We talked to more than 10 brand owners about why it is difficult to plant grass on Xiaohongshu

Xiaohongshu has undergone a series of organizational restructuring in 2024, demonstrating its ambition to commercialize. However, despite the rapid growth of platform users, brand owners are facing the challenge of "difficulty in planting grass". Through in-depth conversations with more than 10 brand owners, this article reveals the difficulties in Xiaohongshu's commercialization process, including the saturation of the red ocean track, the low advertising ROI, the ambiguity of data attribution, and the difficulty of building a closed loop within the site.

In 2024, Xiaohongshu's organizational structure changed frequently.

On the one hand, Xie Yunwei (nickname: Kappa), the former head of community content, stepped down, and Jiang Yuan (nickname: Yunfan), who had worked for another community platform and had many years of experience in community operation and commercialization, became his successor.

On the other hand, the commercialization team has introduced a number of external fresh blood. According to market news, former Didi executives Wu Yingbing and Zhang Rui joined Xiaohongshu's e-commerce and commercialization teams respectively, and Ye Heng, the former head of Kuaishou's e-commerce products, joined Xiaohongshu as the No. 1 position in e-commerce C-end products.

Behind the drastic personnel changes is Xiaohongshu’s significant commercial ambition.

Earlier, the Financial Times quoted insiders as saying that with the help of rapidly growing advertising revenue and e-commerce transformation, Xiaohongshu's revenue in 2023 will reach 3.7 billion US dollars, achieving a historic turnaround from loss to profit. According to 36Kr, Xiaohongshu's DAU in 2023 will reach 106 million, with advertising revenue of 19 billion. The DAU target for 2024 is 130 million, and the advertising revenue target is 22 billion.

But after talking with many brands, Doujiao clearly felt the dilemma of Xiaohongshu's commercialization:

The crowd in the red ocean market is saturated, the ROI of information flow advertising is low, data attribution and crowd flow are unclear, and it is difficult to build a closed loop within the site...

What is the B-side of Xiaohongshu's commercial leap? Why has the metaphysics of grass-planting, which is contrary to the genes of high-quality communities, not been solved yet?

Recently, Doujiao Spicy talked with more than 10 brands and suppliers to try to find the answer to the question.

1. The benefits of beauty, cosmetics, and maternal and child products have reached their peak. Do KFS and Lingxi really work?

"The biggest problem with Xiaohongshu at this stage is its population saturation. The growth of the beauty and makeup population on Xiaohongshu can no longer meet our growth needs." LISA, a product manager at an international beauty brand, told Doujiao.

It is reported that the brand group that Lisa works for has an annual budget of tens of millions on Xiaohongshu. Its classic products have tens of thousands of posts on Xiaohongshu and have "cooperated" with the top beauty influencers in the industry. "It's not that there are no new products, but the budget for new products is limited. When promoting classic products, there are no more new beauty influencers to cooperate with, so this part of the investment will also be reduced. Every year, we only do two or three waves of promotions combined with new products and big sales."

The platform is not unaware of this problem. At the end of 2022, Xiaohongshu launched the "KFS content marketing combination strategy", which is the explosion of high-quality content from Kol (creators) + precise reach and efficiency improvement of Feeds (information flow advertising) + enhanced search interception by Search (search advertising). In this combination, Xiaohongshu emphasizes the use of platform tools to optimize content reach and do refined seeding, rather than simply laying out influencers.

"The KFS delivery combination is the platform's way of taking more of our performance budget. In the past, Xiaohongshu has always emphasized seeding, and our core consumption is to invest in influencers. Advertising companies help us with this link. The money that Xiaohongshu can earn is the commission from the platform, which is very limited. But now promoting combined delivery is equivalent to selling delivery tools and resource positions in disguise, which is a kind of self-rescue for the platform." LISA said.

According to LISA, when it was first launched, this model did attract brands to migrate their influencer budgets to the platform, but in 2023 she found that the results were not obvious.

"At present, our conversion indicator is the increase in the number of searches for Tmall's official flagship store, but when we put it out, we find that the effect is very limited. Take the information flow as an example. We will screen some high-quality content with click-through rate and interaction rate above the baseline for placement. Generally, the ratio of hidden to like is greater than 1, but these seed contents often fail to run."

