Tencent's e-commerce is undergoing another "change", can Video Account handle it all?

Tencent has always been obsessed with e-commerce; this time, it even placed its hopes on the video account, which has performed well recently. But in this change of Tencent's e-commerce role, where will the video account go?

As the carrier of Tencent's e-commerce dream, Video Account has always been highly anticipated.

Recently, WeChat released an internal announcement that the WeChat Video Account Live E-commerce team will be adjusted. The WeChat Video Account Live E-commerce team will be incorporated into the WeChat Open Platform (Mini Programs, Official Accounts, etc.) team and will be managed by the person in charge of the WeChat Open Platform.

People familiar with the matter said that this adjustment will help WeChat Video Account live e-commerce business better integrate into the WeChat ecosystem, allowing video account live e-commerce to achieve more favorable development. WeChat has not yet responded to this.

However, this move is obviously to raise the strategic position of video accounts to a higher level, trying to stimulate their greater potential. Faced with the rapid development of Douyin and Pinduoduo, traditional e-commerce companies such as Alibaba and JD.com are strictly guarding and seeking progress in a stable manner. Why does Zhang Xiaolong, the head of WeChat who has always been "Buddhist" and restrained, further let video accounts carry the banner of e-commerce to make money to support his family?

1. Is there really an opportunity for video account e-commerce?

Before the birth of video account e-commerce, Tencent had tried various e-commerce formats such as Paipai.com, Xiaoe Pinpin, and QQ Store, but none of them worked. In recent years, WeChat's e-commerce system has been mainly implemented by mini-programs, and the suppliers of these mini-programs are often third-party service providers rather than WeChat officials, and are mainly concentrated in the top merchants. Therefore, it is difficult to find a balance between WeChat, which has platform and tool attributes, and e-commerce, which has diversified goods and supply chain characteristics, and "public domain".

Until the emergence of Video Account, Tencent began to entrust Video Account with important tasks. At the annual employee conference held by Tencent founder Ma Huateng in early 2023, Ma Huateng, the CEO of Tencent, repeatedly mentioned two key words: "Evergreen" and "New Sprouts". The new sprouts are Video Accounts.

Judging from the financial report, video accounts have developed rapidly in recent years. Data shows that the GMV of video accounts in 2023 has increased nearly 13 times compared with 2022, with actual payment GMV between 130 billion yuan and 150 billion yuan, the number of orders has increased by more than 244%, and the number of goods supplied has increased by about 300%. This not only puts video accounts in the C position, but also raises market expectations for it.

At the end of last year, there were reports that Tencent planned to increase its investment in "live streaming with goods". To this end, Tencent adjusted the organizational structure of the WeChat Pay and Video Account teams to connect WeChat Pay and Video Account.

Before the adjustment, the entire transaction chain of Video Account was completed within the WeChat ecosystem. The entire transaction chain and other services for users to purchase goods in Video Account Stores are completed within the WeChat system itself. For example, in the recent Video Account Store order, some users can find the order and card package option under the WeChat Me, which is at the same level as the collection, Moments, and other functions.

The WeChat open platform that was incorporated this time refers to the platform provided by WeChat to third-party partners. In the open platform, many developers can create website applications, mini-programs, etc., and use various interfaces and capabilities of WeChat. The entire shopping process and supporting services of the subsequent video account can jump out of the WeChat system and complete the closed loop in the third-party mini-programs. In addition, users are relatively mature in their minds when shopping through mini-programs.

Therefore, the subsequent construction of the video account live e-commerce ecosystem will be completed by a large number of third-party partners, which can avoid the confusion and conflicts between the video account e-commerce and WeChat ecosystem.

After this adjustment, the level of video account live e-commerce has risen to the same level as mini programs and public accounts. This means that the autonomy of video accounts has been improved, and there will be more room for imagination in the future.

