Video e-commerce in the past year: from private domain to public domain, from social to algorithm

Video account e-commerce has achieved significant growth in the past year. This article will deeply analyze the development history of video account e-commerce, explore how it has shifted from private domain traffic to public domain traffic, and the business logic and potential impact behind this transformation.

In 2023, the GMV of video accounts reached 320 billion yuan, which is less than one-tenth of Douyin, but it took only one year to achieve it from scratch, which is rare. What's more rare is that the various data of video accounts are still maintaining a strong growth momentum.

With this leap, Video Account has not only become "the hope of the entire Tencent" as described by Ma Huateng, but also the contributor to the growth of Tencent's advertising revenue in the Q1 financial report.

The reason why it is so highly praised is probably because Video Account has accomplished both short videos and e-commerce at the same time. It not only restored face for Tencent but also has the potential to create another profit center.

As far as e-commerce is concerned, live streaming e-commerce is of paramount importance, accounting for more than 90% of GMV in 2023. The same is true for Douyin. Live streaming e-commerce is the absolute main body of scene-based e-commerce.

Earlier, the market generally compared Video Number live e-commerce with Douyin and Kuaishou. At first glance, it seems reasonable, as they are both short video platforms. But in fact, the difference between Video Number and Douyin and Kuaishou lies in the source of traffic:

The traffic entrances of Douyin and Kuaishou live streaming e-commerce are relatively simple, mainly short videos. The traffic of video accounts is more diverse - in addition to the main site, it also includes group chats, small windows, Moments and many other private domain traffic.

To paraphrase Ma Huateng’s words “make short videos for social interaction with acquaintances”, these private domain traffic is the key to the cold start of video account e-commerce. But now Tencent intends to shift video account e-commerce from private domain to public domain. Combined with Zhang Xiaolong’s public call a few years ago that the proportion of public domain traffic should exceed 80%, it seems that the retirement of private domain traffic is imminent.

But is it really like this?

1. Private domains that have made outstanding contributions

When it comes to private domain, we can’t avoid another short video platform that was almost sued by the anchor to the China Securities Regulatory Commission. However, Kuaishou, which has always emphasized private domain operations, is not only inferior to its old rival Douyin in terms of "pen price", but even less than half of the newcomer Video Account.

The so-called unit price refers to the average transaction amount corresponding to each transaction record (such as a bill), which is usually calculated by dividing the total consumption amount by the number of consumption transactions.

According to WeChat Open Class, the unit price of a video pen will reach 205 yuan in 2023, much higher than 130 yuan for Douyin and 88 yuan for Kuaishou.

The reason why the unit price of video accounts is so high has a lot to do with the private domain transaction attributes.

According to WeChat Open Class, private domain traffic of live e-commerce will account for 50% in 2021 and 30% in 2022. Compared with Douyin and Kuaishou, a very large proportion of transactions on Video Accounts come from private domain transactions, and more traffic comes from WeChat groups and other sources.

This transaction link naturally has a certain trust attribute, so high-priced goods can also sell relatively well. It was mentioned in the WeChat public class that the top-ranked pet green plant has a unit price of 213 yuan, followed by clothing and home furnishings at 172 yuan, fresh food at 160 yuan, and household cleaning and daily necessities at 152 yuan.

Careful readers must have discovered that the above-mentioned high-unit-price categories have one thing in common, that is, they all have the attributes of white-label and non-standard products. Because under the label of white-label and non-standard products, it is impossible to compare prices between platforms, so there is less pressure to compete on low prices.

Orient Securities has counted the GMV distribution of Video Accounts and Douyin, and found that typical white-label, high-priced, non-standard products such as clothing, snacks, and jewelry all sell better on Video Accounts. Weimob data also supports this view, with 85% of Video Accounts' GMV in 2023 contributed by white-label merchants.

