30 billion market value to zero, what happened to Qutoutiao?

"Beyond the Five Rings" is one of the hottest words of 2018.

On July 26 of this year, Pinduoduo, which originated in the sinking market, rang the bell in Shanghai and New York and landed on the NASDAQ, and the stock price rose by more than 40% on the first trading day. Speaking in Shanghai, Huang Zheng said that Pinduoduo already has more than 344 million active buyers. It was successfully listed after 2 years and 11 months of its establishment, and Pinduoduo set a new record for the fastest listing of domestic Internet companies at that time.

More than a month later, the record was broken. On September 14, 2018, Qutoutiao, which is also known as the "three giants of the sinking market" along with Pinduoduo and Kuaishou, also landed on NASDAQ, only 2 years and 3 months after its establishment.

What is even more fierce than Pinduoduo is that on the first trading day, Qutoutiao's stock price soared 128%, and trading was suspended five times during the session, setting the largest first-day increase in US IPOs of more than $5 million that year, and closing on the day with a market value of $4.6 billion, equivalent to more than 30 billion yuan. Tan Siliang, the founder of Qutoutiao, said that "the listing is not the end, but the beginning". 

Five years later, Pinduoduo and Kuaishou have grown into real behemoths, but Qutoutiao is facing delisting, with its stock price below $1 for a long time, and its market value has lost 99%.

On March 21, Qutoutiao announced that it had received a decision letter from Nasdaq on March 14, 2023 to delist the stock and said it would not appeal. Delisting is a foregone conclusion.

According to the NASDAQ listing rules, the market value of publicly held shares of listed companies should reach at least $1 million, and the closing price should remain above $1 million. However, Qutoutiao failed to return to compliance within the 180-day grace period. In addition, Qutoutiao also failed to submit its 2022 interim financial report within the stipulated time.

Qutoutiao, once the focus of business schools, is the focus of successful entrepreneurial cases, but now it has ended up in such a tragic situation, what happened?

First, nuggets "outside the five rings"

Management guru Igor Ansoff once defined corporate strategy as follows: clarify your position, define your goals, and identify the actions that must be taken to achieve those goals.

Ansoff also proposed a strategic theoretical analysis tool, the Ansoff Matrix. This matrix divides strategic decisions into four quadrants through two dimensions (existing product/new product, existing market/new market).

According to this matrix, the strategy selected by Qutoutiao is actually to make efforts in "old products, new markets".

It is said to be an old product because Qutoutiao's algorithm-based content recommendation model has been reflected in today's headlines. You know, Qutoutiao was founded in 2016, and Toutiao was founded in 2012.

The real difference between Qutoutiao and today's Toutiao is that Qutoutiao chose "outside the fifth ring road" and entered a wider and more sinking number of people in third-tier cities and below. This is significantly different from the population in first- and second-tier cities in today's headline card slots.

According to official data, 70% of Qutoutiao's users come from the sinking market, 60% of users are women, and the median age is about 40 years old. With the middle age of the town, Qutoutiao and Today's Toutiao have achieved an installed coincidence of less than 20%, and it can be said that Qutoutiao is the "Today's Toutiao" outside the fifth ring.

Of course, only the "blue ocean" of the sinking market cannot be successful, and specific commercial designs must be carried out.

For Qutoutiao, the core of its early rise business model comes from the two dimensions of human nature: the apprenticeship system to obtain new customers, and the gold coin system to promote activity.

The so-called apprentice is to invite friends, and the invitee is the "apprentice". For each apprentice accepted, the master can receive gold coins and direct RMB rewards. In addition, apprentices share, read, and comment on the news, and the "master" can also receive "tribute", that is, gold rewards.

The gold coin system is a direct incentive for user behavior, if users read information, sign in, complete tasks, participate in sharing, etc., they can receive gold coins, and gold coins can be exchanged for yuan.

The mechanism behind this is to change the user's life cycle from "acquisition-activation-retention-revenue-recommendation" to "acquisition× fission-activation-retention-revenue".

This set of fission gameplay is reflected in Qutoutiao's quarterly financial reports. Among the fees, Qutoutiao will specifically list "User engagement expenses" to increase activity and "User acquisition expenses" to increase the number of users.