In fact, at the end of 2023, WeChat had made a round of adjustments to the organizational structure of the video account. It drew personnel from relevant departments to participate in the infrastructure of products and rules for live streaming of video accounts, such as participating in the expansion and operation of categories, talents, and customers in various industries, and trading products. Immediately afterwards, WeChat once again increased its resource investment in the live streaming e-commerce of the video account, and has adjusted the organizational structure of the WeChat payment and video account teams for this purpose, mainly to connect WeChat payment and video accounts, and the two teams work together.

By 2024, Video Account has significantly accelerated the introduction of new talents, enrichment of merchant inventory, and marketing "festival creation". Video Account has been improving its infrastructure rules for nearly a year, and will not change due to team adjustments. This adjustment is to further meet the needs of users and merchants, ensure transaction security, improve transaction efficiency and the experience of users and merchants. In the future, we will continue to work around consolidating transaction infrastructure, improving the transaction environment, and exploring new transaction models.

2. How Tencent e-commerce realizes its dream on WeChat Video Account

The reason why Tencent is focusing on video accounts is to open up another path besides games and social networking.

Tencent's main revenue comes from three parts: value-added services, advertising revenue and Jinke Enterprise Services. In the first quarter of this year, value-added services including games (overseas and domestic) as well as music subscriptions, video accounts, live broadcasts, mini games and video subscriptions accounted for 49% of total revenue. However, the game business faces two main problems: one is that it is difficult to launch new hits, and the other is that the revenue of old hits is gradually decreasing.

Tencent's second largest business, online advertising, had revenue of 26.5 billion yuan, a year-on-year increase of 26%, but its live broadcast business declined sharply. This is inseparable from the decline in the revenue capacity of live show broadcasts due to strict supervision. At the same time, Tencent's financial report emphasized that it is necessary to continue to cultivate high-quality sources of income, mainly referring to high-gross-profit businesses such as WeChat Video Account and Souyisou (advertising), mini games (platform service fees) and Video Account (merchant technical service fees).

The above is the performance pressure that Tencent has recently put into its video account.

Previously, Tencent built a smart retail system based on WeChat, a private domain traffic pool. However, smart retail lacks retail genes. It mainly serves brand merchants and provides a one-stop solution for brand private domain construction, which is difficult to take into account for the majority of small and medium-sized merchants.

In addition, the main battlefield for smart retail transactions is mini-programs, which cannot replace scenario-based services and cannot meet users’ demands for more segmented and diversified products. The birth of video accounts seems to be aimed at improving Tencent’s retail infrastructure.

As early as 2021, Zhang Xiaolong, president of the WeChat Business Group, denied that "many people say that Video Account is a strategic focus of our company (Tencent)". Since 2022, Tencent has accelerated its resource investment and commercialization process in Video Account.

In 2023, video accounts have successively released incentive plans such as brand incentive plans, "cold start support policies" and "growth support policies" for live streaming. In addition, Tencent also proposed the concept of pan-internal circulation advertising revenue in its financial report for the first time, that is, advertisements with WeChat mini-programs, video accounts, public accounts and corporate WeChat as landing pages can account for more than half of WeChat advertisements.

Since the beginning of this year, Video Account has implemented the "Butterfly Plan" to encourage new talents, and later invited local life industry merchants to settle in related Video Account stores.

All of the above, combined with the video account live e-commerce access to the WeChat open platform. The author believes that this is equivalent to inserting a "Taobao" into the WeChat ecosystem. The WeChat open platform is similar to the Taobao merchant division of the past, WeChat mini-programs are similar to Wangpu, and content positions such as public accounts and video accounts are similar to Weitao. Previously, the "brand discovery" in WeChat was similar to the prototype of Tmall shelves. It can be said that everything is ready, except for the (traditional) "shelves".

After all, the distribution efficiency, accuracy, and repurchase rate of traditional shelves are relatively impressive. Whether traditional shelves will be built in the WeChat ecosystem with private domain attributes remains to be seen. Of course, products and services involving user data in the ecosystem must belong to the official.

