A Conference Note From Robbie Scott

The primary takeaway from the Jan. 8-9 NewRank conference, a media and marketing conference focused on new social media and key opinion leader (KOL) platforms, was the upbeat 2019 outlook for content-driven advertising in China. Media platforms including Tencent Holdings Ltd., Phoenix New Media Ltd., Qutoutiao Inc., Beijing Kuaishou Technology Ltd.'s kuaishou.com and Xingyin Information Technology (Shanghai) Co. Ltd.'s Xiaohongshu.com all launched new strategies to attract content providers in 2019, including incentives on sharing advertising revenue and social commerce opportunities. 

Tencent’s WeChat has been China’s leading social media app with more than 1 billion daily active users (DAUs). However, the company’s leaders have been hesitant to monetize the platform via increasing ad loads for fear of diminishing the user experience. Additionally, they have yet to impose revenue sharing-agreements with their top KOL accounts, a potentially lucrative venture. For example, Tang Jie, a GQ China publisher and speaker at the conference, said their WeChat KOL accounts’ advertising revenue was 200 million yuan in 2018 and that WeChat has thousands of other top accounts generating similar revenues.

Tencent representatives at the conference reiterated this sentiment and said their 2019 content plan is to boost its instant messaging app QQ rather than rely heavily on WeChat resources. Despite this, no matter how much Tencent invests in its new QQ content ecosystem with subsidies or free traffic, it does not guarantee migration of users or content providers right away, especially since other new social platforms are more popular with “unique” characters. Xu Danei, founder of newrank.cn and a senior media expert, said quality content provides great opportunities for emerging Chinese companies. “How did Toutiao take away 7% of Tencent’s user time in 2018? Through its content, especially short-video platform Douyin,” he said. “Among all the emerging new platforms I have been watching, Xiaohongshu.com's advertising growth has been the most robust, of course because it creates such as a beautiful lifestyle that so many young people admire.” 

For content providers who are interested in sound, they can go to platforms like Shanghai Zhengda Ximalaya Network Technology Co. Ltd. and Ximalaya FM's app. Zhang Yongxu, Ximalaya’s vice president, said their business model does not rely on advertising, but rather on revenue generated from subscriptions, voice books and live-streaming. One of their trial businesses -- radio products of KOLs, celebrities, and leading intellectual property -- had sales of 435 million yuan in 2018, which exceeded their expectation. 

China’s digital consumption has expanded greatly from the generations born through the 1990s and is expected to be further driven by all the potential new users from less developed areas and the senior population. “Generations born after the 1990s have been primary drivers of the consuming power of digital entertainment in China, and they are willing to pay for subscriptions, good content and with high re-shopping rate,” said Zhang Yongxu.  

As for whether China’s internet user growth has hit a ceiling, executives of companies like Qutoutiao and kuaishou.com said no. “’Wuhuanwai’ [fifth ring outsiders, a term referring to people who live outside of Beijing’s fifth ring, referring to rural population in general] will be the incremental user and advertisement dollars,” said Chen Sihui, co-founder of Qutoutiao. “When talking about live-streaming hosts, many people thought they were all look-alike plastic surgery faces selling facial masks. In fact, online users have grown fast and that period is over,” said Yue Futao, vice president of kuaishou.com, “Users are more and more interested in real people and real stories; and many of our KOLs gain good revenue from selling agriculture products they grow.”