Where does Qutoutiao's revenue come from? Quite simply, advertising. It can be said that from the beginning of its establishment, Qutoutiao has used advertising genes to make products in its bones, rather than a news port.

At Shanda Games, Qutoutiao founder Tan Siliang was the head of the advertising business, and he also founded an advertising agency. In 2015, Tan Siliang sold the "Mutual Advertising" he founded for 1.35 billion yuan, cashing out nearly 400 million yuan in cash.

For Qutoutiao's business model, Tan Siliang once simplified it to the inequality M>N. The so-called M is the revenue generated by users clicking on ads, and N represents the cost of attracting new and promoting revitalization. As long as M is greater than N, Qutoutiao can make a profit. Therefore, its essence is to buy traffic from users and then sell traffic.

With the gameplay of social fission, Qutoutiao, which went public in 2018, had operating income of 58 million yuan, 517 million yuan and 3.022 billion yuan in 2016, 2017 and 2018, with a compound growth rate of 273%. In 2019, Qutoutiao reached a peak of 5.57 billion yuan, and the year-on-year growth continued to increase by more than 80%. And this revenue is almost all advertising revenue.

Second, "making money by brushing the news" has failed

Qutoutiao's downhill path also began in 2019. From the data point of view, since the fourth quarter of 2019, Qutoutiao's revenue has generally declined.

Why Qutoutiao fell quickly can be observed from three aspects.

The first is that there is no moat for business. The so-called moat, translated into the vernacular, is the barrier of "the opponent can't come in, the customer can't get out". If there is no moat, the business growth of the enterprise will enter a so-called "thief-type business", that is, the business continues to develop, but the loss of customers continues to form, and it is difficult to form a stable positive superposition structure, and it is difficult to gather sand into a tower.

For Qutoutiao, although it has a deep insight into human nature, it uses monetary incentives to design a whole set of methods to promote activity through fission. But this style of play, peers are not difficult to imitate. In September 2018, Toutiao launched an extreme version for the sinking market, which can also make money by doing tasks.

When giants begin to use similar actions to compete, "watching information to make money" has become a self-defeating barrier.

Moreover, Qutoutiao itself has not positioned itself as a HYIP product.

In 2019, Qutoutiao COO Chen Sihui said in an interview with 36Kr that he did not agree with positioning Qutoutiao as a HYIP model. "Earning 6 yuan a month, users can't do anything. It can only be said that after he retains for two or three months, he experiences some interesting gameplay on the platform, and then increases the relationship and stickiness between users and the platform. ”

The advantage of the giants over Qutoutiao is that the gameplay is the same, but the content is richer, which constitutes crushing it.

According to the February 2021 information flow APP data released by Analysys, Baidu Extreme Edition has exceeded 51 million monthly activity, and Toutiao Extreme Edition has exceeded 46 million, while Qutoutiao only has 7.89 million.

In addition to the competition of similar products, competition in other categories will also carry out cross-border attacks on Qutoutiao. The rise of short videos such as Douyin and Kuaishou has also taken away most of the mobile traffic.

According to the Statistical Report on Internet Development in China released by the China Internet Network Information Center for the 50th time, as of June 2022, the number of short video users in mainland China reached 962 million, an increase of 28.05 million from December 2021, accounting for 91.5% of the total Internet users. In addition, users of short videos spend even more time than instant messaging apps such as WeChat.

Qutoutiao actually realized the impact of short videos on graphics and text, and launched two products in the first two years, "Quduo Shoot" and "Lao Tie Video", but these two short video apps eventually failed to gain a foothold in the market.

Finally, due to poor content, the platform loses competitiveness.

In July 2020, CCTV's "315 Gala" exposed a large number of false advertisements on the Qutoutiao App, and even involved illegal gambling advertisements. After that, Qutoutiao was removed from the domestic Android app store, which directly led to a significant decline in Qutoutiao's advertising business.

According to the financial report, Qutoutiao's advertising and market revenue in the third quarter of 2020 was 1.063 billion yuan, compared with 1.382 billion yuan in the same period of 2019, down 23% year-on-year. This reflects Qutoutiao's overly reliance on "black five" ads.

