Content community: starting from content, fire in traffic, trapped in commercialization

The illustrations are from Canva Paintable

Rumors on the Internet about the listing of Xiaohongshu and the secondary listing of Zhihu have come and gone. Recently, online media broke the news that China's online Q&A platform Zhihu plans to be listed for the second time in Hong Kong, China, and may raise about 300 million US dollars. It was also pointed out that Zhihu is in consultation with the consultant on the listing of Hong Kong, China, and may submit a listing application as early as this month.

Regardless of whether it is listed or not, Xiaohongshu and Zhihu are well-deserved content community giants. In the vigorous development stage of the mobile Internet, Xiaohongshu and Zhihu have gained a large number of high-viscosity users with their unique content advantages, and are still the "surfing holy land" of Z generation young people.

However, the content community has suffered from traffic changes for a long time, losses have become the norm, and commercialization has always been a thorn in the eye of the content community giants. According to the financial report data, the net loss in the third quarter of 2021 was 269.8 million yuan, an increase of 145.27% from 110 million yuan in the same period last year, and the loss continued to expand.

From the perspective of the commercial layout of Zhihu and Xiaohongshu, how to balance content and business on the content community platform is an eternal test. Different platforms go out of different paths, trial and error and trial and error until the right balance is found...

The commercial dilemma

Content community platforms seem to be unable to escape an expansion curse: content is diversifying, content quality is significantly declining, and commercialization models are difficult to break through.

Zhihu users think that Zhihu is "edited", Xiaohongshu users spit on Xiaohongshu "filter book", and Station B is "tasted" by two-dimensional users. The reason for the decline in the reputation of the content community is the decline in content quality, and the decline in content quality is the negative impact of commercialization and the lack of content supervision on the platform.

In the process of content "self-examination", Xiaohongshu frequently lit up red lights. According to the "Panda" Plan 2021 Annual Governance Announcement, Xiaohongshu managed 535016 notes on the diversion and sale of fakes last year, and handled 124873 accounts for the sale of fakes, of which 100729 accounts were handled, covering 502 brands.

In addition, the "Announcement of the Results of the Special Rectification of the Chaos of Qinglang Internet User Account Operation" shows that Xiaohongshu disposed of a total of 51 "reincarnated" accounts, more than 60,000 illegal user name accounts, cleaned up more than 7 million "zombie fans", 517 malicious marketing accounts, and 41 illegal accounts that rented and sold online game accounts to minors.

Admittedly, a large part of the poor quality of content on community content platforms is the rush to commercialize.

Taking Zhihu as an example, its monetization channels include advertising, e-commerce, marketing solutions, etc., of which advertising revenue is the main source of income, which can also be said to be highly dependent on advertising monetization. After users reach a certain scale, they know that they have begun to introduce advertisements and commercial tweets, and low-value accounts such as marketing numbers and enterprise accounts are increasing, and the proportion of high-quality content is declining.

In this way, the quality of platform content is indeed related to the process of commercialization. The content community platform has entered a vicious circle of "content attracts users - users attract advertisers - excessive commercial promotion leads to user loss", and coordinating user value and commercial value has become the development consensus of content community platforms.

Little Red Book Strengthens "Grass Growing Economy"

Even if the mainstream consumer population is changing, "content is king" is still the iron law of the content community track, and xiaohongshu relies on the unique content shared by high-viscosity users.

On the one hand, the xiaohongshu user group base is large and young, and these post-90s and post-00s are easy to accept new things and like to share and recommend, forming a unique "grass planting culture" on Xiaohongshu. On the other hand, the content classification on the Little Red Book is complete, involving beauty, personal care, film and television, fashion, photography, painting, technology and digital, etc., which is enough to meet the needs of user content search.

It is reported that as of November 2021, Xiaohongshu MAU reached 200 million, 72% of the users are post-90s, and 50% of the users are in first- and second-tier cities. In 2021, the number of xiaohongshu user notes published increased by 100% year-on-year, and the community gathered nearly 80,000 brands in more than 230 countries and regions around the world.

High-viscosity users have laid the foundation for Xiaohongshu to explore diversified business models, and Xiaohongshu has opened two monetization channels, one is advertising, and the other is e-commerce. According to the data released by Dongxing Securities, in 2020, the revenue of Xiaohongshu is mainly composed of advertising and e-commerce. Among them, advertising revenue is 600-800 million US dollars, accounting for about 80%; while e-commerce GMV is about 1 billion US dollars, and its revenue accounts for about 15%-20%.

Advertising is the main revenue pillar of Xiaohongshu, but the stability of advertising revenue is low and the growth space is limited, and there are more large advertising players such as Baidu, Weibo, and Douyin, and Xiaohongshu needs to find more room for growth.

First, the Advertising Business of Little Red Book is easily affected by the market environment, while the Internet advertising environment is not optimistic, and its profit space may be compressed. According to QuestMobile data, the overall growth rate of Internet advertising in the third quarter of 2021 slowed down, with the year-on-year growth rate falling to 9.5%.

Second, in the past, the advertising industry used to be mainly traffic-driven, but now in addition to traffic exposure, advertisers pay more attention to "product and effect integration" and put forward higher marketing requirements for content platforms. For Xiaohongshu, content recommendation and consumption are closely linked, how to further improve the conversion of recommendation to sales, increase the efficiency of advertisers is a big test.

In addition to advertising, e-commerce is another commercial position that Xiaohongshu wants to raid.

Previously, Xiaohongshu and Taobao reached a consensus on cooperation, Xiaohongshu was responsible for the content of Taobao responsible for the goods to perform their duties, users "shopping" on Xiaohongshu and "placing orders" on Taobao were not happy. However, diversion for third-party e-commerce platforms is not the ultimate goal of Xiaohongshu's development of e-commerce business, and in August 2021, Xiaohongshu closed Taobao external links and launched the "number store integration" policy, forming a complete "production and marketing integration" e-commerce closed loop.