However, judging from the official support policies of Video Account, the e-commerce ecosystem of Video Account will continue to be enriched from two directions in the future. On the one hand, it will vigorously support merchants in industrial belts to expand the inventory of white-label merchants in Video Account. On the other hand, it will introduce more brand merchants to improve the inventory quality of Video Account e-commerce.

In particular, the latter has begun to show results. From 2022 to 2023, the GMV contributed by brand merchants increased from 10% to 15%.

In addition to transaction attributes, factors that affect the high unit price of video accounts also include user net worth.

Putting aside the private domain transaction attributes, considering only the transactions imported from the public domain such as Video Account, the difference between Video Account and Douyin and Kuaishou is not that significant. According to Questmobile data, Douyin is higher than Kuaishou in terms of both consumption capacity and consumption willingness, while WeChat is in between the two.

Moreover, as the DAU of video account users increases, its user attributes will gradually converge with the overall WeChat. If the GMV is still contributed by white-label products, it will easily lead to the situation of goods not being delivered to customers. Referring to Pinduoduo's 10 billion subsidies, although the original intention was to attract new customers at a low cost, after rounds of subsidies, consumers' impression of Pinduoduo has changed immediately.

Video accounts may not follow Pinduoduo’s example in offering subsidies, but brand merchants must expand their stock. The methods may be different, but the results must be the same.

As for private domain traffic, which has made outstanding contributions, WeChat’s actions over the past year have already made its attitude clear.

While reducing the weight of private domains, merchants are encouraged to direct private domains to public domains. The specific figures can be seen in the traffic pool. The proportion of recommended traffic emphasizing algorithm optimization has increased from 26.4% in 2021 to 42.5% in 2023. The data from the growth black box statistics also show that the proportion of DAU from Moments, chats, and public accounts has decreased, while the proportion of system recommendations such as discovery pages, searches, and live broadcasts has shown an upward trend.

However, under the dual distribution mechanism of social + algorithm, the private domain ecology is still the unique advantage of video account e-commerce compared with other e-commerce.

In the view of Wang Yuanyuan, general manager of the WeMall Marketing Video Account Merchant Operation Center, the Video Account, as an "account", is connected to the WeChat ecosystem, enabling WeChat's unique social communication link to provide the Video Account with a lower starting threshold and more controllable costs when it comes to dissemination, while also bringing better user interaction and conversion.

2. Accelerate private domain conversion

At the end of May this year, Tencent officially announced a less conspicuous organizational structure adjustment: the video account live broadcast e-commerce team was merged into the WeChat Open Platform (mini programs, official accounts, etc.) team, and the original WeChat video account live broadcast e-commerce team was transferred to the person in charge of the WeChat Open Platform.

On paper, this is not a major structural adjustment, but just the cancellation of the original independent video live e-commerce team. But in fact, Tencent is trying to resolve the increasingly obvious conflict of interest between the WeChat Mini Store team and the video e-commerce team.

It is not uncommon knowledge that the reason why WeChat live streaming e-commerce and small stores dared to start cold and achieved a GMV of 320 billion within a year was largely due to the conversion of existing merchants in WeChat mini program.

The so-called stock conversion means that the mini-program and mini-store links originally posted by merchants in the group are replaced by live broadcast room or video account store links after switching.

In order to encourage merchants to switch actively and successfully complete the cold start work such as supply chain construction and merchant entry of content e-commerce, the video account live broadcast team also provides matching discounts for free public domain traffic, so that the total GMV of merchants can be increased.

In the face of real money benefits, many of the original mini-program merchants have transformed into video account merchants, and the three-fold GMV growth of video accounts in 2023 came from this.

This organizational structure adjustment is obviously intended to accelerate this process. The integration of teams under the new structure means that video account transactions and mini-program transactions can be deeply integrated, potentially increasing traffic and accelerating the conversion of existing GMV.

In fact, the conversion and transaction link is still beneficial to Tencent.

