Has Kuaishou found the methodology to turn “foreigners” into “old friends”?

After experiencing a series of setbacks, Kuaishou seems to have gradually found a way to go overseas, especially its performance in the Brazilian market has improved, showing its determination and efforts for globalization.

In the past, we often said that the problem with community products was monetization, but relying on its e-commerce business, Kuaishou found a fulcrum.

In the first quarter, not only did Kuaishou's revenue increase, but its net profit also increased significantly. Its revenue increased by 16.6% year-on-year to 29.4 billion yuan, and its net profit exceeded expectations, earning 4.1 billion yuan in the first quarter.

Specifically, Kuaishou's other revenues from e-commerce in the first quarter were 4.2 billion, up 48% year-on-year, exceeding the market expectation of 3.9 billion. The reduction in expenses brought about by the "Guangjin Plan" is also indispensable to making money. Not only has the proportion of sales and marketing expenses dropped from 34.6% in the same period last year to 31.9%, but administrative expenses have also been cut in half.

However, Bohu Finance believes that more critical data comes from overseas.

In the first quarter of 2024, Kuaishou's overseas revenue increased by 193.2% year-on-year to RMB 991 million, with marketing revenue increasing nearly 3 times year-on-year.

Has Kuaishou found the methodology to turn “foreigners” into “old friends”?

1. Kuaishou’s bumpy overseas expansion

If we say that at the commercialization level, whether it is live streaming e-commerce, general shelf e-commerce or local life, Kuaishou is one or even several steps behind Douyin, then from the perspective of globalization, Kuaishou is even further behind.

Unlike Tiktok, which joined the 1 billion user club early on, Kuaishou's overseas expansion can be described as getting up very early but still failing to catch the latecomer.

It’s hard to say that Kuaishou doesn’t attach enough importance to going overseas.

Kuaishou began to plan its overseas expansion in 2017. At that time, Douyin was just a newcomer, while Kuaishou was an industry giant with nearly 70 million daily active users, a lot of investment, and a methodology that had been verified in China.

According to relevant media reports, at a Kuaishou employee meeting, Kuaishou CEO Su Hua once said at an internal meeting that Kuaishou has already achieved success in China, and it is only a matter of time to replicate this model around the world and conquer overseas markets.

At the end of 2016, after launching the international version of its short video product Kwai in Russia and South Korea, Kuaishou accelerated its internationalization. On the one hand, it hired Liu Xinhua, president of ByteDance's international business, to be in charge of overseas market development, and on the other hand, it expanded Kwai's coverage to markets such as Brazil and Indonesia.

But Kuaishou's progress is far less smooth than Tiktok. Although Kwai's downloads once topped the Google Play and App Store downloads in Brazil, Indonesia, Russia and other countries by burning money, its retention data is very poor. In August 2018, the daily downloads of Kwai's Indian version dropped from hundreds of thousands at its peak to 10,000, sometimes even to four digits. The situation in several other markets was similar, and Liu Xinhua resigned as a result.

Subsequent successors including founder Cheng Yixiao and former Didi International Chief Operating Officer Qiu Guangyu also failed.

The reasons for the failure are generally attributed to two reasons.

One is that growth is mainly based on spending money, but lacks strategic determination. For example, after the K3 campaign began, Kuaishou launched the short video app Zynn in North America, enabling a fission gameplay in which users can get cash rewards by inviting them: $20 for each user invited, and $110 for five new users.

This is much more generous than Pinduoduo.

But on the one hand, spending money will always face the impact of compliance and other aspects. Relying on its "money power", Zynn once rushed to the top of the iOS ranking in the United States. But the core of short videos is still content. After being blocked for promotion violations, the popularity of Zynn, which was re-launched, dropped significantly.

On the other hand, your competitors may be richer than you. In the Latin American market, Kuaishou has replicated the money-burning strategy, such as sponsoring the America's Cup and offering a $6 reward for attracting new users. After TikTok entered the market, it directly raised the reward to $20, which also made its daily active users quickly surpass Kuaishou's Kwai.

According to Photon Planet, an industry insider revealed that ByteDance is determined to expand overseas, but Kuaishou is hesitant and has difficulty deciding how much money to invest.

