Video Account launches another “big move”, will Tencent’s “e-commerce dream” be one step closer?

WeChat Video Account's actions in the e-commerce field have attracted widespread attention in the industry. Tencent plans to upgrade Video Account stores to WeChat Stores and implement new management rules. This move foreshadows WeChat's ambitions in short video sales and e-commerce ecosystem construction. This article will analyze the strategic adjustments of Video Account in the e-commerce field and the potential impact of these changes on merchants and the entire e-commerce ecosystem.

WeChat’s determination to improve the infrastructure for selling products via short videos is obvious.

Recently, a short announcement released by Video Account has sparked a lot of discussion and attention. The announcement shows that Tencent plans to upgrade Video Account Stores to WeChat Stores from August 25, and implement the management rules of WeChat Store's 0 deposit trial operation.

At Tencent's 2024Q2 earnings conference last week, Tencent President Martin Lau said he hopes to build an e-commerce ecosystem within WeChat, connecting all elements of WeChat, including official accounts, mini-programs, corporate WeChat, etc., in addition to video accounts and live broadcast channels. He mentioned that he hopes to build an ecosystem in a very patient but systematic way, distinguishing it from e-commerce that only does live broadcasting, and build a larger, more meaningful, and higher-ceiling e-commerce ecosystem.

Combined with the external information such as Douyin launching a new APP "Douyin Mall", Pinduoduo insisting on only refunds, and Taobao relaxing its restrictions on only refunds, Tencent is ready to move into e-commerce, and its determination to build a complete e-commerce ecosystem is becoming increasingly obvious.

Of course, this is not the first time Tencent has made efforts in video accounts. After the intensive adjustment of video account strategies, many businesses have become more cautious about video account e-commerce. While the top anchors of video accounts have not yet appeared, do small and medium-sized businesses have a chance to show their talents?

1. Video accounts use another "big move" to promote products

Looking back at 2020, when the video account was in internal testing, it received great attention from Ma Huateng, chairman and CEO of Tencent, and Zhang Xiaolong, senior vice president of Tencent and founder of WeChat. The video account is also seen by the industry as the hope of carrying Tencent's "e-commerce dream". Today, the video account has gradually accumulated a group of content creators, merchants and users in various fields, but its commercialization is still a problem both internally and externally.

At the end of 2023, WeChat allocated a lot of manpower from within the company to support the development of the video account e-commerce business.

In April this year, Video Account implemented the "Butterfly Plan", which divided influencers into five levels from low to high: S+, S, A, B, and C. Completing the tasks will earn you corresponding e-commerce growth card rewards, with a maximum of 1.5 million e-commerce cards for video and live streaming, in order to attract more merchants, influencers and brands to settle in and start live streaming.

In May, the Video Account e-commerce team was merged into the WeChat Open Platform team (this team is responsible for businesses including WeChat mini-programs and official accounts), and the original WeChat Video Account live broadcast e-commerce team was transferred to the head of the WeChat Open Platform.

At that time, it seemed that only the original independent video account live broadcast e-commerce team was cancelled. But in fact, the direct conflict of interest between the WeChat Mini Store of the mini program team and the video account e-commerce was resolved, making the department's potential more focused. The level of video account e-commerce has been upgraded to the same level as mini programs and public accounts. Whale Business has analyzed it in the article "Tencent e-commerce has changed again, can video account take it all?". Since then, the autonomy of video account has been improved, and there will be more room for imagination in the future.

In July this year, there was news that the WeChat Video Account e-commerce team had suddenly adjusted, and Tencent CDG (Corporate Development Group) adjusted some of the functions of its AMS (Advertising Marketing Services), that is, the team mainly engaged in sales operations and business governance began to make rectifications and optimizations. In addition to providing merchants with traffic and digital marketing services, the work of the AMS business line also includes some support and service work for video account transactions. After the adjustment, Tencent Advertising will no longer be engaged in video account sales operations and governance, but will be transferred to the WeChat business unit.

