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The difficulty of social networking

author:Titanium Media APP
The difficulty of social networking

Image source @ Visual China

Wen 丨 Juchao Business Review, author 丨 Yang Xuran, editor 丨 Wang Fangyu

In addition to "Wendi Deng's ex-husband", Murdoch has a lot of labels: world newspaper tycoon, chairman of News Corp., film and television predators, and - Zuckerberg's stepping stones on the road to success.

In 2005, when Facebook's career was just getting started, the world's largest social network was myspace. The company was bought by Murdoch for $580 million.

Murdoch, as a media giant, hopes that the video business of the social network myspace will be as successful as YouTube. And back in 2007, it was announced that myspace had earned $1 billion in revenue and $250 million in profits.

But these revenues and profits are obtained at the expense of the user experience:

Myspace's video business used to rank second after YouTube, but News Corp,, which is eager to generate revenue, inserts ads in front of every video. Du Wolfe (the original founder) had advised the company to reduce video advertising, but News Corp. noted that it would first need to conduct a six-month analysis to see how much revenue would be lost by reducing video advertising.

The end result was that Murdoch sat back and watched Zuckerberg's Facebook grow bigger and bigger, and eventually sold off at a low price.

On the other side of the ocean, Xiaomi founder Lei Jun launched Mi Chat at the end of 2010, but chose to close it in early 2021.

Mi Liao was defeated in front of WeChat, and Lei Jun was also fully prepared for this. He once stated that "when I first did Mi Chat, I bet on the time difference with Tencent": if Tencent reacted after a year, the winning rate of Mi Chat was 50%, and if Tencent had a reaction in two or three months, Mi Chat should be 100% dead.

The development of the situation eventually developed according to Lei Jun's worst deduction: Tencent launched WeChat in 3 months, and with the strategy of qq registration, it developed rapidly, and has since achieved Tencent's trillion empire.

The difficulty of social networking

Tencent's Share Price Performance (2004-2021)

Social networking is probably the most successful business on the planet. On this battlefield, we have seen the failures of Murdoch, Lei Jun, Zhang Yiming, and Luo Yonghao, and also seen Ma Huateng and Zuckerberg standing at the peak of the planet's wealth.

It is not easy to stand on this peak for a long time. A successful social network needs to meet the contradictory demands of users, constantly expand value, and always face challenges from competitors.

It's like climbing on a towering, smooth mountain of gold: the mountain is all yours, but not every step can be lost.

According to deva valuation theory, the most important determinant of a company's market capitalization is the number of users.

The Internet gradually formed after the advent of PCs, and behind the PC was every Internet user.

These users obtain information, leisure and entertainment, and pay for shopping through the Internet, and together build a huge ecosystem of the global Internet.

Although the Internet is full of various application functions, information and services, they all have one common feature: they are all serving users (and communication between users). Whoever has the user has the value.

Robert Metcalfe, inventor of Ethernet, founder of 3com and pioneer of computer networks, proposed Metcalfe's Law in 1973, a law as important as Moore's Law:

The value of the network is proportional to the "square of the number of connected devices".
The difficulty of social networking

Based on this definition, Internet queen Mary Meeker proposed the earliest valuation formula for Internet companies - deva Valuation Theory. This theory is still one of the important bases for the valuation of Internet companies:

The market value of Internet enterprises = the square of the number of users * The value created by enterprises for each user

This valuation theory emerged in the early days of the development of the Internet economy, and it was not perfect, and even had many flaws. Although it is now less common, it still has enough reference significance. According to this valuation theory, the most important determinant of a company's market capitalization is the number of users.

This is the same as metcalfe's law, more users can be intertwined into a larger, highly sticky user network. The increase of network nodes also means that information and services have a larger carrier.

Users on social networks have two main demands for social networks:

1. Use social networks to achieve your own social interactions;

2. Use social networks as a carrier, using a part of the application.

This is also the starting point for WeChat to do business. People connect with relatives, friends, acquaintances on this social network, and contact strangers on this network, and then enter another circle.

