Image source @ Visual China
Institute of Literary | Value
On April 22, according to a number of media reports such as 36Kr, China Times, and Securities Times, the content community Xiaohongshu recently opened a round of large-scale layoffs, with the overall layoff rate approaching 20%.
At the time of the crazy fermentation of relevant rumors, the Official of Xiaohongshu quickly put out the fire, saying that the personnel reduction was the annual performance inventory and personnel replacement of the policy, and the overall proportion was within 10%, but the specific layoff department, employee compensation plan and other details did not respond one by one.
A fact that cannot be ignored is that before being laid off, Little Red Book has actually been expanding its enrollment. But the miscalculation of Xiaohongshu may lie in the fact that the cold winter of the Internet advertising market has come faster and lasted longer than expected, seriously affecting the hematopoietic ability of its core business.
In addition, in the context of the collective fall of new consumer brands and the fading of the Internet celebrity economy, it is becoming more and more difficult for Xiaohongshu to retain its market share and customers - the perfect diary that made a fortune in Xiaohongshu's viral marketing is the best example.
After the online traffic dividend is exhausted and the marketing costs are rising, the scene of Internet celebrity brands spending thousands of dollars to fight the marketing war may become history. The upstream brand side tightens the faucet, and the little red book located in the downstream of the industrial chain will inevitably usher in pain.
Thriving on traffic and trapped in commercialization is a common problem for all content communities. In order to get rid of advertising dependence, what other way can the Little Red Books go?
Internet big factory "optimization tide" added another member: Xiaohongshu was laid off by 20%
On April 22, according to a number of media reports such as 36Kr, China Times, and Securities Times, the content community Xiaohongshu recently opened a round of large-scale layoffs, with the overall layoff rate approaching 20%.
On the pulse of the workplace community, the information of Xiaohongshu's layoffs also appeared on the hot list of the day at the speed of light, and the comment area was filled with the complaints and accusations of Xiaohongshu employees. Some pulse users marked as Xiaohongshu employees bluntly said that the 20% layoff ratio of the network is accurate, "All departments are laying off, and there are many old employees with options." ”
Nicknamed "Dharma Master" pulse users also posted that the front-end, e-commerce and other departments that have been recruiting before have not escaped the nightmare of layoffs, but the proportion of layoffs in various departments has a certain difference, "The proportion of layoffs in product and technology departments is relatively not so high, about 15%." ”
At the time when the relevant rumors were fermenting wildly, Xiaohongshu also made an urgent response. Through the public account Shanghai network to refute rumors, Xiaohongshu said that the personnel reduction is the annual performance inventory and personnel replacement of the policy, and the overall proportion is within 10%. However, for the specific layoff department, employee compensation plan and other details, Xiaohongshu did not respond one by one.
In fact, the wave of layoffs by Internet giants has intensified this spring, and it is not surprising that Xiaohongshu has "entered the game strongly" - the shrinking of the Internet advertising market, the content community has encountered walls everywhere, and the expansion of Xiaohongshu in innovative businesses such as e-commerce has not been successful, all of which have laid the groundwork for this layoff.
A fact that cannot be ignored is that before the recent two days of layoffs, Xiaohongshu has actually been expanding recruitment.
The Value Research Institute observed that during the autumn recruitment last year, Xiaohongshu was one of the largest Internet manufacturers in recruitment efforts, and released a large number of HCs in development, product, operation and other positions.
Last year, Xiaohongshu reached a school recruitment cooperation platform Aisiyi provided a set of data, in this autumn recruitment, Xiaohong wrote to the major universities across the country to provide 1000+ offers, the average monthly salary of more than 10,000, algorithms, front-end development and other popular positions to provide up to 25 salary attractive conditions.
The crazy recruitment of The Little Red Book, at that time, was walking on the road of expansion: on the one hand, it was expanding the community capacity and extending its tentacles to more vertical communities; on the other hand, it was constantly increasing new businesses such as e-commerce, aiming to seek a second growth line.
However, the miscalculation of Xiaohongshu may lie in the fact that the cold winter of the Internet advertising market has come faster and lasted longer than imagined, seriously affecting the hematopoietic ability of its core business.
The third quarter should theoretically be the peak season for Internet advertising. But QuestMobile's report shows that the size of China's Internet advertising market in the third quarter of last year was 158.2 billion, not only lower than the 159.6 billion in the second quarter, but also the year-on-year growth rate of 9.5% was also significantly smaller than the 26.2% in the same period in 2020.