LISA analyzed that this has a lot to do with Xiaohongshu's "de-beautification". In the past, Xiaohongshu's crowd portrait was relatively clear and focused, especially on the beauty crowd. As long as basic screening was done, it could achieve relatively efficient customer lock-in. However, with the increase in Xiaohongshu's traffic and the improvement of crowd categories in recent years, the user pool has become complicated, but the corresponding data capability evolution is far from enough.

It is reported that Xiaohongshu's information flow ads currently support setting targeted tags such as gender, age, region, interest, and device, but lack a deeper population portrait. "Many times, the selected push audience includes a large number of users who have already been reached or are not interested in our brand at all, so the ROI cannot be improved. Even strong brands like us will have difficulty in consumption."

Ador, who is in charge of the Xiaohongshu advertising for a maternity and baby brand, has a similar feeling. Her brand mainly promotes a certain type of milk powder. The annual budget of Xiaohongshu exceeds 8 million, but the overall feeling in the past year is also that "the crowd has reached its peak."

The measurement logic of Ador's brand is more direct. With the help of Xiaohongshu and Alibaba's data link - Xiaohongxing, the transaction data of grass-planting content is monitored in real time to determine the conversion effect.

"Our conversion data was very low in the past year. The interaction volume of notes and collections was good, and there were popular content, but it just didn't bring in sales." Ador told Doujiao. According to her, due to the special nature of the product itself, the brand intercepted a large number of search terms on Xiaohongshu, and the core terms of the special effects of milk powder were fully covered. There would be popular notes of her brand under each search point. It can be said that it was strictly following the grass-planting guide of Xiaohongshu, but it was difficult to jump. "And it's not just our problem. As far as I know, maternal and child vertical brands with budgets three times ours are also average."

"After internal review, we feel that it has a lot to do with the track. The bonus period for maternal and child products on Xiaohongshu has passed. Now, various contents are highly homogenized, and it is difficult for real consumers to be attracted by advertisements. A large number of influencers we work with are taking advertisements from multiple brands. They praise us today and another one tomorrow. The persuasiveness of the content produced is very limited. Moreover, it became very obvious since last year that the content data of a large number of mid-level influencers are seriously inflated. If you look closely at the comment section, you will find that they are all messages from water armies," said Ador.

Obviously, for red ocean sectors such as beauty, maternal and child care, growth difficulties have become the biggest difficulty, and in terms of refined user development, the data provided by Xiaohongshu also has limited appeal.

Taking the Lingxi platform as an example, according to the official introduction of Xiaohongshu, Lingxi will provide more detailed user portraits and give more detailed data insights in dimensions such as product trends, user needs, and brand assets. Taking brand assets as an example, Lingxi proposed full-link user management of A (cognitive population) I (grass planting population) P (purchasing population) S (sharing population), which is obviously similar to Alibaba's AIPL model and Douyin Cloud Map's 5A population assets. It is reported that this product has been launched since the end of 2022, and it has not yet been fully opened. Only KA brands in the fields of beauty, food, maternal and child care, 3C, home appliances and home furnishings can apply for opening permissions.

However, Ador, who has used Lingxi, admitted that "at present, Lingxi has limited actual value to us. First, the underlying data is not clear, and the criteria for dividing the population is vague. Secondly, it is difficult to determine the purchasing population. How can we determine the population of Xiaohongshu for brands that do not sell on the site?"

LISA also told Doujiao that the Lingxi platform's main purpose of "discovering popular trends and assisting product selection decisions" is also limited in practice. "In the beauty industry, Xiaohongshu itself is full of advertising content. Is this captured trend a pure consumer demand, or a pseudo-trend that has been 'polluted' by a large amount of advertising information? Currently, Lingxi mainly provides us with a PPT screenshot for reporting to our superiors to prove that the platform analysis matches our product strategy."

2. With human intervention in popular articles and fluctuations in influencer traffic, why do new brands strategically give up?