Originally, when a transaction was made on the mini program, one only had to pay a 0.6% WeChat payment fee for withdrawals; after switching to the video account store or live broadcast room for the transaction, in addition to paying the fee, an additional technical service commission ranging from a nominal price of 1% to 5% was required.

Video Account Merchant Technical Service Fee

However, not all of the mini program e-commerce GMV, with a total scale of about 3 trillion yuan, can be converted. The mini program GMV of platform-based e-commerce companies such as JD.com, Pinduoduo, and Meituan Youxuan is more difficult to convert.

Of course, don’t think that Tencent’s accelerated conversion means giving up the private domain. The fact is just the opposite.

In May this year, Video Account enriched the store sharing function. Merchants can link the personal WeChat of the sharer and the corporate WeChat bound to the personal WeChat through the Video Account Store PC. After the link, the sharer can forward the homepage, window, products, live broadcast room and short videos of the Video Account Store to the private domain. In addition to the store-related information, the sharer can also generate an exclusive QR code for the store live broadcast appointment link and invite users to scan the code to enter.

For merchants, with sharers, they can connect with potential fans more efficiently, thereby improving conversion rates and exposure, and increasing sales. In order to stimulate merchants to use this function, the video account will give merchants traffic coupons as incentives according to relevant policies for transactions generated through some scenes shared by sharers. Sharers can also obtain incentives based on transactions generated by sharing, and the number of users who successfully make reservations through the live broadcast reservation link they share will also be calculated into the sharer's performance.

This alliance model that actively mobilizes consumers to participate in social fission distribution has fully utilized the subjective initiative of the vast WeChat user group. The e-commerce companies that previously took advantage of WeChat traffic were Pinduoduo and Taobao. The latter contributed about 200 billion GMV to Alibaba through WeChat traffic diversion in 2016 alone.

Rather than letting outsiders take advantage of the situation, it is better to do it yourself. Moreover, the conversion of WeChat private domain to Taobao's external loop link requires complicated operation procedures such as copying links and longer transaction links. WeChat e-commerce closed loop to be a small store sharer, what is shared to the group is the live broadcast room itself or the video account store, and its private domain conversion rate is much higher than the Taobao external loop conversion rate.

Therefore, if all conditions such as the supply chain are the same, sharers will definitely be willing to choose the transaction link within the WeChat internal loop to promote fission.

3. Everything for advertising?

Over the past year or so, the description of Video Account in Tencent’s financial reports has often been linked to advertising.

For example, in Q2 2023, it was mentioned that the video account advertising revenue was 3 billion yuan; in Q3 2023, it was mentioned that the WeChat pan-internal circulation advertising revenue (landing page advertising such as mini programs, video accounts, and public accounts) increased by more than 30% year-on-year, contributing more than half of WeChat's advertising revenue. In Q1 this year, the online advertising business contributed 26.5 billion yuan in revenue, a year-on-year increase of 26%, benefiting from the growth of Souyisou advertising and video accounts.

Last month, media reported that the commercialization of Video Account will be led by WeChat Advertising, and the WeChat Advertising team will report to Tencent Advertising.

The formation of this reporting relationship is most likely because Tencent Advertising, which has more voice and resources, needs the new traffic pool of Video Account to expand its advertising loading rate, especially after Video Account has shifted from the private domain to the public domain.

Theoretically, in the past, video accounts with too much private domain attributes could not take on too many advertisements. For example, Langzi, whose private domain transactions account for 80%, does not have the link of traffic investment in its video account business model. However, Adopt a Cow, whose public domain transactions account for 60%, has advertising in addition to natural referral traffic.

Referring to Douyin and Pinduoduo, public domain traffic determines the ceiling of internal circulation advertising, especially the latter. With the support of site-wide promotion tools, both revenue and profits have ushered in explosive growth.

But this also means that under the recommendation of the platform's precise algorithm, the certainty of merchants' investment will become higher and higher, while the dividends will almost disappear.