In the second half of last year, among the listed Internet companies with advertising revenue of more than 10 billion, the highest year-on-year growth rate was Kuaishou, and the year-on-year growth rate of advertising revenue in the third quarter was close to 76%. But Kuaishou CEO Cheng Yixiao was not very satisfied with the report card:
"Kuaishou advertising market share of 4%, the total user use time accounted for 11%, the two data do not match, ad conversion is still relatively low."
QuestMobile expects that the growth rate of China's Internet advertising market will continue to decline in the next two years, and the content community platform is no exception. The report pointed out that the growth rate of the social advertising market size in 2022 and 2023 is expected to be 16.4% and 12.1%, which is significantly different from the peak of 28.3% in 2020.
Image credits @QuestMobile
In November last year, Xiaohongshu completed a new round of financing led by Temasek and Tencent, and its valuation reached a peak of $20 billion. This huge valuation figure has basically overdrawn the financing potential of Xiaohongshu in the primary market, and in addition to the IPO, it is impossible to seek capital transfusion.
More unfortunately, the unlucky Little Red Book encountered the plunge of Chinese stocks and the extreme pressure of the SEC, and the listing at this time will inevitably lead to a sharp decline in valuation, which can be described as a dilemma.
Market data show that in just four months, the value of many star Chinese stock markets is close to the waist. Among them, there is no shortage of knowledge that is in the same content community track as Xiaohongshu, vipshop and mushroom street belonging to the e-commerce sector, and the market value of Yixian e-commerce, which cooperates closely with Xiaohongshu and has the attributes of internet celebrities and grass, has directly shrunk by more than 70%.
Considering this, it is inevitable to take the initiative to lower growth targets and reduce manpower, although it is helpless.
What's more, Xiaohongshu is more worried about more than just the obstruction of expansion - in the context of the collective fall of new consumer brands and the fading of the Internet celebrity economy, it is becoming more and more difficult to retain the market share and customers in hand.
The internet celebrity economy faded, and the era of grass planting for the whole people came to an end
In December last year, Xiaohongshu Yuehuo announced that it exceeded 200 million, of which 72% were post-90s, 50% of users were from first- and second-tier cities, and the entire community ecology showed a thriving trend.
If you want to talk about user activity and user stickiness, Xiaohongshu is indeed no less than a horizontal comparison of competitors such as Weibo, Zhihu, Douban, and Tieba. As of the first quarter of this year, it is no accident that the monthly active will exceed 100 million, and the weibo with the highest monthly active has been plagued by "zombie powder" and "water army", and it is no accident that the little red book that came after it can win the recognition of many brands in a short period of time.
However, the glory of the Little Red Book did not last long, and the recession of the grass planting economy came as promised - from the industry's internal roll to the fading of the traffic dividend, and then to the regulatory hammer, in the past year, the moat of the Little Red Book has become crumbling.
The grass planting community is rolled up, and the opponents of the Little Red Book are increasing
First of all, the business of planting grass is no longer the exclusive property of Xiaohongshu, and in the past two years, the volume has become more and more serious, and Douyin, Zhihu, Kuaishou, and even Jingdong and Taobao all want to grab the business of Xiaohongshu and eat away at the latter's market share.
During the 618 period last year, Jingdong simultaneously launched short video, graphic and text with goods business, and the short video professional grass planting video produced during this period exceeded 900,000, and the proportion of goods increased by 334 times. As a leader in the content community, Zhihu also produced 2 million+ content at the same time, driving the total order volume of the platform to increase by 124% year-on-year, and GMV soared by 125% year-on-year.
As for the fate of Douyin and Kuaishou, it is an unprecedented severe challenge to Xiaohongshu - the former is not only a large user scale and a high user stickiness, and the conversion rate of short video planting grass is by no means comparable to graphics and text, which can be described as the strongest opponent of Xiaohongshu.
Last month, Douyin began to test the first-level entrance of the grayscale grass planting function, and has now taken the lead in opening up internal tests to users in Beijing and other regions.
In the grass planting track where the inner volume is intensified, the little red book as a predecessor may not have the confidence to win the vibrato and fast hand steadily.
The traffic law has failed, and internet celebrity brands are no longer superstitious about planting grass
Secondly, the huge traffic and grass planting model of Xiaohongshu have brought real users and benefits to major brands. But this set of growth laws now seems to have begun to fail - the most direct evidence is that those Internet celebrity brands that spend a lot of money on the little red book to plant grass have gone downhill.