The red ocean track is involuted, so with the increase in traffic of Xiaohongshu, will there be more new opportunities in the new blue ocean tracks such as food and beverage, 3C digital, automobiles, games, gold and jewelry?

"The most difficult thing at the moment is that there is no way to develop a universal model." This is the most intuitive perception that Doujiao got after talking to several brands that started to focus on Xiaohongshu last year.

JOY, the promotion director of a new domestic food brand with annual revenue exceeding 800 million yuan, told Doujiao that after successfully increasing the volume in 2022, they further expanded their presence on Xiaohongshu last year, focusing on promoting gift boxes, but after more than half a year of trial and error, they still didn't understand Xiaohongshu's ways.

"For example, the product retention, brand data, and sales data of other e-commerce platforms are completely connected. The steps from seeing the grass-planting content of our products to the final consumption are very clear to consumers, and the content that users in specific circles are interested in is clearly precipitated. We can see what products students like, what advertisements white-collar workers like, and even what packaging pregnant women like. However, it is difficult to review the logic of success on Xiaohongshu. First of all, explosive articles are not equal to explosive volume. Secondly, the logic of explosive articles is also difficult to summarize. In addition, the data of on-site e-commerce and grass-planting are not completely connected." JOY said.

Xiaohongshu commercial product pictures

The head of a rapidly rising domestic clothing brand also confirmed this statement from the side. She directly used "incomprehensible" to describe the commercialization of Xiaohongshu. "We have spent a lot of money on it since the second half of last year, but the data attribution and crowd flow are not clear. Every time I see the summary of Xiaohongshu's delivery information, it is difficult for me to draw a firm conclusion. Even if we don't look at off-site conversions, just looking at CPE, CPM, and on-site search volume, they are not stable."

During conversations with multiple service providers, Doujiao discovered that the uncertainty of explosive content is also closely related to Xiaohongshu's strict control over mid- and high-level traffic pools.

"Within Xiaohongshu, the tug-of-war between advertising information and content ecology is an ongoing problem. Before 2023, the voice of Xiaohongshu's commercialization team was significantly weaker than that of the community department. The platform has not found a way to strike a balance, which corresponds to the four changes in advertising product rules and the opacity of traffic distribution. Since last year, Xiaohongshu has vigorously promoted commercialization, but popular content is not entirely left to algorithms. Compared with Douyin, Xiaohongshu has stronger human intervention in the distribution of large traffic, which also means more subjective factors. Many times, some amateur KOCs can generate notes that are searched hotly on the entire site, while bloggers with more than 100,000 fans are often restricted." said a Xiaohongshu service provider.

He told Doujiao: "There is no absolute top user on Xiaohongshu. Above 100,000 followers, traffic is visibly declining. This is also an obvious logic of platform manipulation - the middle level is constantly rotating, and there are always new users. In addition, last year, more and more new users used Xiaohongshu as a search platform, so it became normal to have popular articles but no increase in followers."

To some extent, such content operation and traffic distribution logic is good for the community atmosphere, as a large number of real reviews shared by ordinary people get the opportunity to be distributed. However, for influencers and official brand accounts, it means huge promotion difficulties.

"The overall traffic of influencers fluctuates greatly. The constant presence of new people means dilution of traffic, and it is becoming increasingly difficult for advertising content to attract attention. In addition, it is becoming increasingly difficult to operate official brand accounts." The marketing manager of a clothing brand told Doujiao.

The operator of a game team also told Doujiao that compared with other channels such as Bilibili and Weibo, it is difficult for Xiaohongshu's official account to gain popularity. "It is true that there are high-content discussions, batches of hot game posts and a large number of game users. It is also true that it is difficult to run an account and the conversion rate is poor. After half a year of operation, the official account has only gained a few thousand followers. Seeing that the related hot posts have exceeded 10,000 likes, but the number of users is not increasing, I am beginning to doubt my life."

