing in 2019, the funds raised will also be used to split the tools in volume, hoping to replicate WPS's successful path in segmented products.

There are two main benefits of splitting

(1) Splitting a large and comprehensive APP into segmented APPs can help acquire more accurate users, enhance stickiness, and expand the user base.

For example, if Qutoutiao only has the main APP, users who want to watch short videos will never think of downloading Qutoutiao to watch short videos, because in their impression, Qutoutiao is just an information APP. After Qutoutiao splits the short videos, it can target the users who watch the live broadcasts.

(2) After the split, promotion can be more focused.

There are many ways to promote WPS advertising, such as PDF, signature, and format conversion. However, due to the large number of functions, users who are diverted by a certain function cannot quickly find the functions they need. If the user's needs cannot be met as soon as possible, the user will easily leave, and the value of the diversion will be reduced. After splitting up separately, you can target PDF tools and advertise PDF-related functions, which is very accurate and efficient.

Of course there are negative examples, such as Ctrip and Meituan

Before 2013, each of Ctrip's product lines was a separate APP: one for travel, one for hotels, one for tickets, and even a separate APP for destination guides. The reason at the time was that the APP had to be fast and effective, so it couldn't be too heavy, and the complexity of Ctrip's own business had to be broken down and understood by users. After Liang Jianzhang returned in 2013, he returned to the comprehensive route.

From now on, this move is very correct. The tourism industry is very relevant and one-stop shopping can save users' energy. Moreover, in terms of promotion, equating "Ctrip" with "travel" is more efficient than promoting each app individually.

The current Internet penetration rate in China has reached its peak, and it is more of a competition for existing population. This kind of large and comprehensive APP is very convenient for users as it can solve many needs by just downloading one APP.

Meituan is also a very typical example. There are many categories gathered in one APP, and many of these categories have competitors of considerable size, such as taxi-hailing with Didi, hotel and travel with Ctrip, food delivery with Ele.me, movies with Tao Piaopiao, car washing and maintenance with Tuhu... Meituan’s slogan is "Eat, drink, play and have fun, all with Meituan." Meituan’s idea is to have the largest number of life-related users, so it tries to include all users first, and then meet different needs.

Different at home and abroad

However, most of the large and comprehensive aircraft carrier-level APPs that have developed well are domestic, while the situation abroad is quite different. I think there are three main reasons:

The first is that there is still a lot of room for adding new users overseas. The Internet penetration rate in the Middle East and Africa is still relatively low, and the Internet penetration rate in developing countries is only about half of that in developed countries. More vertically defined products can attract a larger new user base.

The second reason is that foreign users are limited by the performance of their mobile phones and are still quite concerned about the size of the application package . An overly large app will affect the download volume. According to Google Play's calculations, if the app package size is reduced by half, the download volume can be increased by about 15-20%.

The third is foreign users, especially those in Europe and the United States. They are naturally wary of large, comprehensive, and monopolistic products , and are afraid that too much of their information will be owned by one company. Therefore, different products will be selected to meet different needs.

Take Chiz City, which we will talk about below, for example. Their approach when making overseas fitness products is a little different. The domestic representative is large and comprehensive products like Keep. Chiz City Technology has also made similar products, but because the retention effect is not very good, it turned to a spin-off strategy to develop products.

They have launched a series of small and beautiful fitness apps in Europe and the United States, such as "Female Glute Workout at Home" and "Arm Max for Men", which are designed for users of different genders and age groups, and are only used to train specific parts, such as the abdomen, buttocks, shoulders, and arms. By observing the 7-day retention rate, the data of this strategy is far higher than the industry average 7-day retention rate.

Category 2: What’s popular?

It is to conduct diversified exploration based on the trends and development of the global application market. Typical representatives: Red City and the former Cheetah.

Let’s first look at the history of Chizicheng’s rise:

• In 2011, I started my own business
• 2013, launched solo launcher
• In October 2014, the first module of solo math (advertising system) was launched
• From 2013 to 2017, we launched utility applications, including lock screen, antivirus, and battery management.
• In 2017, media entertainment, fitness, games, and solo x application matrix were formed

From the trajectory, we can see that after getting traffic through the launcher, we directly consider advertising monetization, and subsequent actions are also to absorb as much traffic as possible.