The second is the lack of localized operations. A person who has been paying close attention to Kuaishou's overseas business commented that in the past, Kuaishou's overseas business was mostly staffed by domestic employees, and the way to solve problems such as cultural differences was mainly to recruit some foreign employees in China.

But it is obviously not that easy to convert "foreigners" into "old friends" by relying solely on domestic methods. Whether in China or overseas, Kuaishou has always been a Buddhist, believing that the platform does not provide guidance, allowing users to spontaneously generate content and letting users' interests become the criteria for video screening. This has also led to Kuaishou's overseas products often being labeled as money-making rather than social media.

Correspondingly, TikTok chooses to recruit locally from senior executives to grassroots employees, and reuses a large amount of operational experience of the local team.

2. Localization, has Kuaishou found the antidote?

Judging from last year’s data, the improvement in Kuaishou’s overseas business is not a flash in the pan.

According to Kuaishou's 2023 annual report, Kuaishou's total overseas business revenue reached 847 million yuan in the fourth quarter of last year, an increase of nearly 200% year-on-year. At the same time, Kuaishou's overseas business online marketing revenue increased by more than 300% year-on-year.

On the expenditure side, Kuaishou's new user acquisition expenses dropped by more than 30% year-on-year. As a result, Kuaishou's overall operating loss in overseas business decreased by 63.2% year-on-year, and the quarter-on-quarter operating loss also narrowed further.

In fact, since the outbreak of the epidemic, as the capital market has entered a cold winter, Kuaishou has been under great pressure to make profits. In terms of specific business, Kuaishou has shrunk its international front and put making money in the first place.

In March 2022, Kuaishou integrated its international business, combining the original overseas commercialization business team with the team supporting overseas commercialization business of the original company's commercialization division to form an international commercialization department. In Brazil and Indonesia, where Kuaishou has the greatest influence, Kuaishou has built its own commercialization team, while in other regions, it generates revenue through the authorized agency model.

In August of the same year, Ma Hongbin, who was in charge of commercialization, was transferred to Kuaishou's international business department as the head. After taking office, Ma Hongbin put forward a requirement to the commercialization team: spend more time in the local area, and do not do a good job in localizing the overseas business in Xi'erqi alone.

This strategic change is reflected in Kuaishou's performance in overseas markets.

Take Brazil as an example. On the one hand, in view of football, a national hobby, Kwai has insisted on sponsoring the Brazilian men's and women's national football teams from 2021 to 2023. At the same time, starting this year, Kwai has also sponsored the Brazilian team Flamengo Club. In this way, Kuaishou is constantly expanding its overseas influence.

On the other hand, as a famous melting pot, Brazil has a very complex social structure and a huge disparity in social classes. There is a huge need to make oneself seen and even achieve class leap.

According to last year's data, in Brazil, "foreigners" have shown a trend of transforming into "old irons": Kuaishou's Kwai daily active users (DAU) increased by 13% year-on-year, and the average daily usage time of each daily active user exceeded 75 minutes, making it the number one time killer for Brazilian old irons.

Earlier, Kuaishou's Chief Financial Officer Jin Bing said at the Saudi Capital Market Forum that Kuaishou plans to set up an office in Riyadh, Saudi Arabia soon. He also said that in addition to the Middle East, North Africa and Brazil, Southeast Asia has also become one of Kuaishou's target markets.

3. Final Thoughts

As a short video app, user scale and commercialization capabilities are the wings of Kuaishou. In China, Kuaishou closely follows Douyin in commercialization, but it is difficult to surpass it due to the limited user scale. Therefore, overseas is where the greater opportunities lie.

From the perspective of external competition, Tiktok has always been the best company in globalization, but the regulatory pressure from North America affects not only the North American market, but also other markets. This is an opportunity, but also a wake-up call. From the perspective of commercialization, whether it is e-commerce or advertising, Kwai will also face challenges from local and other Chinese companies.

Kuaishou’s international business will still face many challenges in the future.

Reference source: Xiaguangshe: Spending money, wavering, changing coaches, the inside story of Kuaishou’s “three battles” to go overseas

Author | Chen Pingan This article is written by the author of Operation School [Bohu Finance], WeChat public account: [Bohu Finance], original/authorized to be published on Operation School, and any reproduction without permission is prohibited.

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