Xiaohongshu's e-commerce business cannot escape the fate of making wedding dresses for others. Most users retain the habit of searching for content in Little Red Book and placing orders on third-party platforms. In addition, although Xiaohongshu has content advantages and a high-viscosity user base, there is still a big gap between commodity categories and after-sales service and giants such as Tmall and JD.com.

At the 2022 Xiaohongshu Business Ecology Conference, Xiaohongshu CMO Zhiheng put forward the commercialization vision of the platform: "Our commercialization vision is to help every good product grow in Xiaohongshu. Also launched the "IDEA Marketing Methodology". In addition, some media broke the news that Xiaohongshu has recently made organizational structure adjustments, and the original community department and e-commerce department will be merged into a new community department.

All indications show that the future commercialization path of Xiaohongshu will also provide better marketing solutions for store owners and brand owners based on content, that is, to further strengthen the "grass planting economy".

Knowing that the "Q&A Economy" is deeply cultivated

As the largest Q&A content community in China, Zhihu's strength is the massive amount of professional content.

At the beginning of its establishment, Zhihu strictly reviewed user information in accordance with the invitation system model, gathered Internet bigwigs such as Kai-Fu Lee and Ma Huateng, as well as KOLs from all walks of life, and produced and disseminated high-quality content through questions and answers, and this batch of seed users labeled "elite", "high-end", "professional", "scarce resources" and other content labels for Zhihu, and also made Zhihu successfully out of the circle.

Fang Jin, there are still many people who are keen to participate in the topic of Zhihu, produce and disseminate content, and are willing to pay for Zhihu's paid content. According to the financial report data, as of the third quarter of 2021, the average number of monthly active users reached 101.2 million, and the average monthly paid users have reached 5.5 million.

High-quality seed users have achieved Zhihu, but Zhihu, who is eager to commercialize, has not been able to maintain this content pure land.

Knowing that walking down the "altar" is divided into three steps, one is to cancel the invitation system, the second is the sinking strategy, the third is the loss of high-quality creators, after the "three steps" the number of users has gone up, and the quality of content has declined. Correspondingly, the platform is full of pan-entertainment content such as emotions, star chasing, and constellations, and "forcing, editing, and pulling" has become a user mantra, and the value of the content is greatly reduced.

The commercialization that I attach great importance to is also not satisfactory.

Compared with Xiaohongshu, Zhihu's business model is very diversified, including online advertising, commercial content solutions, paid membership and other businesses (including online education, e-commerce), etc., of which advertising is the main source of revenue, followed by paid membership and commercial content solutions, and e-commerce business is in the exploratory stage.

It is reasonable to say that the diversified business model is conducive to the platform to generate revenue, but it has been losing money for a long time, why? According to the data of Zhihu Financial Report, the net loss in 2019 was 1.431 billion yuan, the net loss in 2020 was 1.198 billion yuan, and the net loss in the first three quarters of 2021 totaled 920 million yuan.

First of all, Zhihu's commercialization path is almost based on "content", and the reduction of content value has led to the loss of core users. In other words, the quality of community content affects user viscosity to a certain extent, and user viscosity is related to the revenue of channels such as paid membership, online advertising, and commercial content solutions on the platform.

According to online public data, as of the end of 2020, the cumulative number of users in Zhihu reached 370 million, and the number of monthly active users was 75.7 million, but its active users accounted for only 20.5%, which was lower than Xiaohongshu (33.75%) and also lower than Station B (32.32%).

Secondly, it is known that "burning money for volume" leads to high operating costs. According to the financial report data, zhihu cost in the third quarter of 2021 was 398.6 million yuan, compared with 162.8 million yuan in the same period of 2020. Among them, sales and marketing expenses were 374.7 million yuan, research and development expenses were 184.7 million yuan, and general affairs and administrative expenses were 188.0 million yuan.

In addition, knowing that other businesses (online education, e-commerce) have a small contribution to revenue, and there are Taobao and Jingdong with a perfect supply chain in the front, and vibrato and Kuaishou with sufficient traffic, the probability of e-commerce having shortcomings is very small. According to the financial report data, Zhihu's other income in the third quarter of 2021 was 45.7 million yuan (about 7.1 million US dollars), accounting for only about 5% of the total revenue.

The attitude of capital also shows that the space for commercial imagination is limited. Zhihu suffered a break on the day of listing, the highest decline of more than 24%, as of January 25, 2022, Zhihu stock price was 4.145 US dollars / share, compared with the high of June 2021 13.849 US dollars / share, down nearly 70%, the total market value of only 23.27 US dollars.

In the future, how to deepen the Q&A economy? Gao Qiang, vice president of Zhihu, gave the answer: The primary task of Zhihu in 2022 is to build and strengthen the content ecology, and on this basis, bring higher value, longer-term trust and growth to customers.

brief summary

Most content community platforms start with content, fire in traffic, trapped in commercialization, Xiaohongshu and Zhihu can be said to be typical cases.

First of all, the efficient monetization of content community traffic is a difficult point, because the unstable business model is very susceptible to the market environment, and the traffic is easy to lose with the rise of new things. Secondly, with the development of the Internet and artificial intelligence technology, the digital competition of various platforms has become more and more homogeneous, and high-quality products and content services have become scarce. Furthermore, content community platforms need to maintain the quality of their content and avoid content and business imbalances.

In short, a good content community needs to continue to provide users with high-quality content in order to maintain its longevity in the ever-changing Internet market.

Text/Financial Reference, ID: Jrwaican