Video content is leading the e-commerce sector in China. But as short-video apps leverage this format to monetize their businesses, the competition between Douyin and Kuaishou is heating up
Bite-size entertainment is hot in China so much so that many companies are leveraging the short-video format to monetize their business. But while short-video apps cement their presence in the e-commerce industry, the competition between Douyin and Kuaishou is heating up as their user bases overlap day after day.
According to a report from mobile data research firm QuestMobile, the number of people using China’s two leading video apps more than doubled in the last twelve months, reaching the figure of 158.8 million overlapping users in June.
The tech-focused WeChat account 晚点LatePost claims that Kuaishou and Douyin have 210 million and 300 million daily active users (DAUs) respectively. Moreover, both companies generated around $3 billion of revenue last year, with Douyin slightly above Kuaishou. Even though Kuaishou did not confirm these figures yet.
For what concerns the origin of these earnings, Kuaishou’s profit mostly comes from the platform’s live-streaming sessions while Douyin relies on advertising revenue. Indeed, if last May, Kuaishou earned $440 million from virtual gifts alone, Douyin did not even reach $58 million from the same revenue stream. However, the last one got $380 million from advertisements.
The two popular platforms are experimenting with e-commerce to monetize their businesses for some time now. Indeed, short-videos and live-streams have revolutionized online retail, providing a format that includes both entertainment and e-commerce features.
© Chinadaily. Video-based e-commerce is shaping up to be the next revenue battleground for China’s leading video apps, Douyin and Kuaishou.
Today, both Douyin and Kuaishou are established Taobao’s products sellers. It means that live-streaming income is achieved by selling consumer goods such as clothes, accessories, and fresh produce, whose sale is supported by interactive links to e-commerce platforms like Alibaba’s Taobao.
As about 95% of e-commerce activity in China is made through mobile devices, video content has thus become a powerful tool for the online retail industry. While players like Vine pioneered this format back in 2012, Chinese companies have been the first to turn the video concept into a new form of online retail.
According to statistics, more than 100 million viewers watch a live online video event every month while nearly 32% of users now buy products through live-streaming videos. It satisfies the customer’s thirst for trust and transparency, as well as the growing need for entertainment and social engagement. The result is a new form of “entertain-mence”, a combination of entertaining contents, e-commerce, and social media features as well, of which the video apps Douyin and Kuaishou represent some of the pioneers.
“Short-video has become a powerful force in China’s social scene by providing 15-second entertainment to grab mobile users’ attention. It can be a strong weapon for e-commerce,” said Lu Zhenwang, chief executive at Wanqing Consultancy.
In particular, operated by Beijing-based ByteDance Technology, Douyin – the domestic version of Tiktok – started to integrate links to Taobao items in its videos in 2018 but it was not until recently that the social video app implemented a dedicated “Products” category in its search bar.
Today, ByteDance’s company already has partnerships with Xiaomi, NetEase Kaola, JD.com, Suning, and other stores to launch e-commerce mini-apps on its platform. But Douyin does not aim to provide e-commerce opportunities to big brands only. With over 250 million daily users, Douyin’s goal is to implement digital commerce features for small and medium scale merchants.
Also Douyin’s rival Kuaishou – known as Kwai in English – made a big move in June by tying up with China’s most popular e-commerce platforms, JD.com, Pinduoduo, Tmall, and Taobao, through a system similar to how affiliate links work. With this feature, the app allows users to show the products listed on these e-commerce sites via a channel called Kuaishou Small Stores.
Kuaishou, which had 341 million monthly active users in June, has sold more than $14 million in goods via its platform from August 28 to 30. According to the company, its promotional videos were viewed more than 200 million times during the three-day promotion called Kaopu Haohuojie.
© Abacus. Kuaishou said there are 1.15 million rural users selling local products on its app through both short videos and live-streaming.
According to Chinese media outlet Jiemian, the company, which has Tencent among its clients, aims to generate $4.36 billion in revenue in 2019 while in June, founders Su Hua and Cheng Yixiao set a target of 300 million DAUs to reach before 2020 Chinese Lunar New Year.
Currently, Tencent is in talks with Kuaishou about investing between $1 billion and $1.5 billion in the platform. By investing in China’s second-most popular short video app, the Shenzhen-based company could, in fact, compete more effectively with ByteDance.
These recent news show how e-commerce has proven to be an important channel for Kuaishou, which uses it wisely to monetize its huge user base, as well as to collect revenue from live streaming and ad sales. And as these latest moves demonstrate, the competition to gain China’s market share is heating up among social-commerce platforms.
Unlike Douyin, Kuaishou is popular with residents in Chinese rural areas and with users living in lower-tier cities. Some of its viral videos include farmers showing off their skills and people live-streaming their lives in the most remote villages.
Nevertheless, although the two video apps’ user bases overlap more and more, they still exhibit some differences in their user demographics and evolution. While Douyin is popular mostly in first and second-tier cities, through live streams, Kuaishou is changing lives in Chinese rural areas. Moreover, while Kuaishou started as a live-streaming platform before integrating short videos, Douyin followed the opposite path.
However, the success of both platforms, especially in the e-commerce industry, is mainly due to the advanced AI-supported content recommendation algorithms which is now enhancing the video-driven e-commerce in the Middle Kingdom.
The short-video industry has more than 820 million monthly active users as of June, meaning that more than seven out of 10 mobile internet users are on short-video platforms. Therefore, as the short-video market gradually nears saturation, Douyin and Kuaishou are increasingly competing for similar audiences, a fact that forces them to step up marketing and promotional efforts.
© Pexels. According to the 2019 Internet Trend Report, in China, users spend an average of 600 million cumulative hours watching short-form videos.
But these two platforms are not the only players here. The companies’ approach to e-commerce will put the two video apps in competition with China’s e-commerce giants like Alibaba and Pinduoduo, which are also trying to stimulate their growth through video content. Indeed, online sales on video platforms are increasingly becoming a great way to reach users, especially for what concerns those who did not have immediate plans to make a purchase.
As mentioned before, short videos represent a bite-size entertainment, a content that people can enjoy anytime, anywhere. Therefore, since this trend started last year, it drastically changed the way users consume content and thus transformed the whole marketing industry. Moreover, with the rising popularity of short-video apps, the live-streaming format also started to gain a renewed interest among users and it is now reshaping the entire e-commerce sector.
Today, e-commerce penetrates the majority of live-streams whether through fashion show broadcasts or via internet celebrities reviewing the latest cosmetic product, enabling consumers to buy what they see on the screen in real-time.
Therefore, not only is video content eye-catching, but it also provides a channel for customers to see how a product looks and feels in real life. A strategy that attracts not only consumers who want to buy a certain product or who are browsing online to make a purchase but also those who do not plan to buy anything.
Monetizing video apps is the result of this increasing trend. Both Douyin and Kuaishou, therefore, represent the perfect case of China’s evolving e-commerce industry while video-based e-commerce is becoming their next revenue battleground.
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