At the same time, some apps are fully available on social networks, such as watching videos – a friend sends a video and I open it immediately, rather than quitting the social network and searching for another platform.

The positioning of these two functions also constitutes two different value points of WeChat:

1. Tools

2. Application

WeChat and Facebook are free for all members of the public, users will not pay for the social tools themselves, although there are many users in this part, but in addition to clicking on advertisements, it is ultimately difficult to directly create value for Tencent and Facebook.

But unlike Facebook, in order to maintain a better user experience, Tencent has shown considerable restraint in using advertising revenue. Therefore, in Tencent's total revenue pool, "tool revenue" is almost negligible.

This does not mean that tools are not valuable. On the contrary, it is the tool value of WeChat that attracts a large number of users - 1.09 billion people open WeChat every day, first of all, not to the Mini Program, public number or video number, but to social chat.

Social tools to attract users + provide users with applications and create value, is the core of WeChat this product operation. Over the past decade, the process has been smooth and has exploded with great value.

But in the process, users' needs have been changing – simpler and more extensible. This tested the wisdom of Ma Huateng and Zhang Xiaolong more and more:

Just like the "colorful black" requested by Party A, how to meet the "simple and complex" required by users?

If WeChat becomes a tool with only social chat functions, its product value will be reduced.

In the US Internet advertising market, Facebook, Google, and Amazon occupy the top three market shares, and the three companies can get a lot of revenue in Internet advertising.

Especially for social networking giant Facebook, the advertising business is the most important source of its revenue. According to the financial report data, Facebook's advertising revenue reached $56.98 billion in the first three quarters of 2020, accounting for 98.42% of its total revenue.

Tencent, which has a stronger "cleanliness fetish" for WeChat, is more willing to keep WeChat away from common advertisements similar to the Facebook interface, and Zhang Xiaolong has also expressed his position many times, without stingy praise for simplicity:

I use simplicity as synonymous with beauty, practicality, reasonableness, and elegance. Simplicity is beautiful. From a physical formula to an everyday item, it's often better to be simple. There are a thousand ways to achieve the same goal, but only the simplest one is the most beautiful. Precisely because there are a thousand methods, it is really difficult to be simple.

The so-called "simple" has a sharp conflict with the corporate value of Internet companies (the deva valuation theory mentioned above), which is the same as water and fire:

Simple, allows users to use more peace of mind, peace of mind, comfortable, without switching to other social software. But the problem is, if WeChat becomes a tool that only has social chat functions, then its product value will be reduced - can you imagine a WeChat that can only chat, can not read the circle of friends public number, can not WeChat payment, can not play games?

Just like 360, wifi master key, Cheetah Mobile once the ace app, once rushed to the first clean master in the world and other tool products, their parent company has not been set by the market to set a high valuation, and these tool products are difficult to maintain evergreen, often to a certain time will be abandoned by users.

Therefore, the "complexity" corresponding to "simple" such as public accounts, financial payments, "nine palace grids", and mini programs, which correspond to "simple", actually play a very important role: increasing the use time of WeChat and generating greater application value.

According to the deva valuation theory, the more value the user is, the greater the value (market value) of the enterprise.

Over the past many years, the vast majority of China's successful Internet companies have followed the principle of "acquiring users and constantly expanding new features to create value for users" – which is actually in line with deva valuation theory.

Typical people such as Meituan, after acquiring users through the catering group purchase business, quickly expand various types of business, including movie tickets, takeaway, medical beauty, shared travel, etc., and the market value of the enterprise will rise with the rising tide;

Alibaba's business is not limited to e-commerce, but also to do financial payments, "health, happiness" business, local life, etc., in order to make the enterprise value continue to grow on top of the huge base.

The same is true for Tencent. WeChat connects more than a billion people in China, and the game, payment, finance, and content businesses precipitated on top of this can help companies make money continuously, but 2020 is not the end of enterprise development, nor is 2021. As long as it is not the end point, new user values must be constantly developed.

