Lessons from the bankruptcy of top white-label streaming platforms: How to run a business without pursuing traffic dividends?

As the traffic dividend gradually fades, former top white-label brands such as Macalline, Wu Huanxi's Wardrobe, and Perfect Diary have encountered difficulties and even went bankrupt. The rise and fall of these brands tells us that a business model that relies too much on traffic and short-term sales growth is unsustainable. This article will explore the reasons for the failure of these brands, analyze the relationship between traffic platforms, traffic entities, and traffic owners, and how to achieve sustainable business development by building a complete growth path, accumulating brand assets and user trust.

The "good times" where success can be achieved with just traffic are rapidly decaying and collapsing.

Douyin's top white-label app, Mai Kailai, went bankrupt and liquidated. At its peak, Mai Kailai had annual sales of 800 million yuan; the Taobao women's clothing store @吾欢喜的衣关, owned by internet celebrity Zhang Dayi, which had 12.4 million fans and sold more than 90,000 pieces of clothing per month, announced its closure in September this year; Perfect Diary, which single-handedly boosted the commercial imagination of Xiaohongshu, had its parent company Yatsen E-Commerce listed in 2020 with a market value of nearly US$16.1 billion. As of December 30, 2024, the company's market value was less than US$1 billion, a loss of about RMB 96 billion from its peak.

All of this points to a cruel fact without exception: from shelf e-commerce to content e-commerce, whether it is using low prices to grab users or exchanging traffic for sales, the king bomb has become a bad card.

The two sides are competing with each other over traffic prices and bargaining with their peers over commodity prices. The double battle has pushed the game to the brink of being out of control. The so-called "technological neutrality theory" has become synonymous with "escaping governance" today, and the overly inward-looking market ecology has forced businesses to be involved in continuous vicious competition.

The fall of the "traffic myth" has frightened merchants, but what is even more painful is the confusion of not being able to see how the business will grow in the next step. Without the traffic dividend, how will the business be run in the future? What enlightenment can we get from the star brands that were popular yesterday? New trends are always hidden in the lessons of yesterday.

1. Who should be held responsible for the “short-lived” business?

Before discussing the heavy topic of "how to survive", we first need to sort out three key entities: traffic platform, traffic subject and traffic owner.

Traffic platforms (such as Taobao, Douyin, Kuaishou, etc.): The core goal is to retain traffic entities and ensure the scale of the platform and user stickiness. Traffic entities (platform users): The origin of traffic distribution, the core service object of platform algorithms and merchants. Traffic owners (merchants): As entities independent of the platform and users, the merchant's goal is to achieve sales through the platform, but the priority determines that traffic owners (merchants) can only be ranked second in the platform's considerations and are on the edge of the ecosystem.

Among these three entities, traffic entity > traffic platform > traffic master. The survival rule is very clear. Traffic master is nothing more than the attention plaything of traffic entity. What really determines whether a business can "survive" is whether users can remember you.

Because no consumer will consume just for the sake of consuming on a platform. What really makes consumers make purchasing decisions is the value of the product, the attractiveness of the brand, and their trust in the brand or product.

The one who truly has the say in deciding "life and death" is always the consumer.

The Macalline case is a warning. In order to cater to the platform mechanism, they ignored or even confronted the long-term competitiveness of the brand itself. They invested 500 million yuan in advertising in three months, but in return they achieved 800 million yuan in sales in a year and a short-term brand leap.

Behind this is the "harmonious cooperation" between platform advertising and algorithms, which intensifies users' attention to products, ultimately guides consumer decisions, and drives sales growth.

"Spending money for traffic" is the most common marketing method. It seems efficient, but in fact it is a tool for content and products, which completely obeys the platform rules and greatly weakens the actual value of the products and the core competitiveness of the brand. At the same time, it strengthens the extreme form of platform business, making it more difficult for merchants to escape the traffic trap.

Another common way to play with traffic is to grab traffic by selling points that match hot spots.

On the surface, such a strategy is not only low-cost, but also can bring short-term exposure and sales. However, what is obtained is often only short-term traffic, and the low price attraction compared with countless similar products in the hot spot. Merchants can only fall into the cycle of "importing traffic - sales peak - traffic decline", and brand resources cannot be accumulated, let alone user loyalty.

The golden age when one could become famous with a single marketing method is still not far away, and the purchasing and sales mechanism that means sales if there is traffic exacerbates the illusion of peak sales.

Sadly, that era has really passed.

Users have been "cleaned" almost completely, and factory sellers have come out from behind the scenes to take a share of the pie, and the traffic costs of various platforms have risen sharply. In 2018, Alibaba's customer acquisition cost was less than 400 yuan, but now, the average customer acquisition cost of the four major public domain e-commerce platforms has reached about 800 yuan.