This move is Tencent's way of deepening the refined operation and management of its e-commerce business. While accelerating the integration of mini-program e-commerce and video e-commerce, it will promote different types of merchants to increase sales and exposure and ensure a good user experience.

Recently, the Video Account Store was upgraded to the WeChat Store. In addition to obtaining technical support from the WeChat ecosystem, it will also receive more traffic empowerment.

Compared with other e-commerce platforms, the biggest advantage of video accounts is the linkage between public and private domains, which is conducive to increasing repurchase and retaining users. Now store and product information can be circulated in multiple WeChat scenarios such as official accounts, video accounts, mini programs, and search, which means a closed loop of traffic.

Coupled with the rules of 0 deposit for entry and open categories, the signal released is even more obvious, that is, to vigorously introduce talents and merchants to attract settlement.

In fact, Tencent has tried e-commerce business several times in the past, but failed to achieve the desired results. The latest change announcement is still in the stage of soliciting opinions, but at the recent Tencent earnings conference, President Liu Chih-ping announced that he would build a WeChat e-commerce ecosystem. WeChat and even Tencent have had many ideas, and only recently have they reached a staged consensus.

Video accounts are seen by the industry as Tencent's counterpart to Douyin and Kuaishou; Video account stores are products that compete with Douyin stores and Kuaishou stores. If video accounts develop, platforms, merchants, and consumers will have to prepare for the response. Of course, Douyin and Taobao have not stood still.

2. Face the “DouKuai Cat and Dog”

In the field of short videos and live broadcasts, short video platforms represented by Douyin and Kuaishou have already occupied a huge first-mover advantage.

It is reported that Douyin e-commerce's GMV in 2023 has exceeded 2 trillion yuan. In the same year, Kuaishou's GMV reached 1.18 trillion yuan, a year-on-year increase of 29.3%. In contrast, after four or five years of development, Video Account's GMV revenue in 2023 is expected to be 320 billion yuan, which is relatively lagging behind.

However, Video Account is a rising star and its growth speed is still impressive.

According to a research report by Guohai Securities, the MAU (monthly active users) of Video Account will be 900 million in 2023, and the DAU (daily active users) will be 450 million, with an average daily usage time of 54 minutes per person. The main competitor Douyin has an MAU of 1.1 billion and a DAU of 760 million. Kuaishou's financial report shows that the MAU will be 700 million and the DAU will be 374 million at the end of 2023. Although the revenue of Video Account is not as good as that of Douyin and Kuaishou, its development speed is relatively fast. In the future, Video Account may have a large number of overlapping users with Douyin and Kuaishou, and the top anchors and content still need to be precipitated.

At the top anchor level, Douyin has big anchors such as Luo Yonghao, Dong Yuhui, and Three Sheep, and Kuaishou has the Simba family. Video accounts do live e-commerce, but they do not continue to support super anchors and concentrate traffic. Currently, there are only a few anchors who are growing up. For example, Guo Yiyi and Bao Ge and Bao Sao couple.

Earlier this year, Ma Huateng said at Tencent's annual meeting that Video Account lived up to expectations and gave Tencent a solid foothold in the short video era, and that live streaming e-commerce would be vigorously developed in 2024. According to official data from Video Account, brand GMV accounted for only 15% in 2023, but brand GMV increased by 226%, the number of brands increased by 281%, and the scale of sales was nearly three times that of last year.

Before Tencent’s Q2 2024 financial report, Tencent’s domestic gaming business had declined for two consecutive quarters. Amid the weak gaming business, the importance of video accounts has become increasingly prominent.

As of the second quarter of this year, Tencent achieved operating revenue of RMB 161.1 billion, an increase of 8% year-on-year; net profit attributable to the parent company reached RMB 47.6 billion, and adjusted net profit increased by 53% to RMB 57.3 billion. This achievement was mainly due to the joint promotion of its two core businesses, games and social networks.