The perfect diary that made a fortune in the viral marketing of the Little Red Book is the best example. According to the data, Perfect Diary entered the Little Red Book community as early as 2018 and was one of the first domestic beauty brands to participate in planting grass. With the precise positioning of "big-name flat replacement" and "light of domestic goods", it has cooperated with nearly 15,000 beauty bloggers.
Those days were the most brilliant period of Little Red Book and Perfect Diary: the former completed $300 million in financing just three months after entering the station, and the latter achieved more than 150 million users in half a year.
However, judging from the financial report of Perfect Diary's parent company, Yixian E-commerce, too much dependence on marketing and spending money in content communities such as Xiaohongshu are the main reasons for the continuous enlargement of its losses.
According to the data, The net loss of Yixian E-commerce was 1.55 billion yuan last year, the gross profit margin in the fourth quarter fell from 66.3% in the same period of 2020 to 65%, and the gross profit fell by 23.7% year-on-year to 990 million. Looking at the financial report of Yixian E-commerce, it can also be found that the annual marketing expenditure of 4 billion yuan in fiscal 2021 has a year-on-year growth rate of 17.4% - even higher than the revenue growth rate of 11.6%.
Image source @ Yixian e-commerce financial report
Hua Xizi, the old rival of Perfect Diary, actually has similar troubles.
Relying on the rapid rise of Hua Xizi in Li Jiaqi's live broadcast room, in the past two years, he has also begun to take the initiative to unbind with A brother of Taobao Live, and to open up customer sources on platforms such as Little Red Book and Weibo. The data shows that since 2020, Huaxizi has simultaneously invested a lot of resources in Xiaohongshu, Douyin, and Weibo, and on the official number of Xiaohongshu, the operators have replied to almost every user's spit notes one by one, and the degree of attention can be seen.
However, the marketing did not bring the expected growth to Huaxizi. Official data show that after 2020, huaxizi's sales volume growth rate fell back to double digits year-on-year, which is not the same as the 20-fold surge in previous years.
Supervision has become increasingly strict, and community chaos has been repeatedly prohibited
Finally, the community ecological reputation that Xiaohongshu is proud of has declined significantly, and it has suffered many controversies in the past year.
Some time ago, the Market Supervision Bureau once again issued the "Guidelines for the Supervision and Enforcement of Commercial Advertising Endorsement Behavior", which for the first time included "disguised commercial advertisements in the form of planting grass and misleading consumers" into the scope of supervision. It can be seen that the tolerance of regulators to the chaos of the Little Red Book is also decreasing.
In the face of increasing regulatory pressure, Little Red Book has also worked hard to save itself.
On February 17, Xiaohongshu announced that it would carry out special rectification of medical aesthetic accounts, cancel the professional certification of private medical aesthetic institutions, and ban and remove accounts suspected of marketing diversion and illegal medical aesthetics.
However, if the remediation effect is, it is still difficult to judge. After all, the game between the regulatory layer and the regulatory layer is a long-term task, Xiaohongshu also struck hard last year to remove more than 7,000 illegal medical beauty notes, blocked nearly 5,000 problem accounts, and now has to continue to increase the rectification efforts.
In the view of the Value Institute, the myth of Perfect Diary and the slowdown in Huaxizi's growth reveal the same fact: the Internet celebrity economic model, which is highly dependent on traffic and heavy on marketing and light on research and development, is failing. Especially in the context of the depletion of online traffic dividends and the rise in marketing costs, the scene of Internet celebrity brands spending thousands of dollars to fight marketing wars may become history.
The upstream brand side tightens the faucet, and the little red book located in the downstream of the industrial chain will inevitably usher in pain.
On Friday, Zhihu landed on the Hong Kong Stock Exchange on the first day of the plunge of more than 20% below the issue price, and the Douban Goose Group was also dissolved last week, and the domestic head content community had a rather bad life.
Thriving on traffic and trapped in commercialization is a common problem for all content communities. Whether it is the broken Zhihu, the Douban managed by the regulatory authorities, or the Little Red Book, which is caught in the rumors of layoffs, they are all looking for a more reliable path to commercialization - especially to get rid of advertising dependence.
What can the content community rely on except advertising for commercialization?
In order to get rid of advertising dependence, Xiaohongshu, Zhihu, Douban, Tiger Punch and other content communities have made many attempts, but unfortunately no one has dared to say that they have succeeded so far.
In January 2020, Xiaohongshu's offline experience store in Shanghai, Xiaohongshu Home, announced the closure of all lines, and the strategy of online and offline linkage was invalidated. According to official information, the first store of Xiaohongshu Home settled in Jing'an Joy City in June 2018, shouldering the heavy responsibility of exploring new retail business for Xiaohongshu. But after just a year of experimentation, this offline format, which had high hopes, declared bankruptcy.