There is not much high-quality content, but Qutoutiao chose to stop cooperating with self-media authors. In April 2022, Qutoutiao announced that it would stop the service and maintenance of the self-media creation platform on June 30, 2022, and had removed the entrance to upload content on April 21, and creators who did not withdraw before June 28 will be deemed to have automatically abandoned the income in the account, and the balance will be "automatically cleared". 

Where does content come from without creators? Qutoutiao's response was: "Based on Qutoutiao's long-term content ecological plan, in order to further optimize users' reading experience, Qutoutiao has reached content-level cooperation with a number of third-party content platforms such as Baidu. ” 

There is no differentiation in the model, there is no differentiation in the content, and it is difficult to say that the interesting headlines are competitive.

3. Mi Yomi can't afford the "hope of the whole village"

Although Qutoutiao stopped cooperating with self-media authors, in the large-scale business layout, Qutoutiao still tried to attract more users through free content, so as to promote the growth of users and monetization ability.

This also makes "rice reading" a hope for the whole village.

Mi Read is a free novel reading app launched by Qutoutiao in May 2018, and the Mi Read Express Edition was launched in May of the following year. Mi Read not only entered the web novel track earlier, but also gained 5 million users in only half a year. By 2021, the number of daily active users of Mi Read will reach 10 million.

From the perspective of business model, Mi Read and Core are similar to Qutoutiao, both use free to attract users, and then monetize through advertising.

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Since 2020, Mi Read has spent a lot of effort in promoting originality and incubating IP. For example, it has successively launched the "Civilian Heroes" plan to support the original creator and the popular book creation plan; At the same time, activities such as the "Imaginative Essay Contest" will be launched to expand the team of creators by guaranteeing the minimum share, traffic recommendation, cash incentives, etc.

But in fact, if a moat is not established soon, any track will inevitably face fierce competition.

This is the case on the web novel track where Mi Read is located. In addition to facing the competitive pressure of leading platforms such as Literature Group, Palmyue Technology, and Ali Literature, Lianshang Literature, ByteDance's Tomato Novel, and Baidu's Seven Cat Novels are also fierce rivals of Mi Reading.

In terms of IP copyright reserves and high-quality authors, Qutoutiao cannot compete with online literary platforms such as Literature Group; When it comes to platform traffic, Qutoutiao can't fight Internet giants such as ByteDance and Baidu; As for the editing resources and financial strength of self-made dramas, and the inability to fight behind the video platforms of Internet giants, it seems that it is difficult for Mi Read to bring more imagination to Qutoutiao.

According to QuestMobile's December 2020 data, in the free reading platform, tomato novels, seven cat novels, and crazy reading novels ranked the top three with 61.62 million monthly lives, 54.34 million monthly active and 23.71 million monthly active animals, respectively, while the original top rice reading has disappeared.

At the end of March 2022, Mi Read issued an announcement announcing that from April 1, Mi Reading's signed works will be successively transferred to China Literature Group, and will also be operated and maintained by China Literature in the future.

Since then, the only highlight of this interesting headline in the earnings report has been hidden.

What do you think of Qutoutiao? In general, the timing of the company's startup, the battlefield chosen, and the growth method adopted in the early stage are beyond reproach. But whether it is the Qutoutiao App or Mi Reading, they are surrounded by giants before they have dug a moat to resist competition.

The reason may be that Qutoutiao seems to cater to human nature, but it does not really meet the needs of users for content. Even when regulations are tightened and giants are pressed with better content and better brand mentality, enterprises instantly become lambs to be slaughtered.

Although Mi Reading, which has high hopes for Qutoutiao, is working on content, it focuses on the positioning of first- and second-tier people, which makes it unable to fully obtain the support of the Qutoutiao APP positioned in the third-, fourth- and fifth-tier markets. This means that once the giants cut in in a similar pose, they can only end dismally.

Business competition is on thin ice, and if you are not careful, you will lose. But a little reflection will also find that returning to meeting the needs of users and trying to find growth levers business common sense may help us have a better chance of winning in the business competition.