The purpose of their diversification is to increase the number of users of their products , and then use this number of users to place advertisements and make profits.

The method is to collect and analyze data from app stores and third-party mobile app analysis platforms to understand the trends and developments of the global app market, so as to quickly find the types of apps that are recently popular with users or are growing rapidly, quickly develop them, and use their own traffic and delivery to occupy the charts, stabilize the user base, and form a new traffic entrance.

This model is to cast a wide net. According to their prospectus, Chiziwang has launched a total of 333 mobile applications and offline 177 in three and a half years, which is quite agile for a team of 62 people.

The disadvantage of this approach is the lack of innovation . They only have a small chance of occupying major market segments. Their idea is not to create a number one application at one time, but to create dozens of top 100 applications. They care not about the product, but the scale and breadth of users. The ultimate goal is to place advertisements.

Cheetah Mobile also followed the model of Chiziwang in the past. In the past two years, it has probably realized that achieving growth through unequal user information and greed for traffic is not a healthy way to grow. The real growth of a company still comes from finding new pain points and creating products that meet user needs . Therefore, Cheetah Mobile has transformed itself into AI+robots, hoping to plan for the future and find a real foothold for growth.

Category 3: Boundless Exploration

Once you have a flagship product, you can explore multiple apps together without limits. Typical representative: ByteDance.

The prerequisite for this approach is to have a very successful product with hundreds of millions of daily active users and tens of billions of revenue. Only when you have a large financial foundation can you have the right to spend money.

ByteDance's Zhang Yiming once said that ByteDance's path to expansion lies in diversified operations and global layout . Therefore, ByteDance has incubated a series of products, from short videos to cameras, from games to children's English. Basically, it will try everything it can, and if a product shows signs of success, it will launch an international version for overseas expansion.

They have the successful experience of Toutiao and TikTok and hope to replicate it on other products.

I sorted out all of ByteDance's products from 2012 to 2020, and listed the development trajectories of their product categories. The width of the lines represents their investment intensity in the corresponding years.

Judging from the many product categories it has tried, ByteDance’s product line development is not a straight line, but a multi-faceted one. This reminds me of the island-hopping tactics used by the US military in the Pacific battlefield of World War II.

The so-called island-hopping tactic is not to recapture each island one by one, but to skip the next island after recapture the next island, especially skipping the Japanese islands with stronger defenses. By occupying islands by hopping islands and using sea and air blockades, the Japanese-occupied islands are isolated and forced to surrender in the end, which greatly improves the progress and effectiveness of the recovery.

ByteDance’s island-hopping strategy is to occupy some of the more important categories now and in the foreseeable future. Once a single product in a category is successful, it will launch other products in the vertical field to replicate its successful experience, and finally hope to penetrate the entire category. For news and information, after the success of Toutiao, vertical related products such as Dongchedi, Pipixia, and Wukong Q&A were launched one after another; after the success of short video app Douyin, Duoshan, Huoshan, and Xigua targeted different groups of people respectively.

Another thing ByteDance does is to export its successful products overseas. A typical example in 2019 is the Uoka Life Camera, which was launched on January 1 and entered the English and Korean markets in August. The game My Kung Fu is Awesome will be released on September 23 and will be launched in overseas markets in December. Another one is the education company GogoKid, which entered the Japanese market in July 2019. The successful internationalization of TikTok has indeed given ByteDance greater confidence and experience.

ByteDance's diversification has not been smooth sailing. The situations of Wuguoqia and Huoshan are not very good. Of course, for ByteDance's current size, this is not a bad thing. Failure will make them more cautious and focused in their vertical expansion.

It can be expected that ByteDance will run faster in 2020. No matter what category or field, we need to be wary of them and try to build a deeper moat in our own category.

Author: Product is thinking

Source: Product Thinking