However, the advantage of video accounts lies in their reach, as most users are unlikely to uninstall WeChat. The disadvantage of video accounts may be that there is less public domain user data at present, which is exactly what businesses care about.

In addition, some merchants complained to Jingshang that they felt the backend experience of Video Account was very poor, customer service did not reply to messages, official people were difficult to find, and they were inexplicably judged to be in violation. A merchant selling middle-aged men's clothing also told Jingshang that "Video Account traffic is currently cheap, and I have found that Video Account has started to become younger recently. In the past, half of the users were middle-aged and elderly users over 45 years old, but now this proportion has dropped to 29%."

He also said, "It is difficult to rely on natural traffic to generate explosive sales. If we don't want to be the slaves of algorithms in the future, we must accumulate more private domain customers and pass on the high promotion fees of the platform to consumers for a longer-term perspective."

In short, the exploration of video accounts requires joint efforts from platforms, merchants, and consumers. The video account live e-commerce team is facing many internal difficulties, and external crises cannot be ignored. Platforms such as Douyin, Kuaishou, and Taobao are all watching closely and paying close attention to every move of the video account.

3. Douyin, Kuaishou, Taobao, and Pinyin, observe secretly

Compared with its "predecessors" Douyin and Kuaishou, the performance of Video Account is slightly weak.

According to relevant information, Douyin e-commerce's payment GMV will exceed 2 trillion yuan in 2023. Kuaishou e-commerce is also not to be underestimated, with its total GMV exceeding 1.18 trillion yuan in 2023.

In comparison, Video Account’s annual turnover of 100 billion is obviously not enough. Of course, Video Account has said that it is not in a hurry to pursue large-scale growth in GMV this year, and its first priority is to pay attention to the user’s product experience. But opportunities are fleeting, and the infrastructure within the Video Account ecosystem needs to be improved. Other e-commerce companies still need to make up for their homework, and the diversity of customer groups also needs to be cultivated.

In addition, the positioning and user mindset of video accounts are still vague. For example, Douyin focuses on entertainment content and hobby e-commerce; Kuaishou focuses on old-timer culture and trust economy; Bilibili focuses on niche culture and a gathering place for the second dimension. Users are well aware of the attributes of the above platforms, and these labels also attract users to open the APP.

At present, the video account is not as good as Douyin and Kuaishou in terms of content ecology, and is not as rich in products as Taobao and Pin, and has no clear positioning and mindset. Therefore, the market has the question of "Why do we still need to use the video account when we already have Douyin and Kuaishou?"

If we have to talk about the user portrait of Video Account, the fact that most of them are senior citizens is obvious. Tencent President Martin Lau said at Tencent's 2023 third quarter earnings conference that a large number of high-income groups among WeChat users are not used to online shopping. Market insiders pointed out that at this stage, the real high-stickiness users of Video Account are still middle-aged and elderly users.

How to cultivate the habit of watching video accounts among young people is a big problem. In addition, Douyin has Liu Genghong, Xiao Yangge and other top Internet celebrities; Kuaishou has Simba family, Sanda brother and other top talents, but video accounts have no leaders who can break out of the circle.

On the other hand, for consumers, in the context of consumption downgrade, consumers no longer blindly pursue brands and prices, but pay more attention to quality and practicality. The supply of video accounts needs to be cost-effective enough.

For merchants, most of them have already completed their layout on platforms such as Douyin, Kuaishou, Taobao, and Pinduoduo, and come to Video Account in the hope of reaping the early dividends of the platform. They are still testing or waiting to see the policies and gameplay of the platform.

Video accounts are rising to the challenge and moving forward in small steps. Whether they can use WeChat's user base and acquaintance social model to carve out a path, achieve a closed business loop, and no longer be criticized by businesses for "making empty promises" still needs some time to show the bullets flying.