In the social network business, video accounts have driven the rapid growth of high-gross-margin businesses such as advertising revenue and mini-game platform service fees, with the overall gross margin rising to 53%, a record high since 2017. The usage time of video account users and mini-programs has increased.

In addition, at the earnings conference, Tencent President Martin Lau mentioned that after Tencent's recent repositioning of live streaming e-commerce, it is "more like a WeChat e-commerce system." He also explained that this is somewhat similar to the mini-programs built by Tencent. "For many years, the mini-program ecosystem did not seem to generate much revenue, but when the energy was truly released, a large number of users participated, creating huge value for online and offline merchants and content providers, and became an important source of revenue for many different fields (including mini-games, etc.). And this will also be Tencent's model for developing WeChat e-commerce."

It can be seen that the recommendation mechanism of Video Account may be similar to that of Douyin and Kuaishou, but its advantage lies in its public-private linkage ecosystem. Therefore, precise traffic push combined with acquaintance social interaction, a large user base, and real interaction provide a breakthrough opportunity for small and medium-sized businesses.

Today's video account e-commerce is no longer an independent business, but is integrated into the entire WeChat ecosystem to achieve greater commercial value. However, the overall e-commerce trend is shifting from serving merchants to serving users, and video account merchants have repeatedly complained that the commercialization of video accounts is "too slow." It remains to be seen how video accounts will handle platform revenue, merchant benefits, and consumer rights.

3. Video accounts have a long way to go to support the family

In the second quarter of this year, although the advertising revenue of video accounts increased by more than 80% year-on-year, many e-commerce customers increased their advertising expenditures. However, many small and medium-sized businesses still do not use traffic investment tools frequently. A Ming, who works in the clothing industry in Yiwu, revealed to Jingshang: "My Doudian traffic investment accounts for as high as 84% ​​of the transaction, while the data for video account stores is around 40%." There are also merchants who used Weidian and Youzan to open stores in the early years, and have gradually transferred to WeChat stores. They have accumulated many years of experience and almost do not need traffic investment.

Therefore, it is the big brands, influencers and MCN agencies in various categories that can drive the advertising revenue of video accounts to a higher level. Judging from the performance of 618 this year, video accounts are still relatively Buddhist and have not produced big anchors who can frequently go viral. For big brands and anchors, how to play with the linkage between private and public domains is also one of the difficulties faced by the commercialization of video accounts.

In addition, the user profile of Video Account is relatively simple. Douyin and Kuaishou have a wide user coverage, and both men and women, young and old, can play. Video Account is mainly composed of users over 50 years old. At present, it can be seen that this part of users is relatively stable and has the ability to repurchase. However, if Video Account wants to expand its scale, it needs to attract more young users with strong consumption power to expand the richness of content.

On the other hand, since the beginning of this year, Pinduoduo has been stubbornly holding on and only offering refunds, while Taobao Group and Douyin have re-examined their "pricing power", weakening absolute low prices at the strategic level and filling the low-price gap with GMV.

Interestingly, in March this year, Douyin e-commerce experienced its first year-on-year growth decline, falling below 40%. After the second quarter, its growth rate further fell to less than 30%. The strategic changes and data changes of the leading e-commerce platforms are enough to prove that low prices are a means rather than an end.

The traffic distribution mechanism of Video Account is to guide merchants not to achieve high conversion by pouring a lot of traffic into the platform. It hopes that merchants can convert users from the public domain traffic of Video Account to the private domain through short videos and live broadcasts, and make long-term operations, so that users can place orders based on their trust in merchants or influencers, rather than engaging in self-destructive price wars.

In short, the slowly developing video accounts still have many unresolved issues. However, the problems may only be temporary, as the trend of video account e-commerce is indeed getting stronger and stronger.

Author | Sanlun This article is written by the author of Operation Party [Jingshang], WeChat public account: [Jingshang], original/authorized to be published in Operation Party, and any reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 protocol.