The public domain traffic pool has gradually become a "salty land", and it is difficult to do business in the world.

The imagination ceiling of platform-dependent business models is the fall of McKeown from its peak, and Perfect Diary, whose valuation dropped from US$7 billion to a market value less than 2% of its peak.

Brands that emerge from the platform should move towards a wider world.

2. What will “patient hard work” bring?

The traffic problem is just a superficial phenomenon. The core is the single operational logic hidden behind it, especially the over-dependence on the platform.

This leads to the fact that when it comes to customer acquisition and operations, AARRR (acquisition, activation, retention, revenue, recommendation) is regarded as the criterion. However, when it comes to business scenarios, most people only do "AA" and not "RRR". Obviously, the root of the problem lies in the incomplete growth path.

Rather than saying it is the pressure brought by "tight time and heavy tasks", it is better to directly understand it as the desire for quick success and instant benefits. In order to "get big results quickly", the allocation of resources is overly biased towards short-term goals, resulting in the neglect of user accumulation, brand trust and long-term value brought by "RRR".

We all know that real growth lies in choosing a robust and sustainable strategy. For example, focusing on the accumulation of brand assets and building user trust, using long-term value to hedge short-term risks. Short-term dividends from traffic alone will not go far. But words like "explosive" are too tempting.

For this reason, more and more self-media and brands have begun to re-advocate positioning theory, hoping to re-build long-term business value by occupying the minds of users.

However, the real challenge in reality is that each position has its own unique ecological logic and gameplay.

There is nothing wrong with the narrative logic of the “positioning theory”, but for merchants under inventory pressure, a more practical approach is to first build a complete growth path within the platform.

Ms. Lu, the owner of a clothing store, is an excellent example. As a member of the most competitive track, Ms. Lu's Alice Clothing originally only operated offline stores. In 2020, under pressure from the environment, it began to expand online.

Currently, @Alice Clothing ALICE has over 7 million fans across the entire network, including more than 4.59 million fans on Douyin, more than 1.1 million fans on Video Account, and more than 1.6 million fans on Kuaishou (data from 2023).

Alice Clothing Tik Tok, Kuaishou, Video Account

Judging from the distribution of fans, Douyin seems to have greater commercial potential, but the actual sales data is surprising. The average sales on the Douyin platform is 750,000 to 1 million yuan, which seems to be a good result, but it still suffers from returns and subsequent repurchases.

Different from Douyin, the sales of Video Number in a single session reached 2.6793 million yuan, and the cumulative number of viewers reached 942,000, almost doubling. According to relevant media reports, Alice's user repurchase rate can reach 60%, and the return rate is significantly lower than that of Douyin.

The team analyzed that this difference is mainly due to the comprehensiveness of Tencent's ecosystem:

1. Video accounts are within the WeChat ecosystem, and are more likely to be recommended by acquaintances. Users enter the live broadcast room based on trust, rather than simply being attracted by paid promotion or low prices driven by traffic logic. This trust makes the brand's dissemination in a specific circle more accurate, which to a certain extent improves the transaction rate and even the average order value, and the return rate is naturally lower;

2. Public domain users can be deposited in the private domain, and the purchase rate and repurchase rate can be increased through repeated contact. After using short videos to acquire customers on the video account or live streaming to complete the transaction, the Alice Clothing team will use WeChat as the core carrier to communicate deeply with users.

The team leader said that after each live broadcast, 10,000 to 20,000 paying users can be retained, and refined operations and services will be carried out afterwards. On the one hand, deep connections are established with users, and on the other hand, the social relationship chain of users is explored, marketing is embedded in the social network of users, and the private domain is leveraged to leverage the public domain, bringing new traffic and new value;

3. Multiple tools are interconnected to form a closed business loop within the ecosystem. @Alice ALICE posts video account dynamics and live broadcast previews to social groups and Moments before the broadcast, guiding users to watch and follow the video account. Later, it will use corporate WeChat, social groups, public accounts, mini programs and other tools to communicate with users again, so that traffic will not stop at the front-end traffic acquisition stage.

Alice Clothing Customer Service, Shop

The Alice Clothing team believes that the integrity of Tencent's ecosystem provides the basis for establishing a closed business loop, allowing them to break out of the dilemma of relying solely on price comparison and squeezing profits in the women's clothing track. Merchants like Alice Clothing that have offline stores can also apply to enter the "local life" business type of video account store to empower offline stores.

Shark pants brand SINSIN has a similar view. Co-founder Chen Hongri's goal for SINSIN is to be "a long-term brand". He pays great attention to the sustainability of the ecosystem and does not want to just pursue GMV growth, but to serve customers with products.

This year, SIINSIIN has plunged into the new waters of video accounts. In Chen Hongri's view, the choice of video accounts is not just because they have "bonuses". He believes that video accounts should not be used just as a short video platform, but should be combined with the power of Tencent's ecosystem.