In addition to games, advertising, and finance, the latest development and expansion path of WeChat user value is the video number, which has even become the most core keyword of Tencent's new decade outlook.

Whether the video number can be successful and the idea of how the video number works are not the core focus of this article. In general, there are several hidden facts about WeChat's push for video numbers:

1. WeChat must catch up with the trend and dividends of the video era through the video number to avoid completely falling behind in the video era;

2. The design of the video number conflicts with the principle of "simple" of WeChat, and the two are working hard to balance;

3. Tencent does not fully adhere to the tool thinking of "simple" and embraces complex video business, which is the correct strategic judgment that can achieve the improvement of corporate value.

Behind the competition for user use time is the competition that brings corporate value to users.

If you don't consider competitors, Tencent is perfect in balancing the contradictory action of "simple and complex".

By increasing the financial payment function, the use scenarios of WeChat have been expanded, and the habits of ordinary people on WeChat have been further solidified;

Through the public account, add content attributes to WeChat, so that more people can precipitate time on WeChat;

Mini programs are a more ambitious ecology, which can introduce countless external applications, greatly improving the functionality of WeChat, so that each mini program becomes an app in the actual sense, and WeChat becomes an "Android operating system".

Zhang Xiaolong shared a set of data in the open class:

1.09 billion users opened WeChat and 330 million made video calls; 780 million users entered the circle of friends, and 120 million users posted the circle of friends; There are 360 million users reading official account articles, and 400 million users using Mini Programs;
The difficulty of social networking

Every ordinary person can use these functions with a little learning, open WeChat, and solve more and more life problems and Internet use needs. The implementation of these functions is based on the fact that it does not increase the complexity of operations too much, which is the embodiment of the super ability of the product team.

However, in the past two years or so, the length of time each user has used WeChat has decreased.

There are many reasons for this, including the change from the era of graphics to the era of video. But the most alarming point for Tencent is the diversion of the time that ByteDance uses on users from one of its most important competitors.

As we all know, ByteDance's products are known for content push through algorithmic distribution. In this mode, each user will be pushed by the platform with various contents, never knowing what the next content is, and constantly being stimulated and "rewarded".

The system algorithm will machine learn the user's behavior and preferences, and push accordingly. Thanks to the huge number of creators on the platform, these push content is endless.

In contrast, WeChat's content distribution relies more on natural social distribution - including circle of friends forwarding, WeChat group forwarding, likes, reading and dissemination formed by watching, and so on.

The development of this type of model to the peak is when Tencent launched the live broadcast business, the live broadcast that users have watched will be directly pushed and prompted to other users, which has caused a large number of users to be dissatisfied, and it has been adjusted later.

For some users, the mode of increasing likes + pushing to friends has become a burden from convenience: a considerable number of people are reluctant to become the source of other people's content, and they will be more cautious about liking, watching or forwarding in order not to let others know their favorite preferences for content.

The end result of this caution is that in social networks, the dissemination of content will be weakened, and content cannot be spread across circles through users' retweets/watches/likes.

As the dissemination of content is limited, the user stickiness formed by the content declines, which in turn leads to a decline in the length of user use. These lost user hours reduce the frequency (or potential frequency) of users using other apps and increase WeChat's "tool attributes".

According to Zhang Xiaolong's words, this part of the user who "runs out and goes" will increase as a result.

Zhang Xiaolong did not take the user time as the KPI, and each open class did not emphasize the importance of the user's time. But as the top product manager in China, how important this indicator is, he knows much better than Juchao Business Review, and he is making various changes to this effect.

Including the launch of "Take a Look" and "Hot Square", and even the launch of video numbers, there are strong considerations for increasing the length of user use. But at least for now, what we're seeing is that ByteDance's user spending time not only continues to rank first, it's also increasing.

Behind the competition for user use time is the competition that brings corporate value to users. Tencent should be thankful that as of now, due to various problems, ByteDance has not been able to do business other than content.

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