In the past few years, Xiaohongshu's peers have also conducted many failed experiments. Douban's e-commerce business "market" and knowledge payment business "Douban time" are all thunderous and rainy, and commercialization is extremely slow.
Hupu, which announced the termination of the listing plan in June last year, had a hard time working through internal incubation and investment to create e-commerce businesses such as getting things and identifying goods, but unfortunately the expansion was not smooth. The prospectus shows that 60% of Hupu's revenue still comes from advertising, and the e-commerce business contributes very little.
The problem of commercialization of content communities can be said to be unsolved so far.
Where is the antidote to the Little Red Book, Douban, and Zhihu? Many people will think of that sentence for the first time - e-commerce at the end of the community.
Objectively speaking, Xiaohongshu has more advantages in e-commerce than Zhihu and Douban - this is mainly due to its overall high consumption level of the user base and a more tolerant community atmosphere.
Doing the Q&A community of Zhihu and Wenqing gathered in Douban, users are more resistant to commercialization, and their tolerance for e-commerce and goods is far less than that of Xiaohongshu.
However, in the 200 million monthly lives of Xiaohongshu, 72% are post-90s, 50% are located in first- and second-tier cities, and 90% are women, who pursue the texture of life and have a strong desire to consume, and are a group of very high-quality potential customers.
The Value Institute believes that there is nothing wrong with the content community to develop e-commerce business, and the question is whether it can solve two key problems: build a closed loop of e-commerce transactions and improve the e-commerce industry chain.
It is worth mentioning that according to media reports, Liu Huantong, the head of Xiaohongshu's e-commerce business, announced his departure due to family reasons in January this year, but soon joined Hago, a game social platform spun off from Huanju Group.
For a large enterprise of the size of Xiaohongshu, the departure of the first leader of the key business often involves the change of the core strategy of the enterprise and the future development direction of the business. In other words, Xiaohongshu's e-commerce business may need to change the positioning of the traffic hub of the e-commerce platform, improve the control of the e-commerce business, and increase the proportion of self-operated business.
The aforementioned Tiger Punch has repeatedly suffered setbacks in the e-commerce business precisely because of poor management of the supply chain, after-sales and other links. In 2019, the GMV of Obtained Product showed rapid growth, and the annual GMV reached 6 billion. However, due to scandals such as sky-high price shoes speculation and failed quality inspection, the number of complaints about property has soared, and even the e-commerce consumer dispute mediation platform has been labeled as "not recommended to place orders", and the platform's reputation has immediately fallen to the bottom.
Mushroom Street and Meili, which also made their fortunes as content communities, have fallen to the bottom in recent years, and their performance and stock prices have fallen to the bottom for similar reasons.
Solving these two key issues will largely determine the success or failure of Xiaohongshu's e-commerce business.
Of course, building a supply chain and creating a closed loop of transactions is not an easy task, and Xiaohongshu cannot achieve it overnight. According to the detailed user portrait, starting from the user's needs and focusing on vertical categories, it is the most reasonable way.
The statistics of Qiangua data show that as of now, beauty, mother and baby, food and home are the four most popular brands in the Xiaohongshu community. Taking gourmet products as an example, the data of Xiaohongshu Mall shows that users generally prefer items with a unit price of about 100-300 yuan, and the consumption potential is amazing.
Taking these key categories as the starting point and gradually improving its own e-commerce supply chain, Xiaohongshu still has the opportunity to catch up with the self that was once pinned on high hopes.
Write at the end
For Little Red Book, it is now a difficult time to face internal and external troubles.
Externally, during the Double Eleven period last year, Jingdong and Taobao both launched their own grass planting platforms, and Douyin was also exploded in the morning to test the grass planting community APP of the benchmark Xiaohongshu, and the Internet giant was eyeing the grass planting business. Internally, Xiaohongshu began to frantically "pull grass" to clear problem accounts, suppress show off wealth, false publicity and other behaviors in the second half of last year, but failed to win the recognition of all users.
Qu Fang, co-founder of Xiaohongshu, once said that confusion is the norm for Xiaohongshu's start-up team.
"In the early days of entrepreneurship, we focused on content, never thought about what the development path was, and we were even more confused about how to monetize."
Today, the problem of monetization is once again in front of them, but the top brass of little red books can no longer be confused. To be sure, e-commerce may not be the best way out for Xiaohongshu, but it is indeed the most realistic way out at this stage.