Take an event of SIINSIIN as an example - the event was first announced in the private domain, and the efficient conversion in the private domain directly became the driving force for sales. Then the users were guided to the public domain, and Tencent’s advertising ecological resources (video account, Moments, mini programs, etc.) were utilized. The public domain traffic was eventually diverted back to the private domain, and the two-way link amplified the traffic conversion rate.

SIINSIIN video account, official account, mini program, customer service, store

It is an extremely critical task to take the long-term approach, retain loyal users, and ultimately convert them into repurchase rates.

Tencent Ecosystem provides a new channel for brands to directly interact and establish connections with consumers. This is what SIINSIIN is pursuing, namely "achieving healthy and sustainable growth".

However, the biggest difference of Tencent's ecosystem, or the most powerful barrier, should be that they provide merchants with a freer environment to operate according to their own differentiated advantages in the self-built links.

For example: short videos promote IP – private domain communities strengthen trust – live broadcast conversion – small green books enrich content forms; or: circle of friends ads attract live broadcast rooms – live broadcast conversion – sedimentation in private domains – short videos promote IP and strengthen trust

The N tools within the Tencent ecosystem are freely combined by merchants like Lego blocks, allowing each merchant to take what they need and run side by side.

Instead of having to go down a single path to the end, there will be ample room for growth, allowing a hundred flowers to bloom and various business models to achieve the results they should have.

3. When resource controllers become value collaborators

Tencent's ecosystem has never been a simple traffic field.

In the 2024 Q2 earnings call, Tencent President Martin Lau said that Tencent will build an e-commerce ecosystem within WeChat, connecting all elements of WeChat's official accounts, mini-programs, and corporate WeChat. Now it seems that every word has an impact.

In May this year, WeChat made a major organizational restructuring, and the video account live e-commerce team was officially merged into the WeChat open platform. This restructuring means that live e-commerce is listed alongside official accounts, mini programs, video accounts and other businesses in the structure, becoming a first-level department;

In August, WeChat upgraded the video account store to "WeChat Store", which literally means that the scope of WeChat e-commerce business will be expanded from the video account to the entire WeChat ecosystem. After the upgrade, WeChat Store not only supports the presentation of store and product information on the video account, but also can be circulated in multiple WeChat scenarios such as official accounts, mini programs, and search.

The much-anticipated video account is indeed a bonus, but Tencent has also made it clear that the video account is only one part of it.

From the public domain to the private domain, all the capability modules in WeChat - video account, WeChat advertising, WeChat payment, Moments, official accounts, search, mini programs, etc. - are tools. Their core mission is to combine into a complete e-commerce closed loop link to provide capabilities for merchants' global operations and growth. Identifying and utilizing the "potential resources" in the platform ecosystem is a hidden way of playing that Tencent's ecosystem provides to users.

In the layout of Tencent's ecosystem, the role of Video Account is far more than a short video platform. It is more like a traffic distribution hub within the ecosystem. Different traffic flows in various scenarios within the ecosystem and is ultimately accurately matched to the most suitable touchpoint.

For example, traffic can be deposited in the private domain, and high-quality services can be used to increase repurchase rates and customer unit prices. From another perspective, the deposit of traffic in the private domain is also the accumulation of brand assets, the accumulation of user data, and the establishment of long-term competitive barriers.

Another example is the recent "gift red envelope" function of WeChat stores, which has further expanded the "transaction logic" in commodity sales. When you consume for others, discounts are no longer the first priority. Whether the product is presentable, whether it represents your intentions, and whether it meets the other party's tone and aesthetics... When commodities are integrated into the social relationship chain as gifts, the relationship between people, the relationship between people and goods, and the relationship between people and brands seem to be integrated with more imagination at the same time.

At this moment, marketing finally breaks away from being a "one-time transaction" and becomes the starting point of a long-term relationship.

If the video account is the fishing line between merchants and business, the ecosystem is the reel that tightens the line. The layout path of Tencent's ecosystem is very clear. Merchants should take the bonus points provided by the video account as the starting point, combine the various tools within the ecosystem, and gradually build long-term competitive barriers.

Only when businesses achieve sustainable growth can the entire ecosystem maintain healthy operation. If it relies too much on a single tool, the ecosystem itself may fall into the dilemma of "trapping itself in its own web".

In fact, any tool, once abused, will eventually become an Achilles' heel. The future competition landscape will not be determined by a temporary traffic competition. The real decisive factor is who can build a sustainable business barrier.

This time, Tencent's attitude is very clear. It has transformed from a resource controller to a value collaborator. It has not only become a "bridge of connection", but also a systematic "organic life form" with everyone, bearing fruit over time and creating a thriving ecosystem.