Some of the new games launched in April Xiaohongshu official account

A Yu, the person in charge of a certain cleaning brand, told Doujiao that due to the low interaction rate of the official brand account, she once tried to set up a "pseudo personal account" on Xiaohongshu, that is, to shape her persona through daily content sharing, and then divert traffic to the brand. "But the effect is also very poor. Currently, the accounts with good evaluation results are the most plain and simple, and they compare and evaluate a bunch of brands horizontally. If you want to be a pseudo brand account, you can't see any successful cases at all."

At the same time, many brands and service providers have no opinion on the commercial model proposed by Xiaohongshu - the "crowd anti-funnel model". "The concept is more important than the actual effect" is the common perception of many people. "In order to establish this model, we must first find the core interest group of the brand. But this is the most difficult step at present. Due to the limitation of data infrastructure and the lack of consumption links on the site, the depth of the crowd data provided by Xiaohongshu is not enough. We can't find a deep brand crowd on the site and accumulate assets."

Doujiao clearly feels that for a large number of new domestic products and developing brands, it is not that they do not want to use Xiaohongshu, but that they do not know how to use it or dare not use it. A health brand of medical equipment and a functional health care product brand told Doujiao that they are optimistic about the track bonus of Xiaohongshu, but because they only test the waters at a certain node with a single budget of several hundred thousand, they cannot support the information flow and search costs, and the focus is still on influencers.

"Brands have limited budgets in the early stages, but we have a track record of doing things on Douyin. By following the huge methodology and combining it with the brand situation, as long as we listen, we will definitely outperform 60% of people. But everything is uncertain on Xiaohongshu. The influencers, content, and users are all uncertain. How can I dare to spend a lot of money at once?" said JOY.

For this reason, a large number of brands that are still in development choose to anchor more accurate destinations. A fashion sports brand and a new beverage brand with a team of more than 50 people that outsourced a large number of marketing activities have placed the core of their grass-seeking base on other channels. Xiaohongshu is not currently within their key considerations. "The team has limited energy and can only strategically give up some channels."

3. Data attribution is difficult, is the key in open loop?

In general, whether it is an old brand or a new brand, the difficulty of data attribution is a "stumbling block" in the process of Xiaohongshu's commercialization. Whether it is a red ocean brand that has reached the peak of the population dividend and urgently needs to dig deep into users, or a blue ocean brand that is developing rapidly and growing rapidly, they are eager to obtain deeper user data and conversion traceability on Xiaohongshu. However, for Xiaohongshu, which has not yet achieved a self-closed loop, such a demand is obviously difficult to meet.

Although Xiaohongshu has vigorously developed live e-commerce and made rapid progress in the past year, a large number of brands still have not opened official live broadcast rooms on Xiaohongshu.

During the conversation, Doujiao learned that most mature brands’ current approach on the Xiaohongshu e-commerce side is “light layout,” that is, “recommendation by top anchors + production by vertical buyers.” The core idea is to use Dabo to achieve mind positioning, without considering self-broadcasting.

Doujiao learned from an insider that since the second half of last year, Xiaohongshu's e-commerce team has been working hard to build alliances and cooperate with leading brands, hoping to attract more brands to join in self-broadcasting, and has offered many preferential conditions, but with little success.

"The current ceiling of Xiaohongshu's e-commerce is too low, and the business volume is very limited. It is too costly for a team to configure self-broadcasting, and it is unnecessary. The core is still to create content here." Xiaoyu, a relevant person in charge of a certain hair care brand, said.

"The core group of Xiaohongshu actually has strong spending power and willingness to buy, so a large number of high-priced products can sell well on Xiaohongshu, and only top figures like Veronica Yip and Dong Jie can grow a GMV of over 100 million. However, the company's top management is wavering in decision-making, and has not thought clearly about the path of differentiated e-commerce. They said they would focus on commercialization and e-commerce, but they have not done enough in terms of resource support and infrastructure." A person close to Xiaohongshu told Doujiao.

Currently, Xiaohongshu is mainly promoting "buyer e-commerce", targeting a large number of products with high aesthetic premium. However, such contrarian thinking is exactly contrary to the current social mainstream sentiment of pursuing "low prices". "For this reason, the internal positioning of buyer e-commerce is actually not clear, because Xiaohongshu wants to attract people with high spending power, but is afraid of missing out on most e-commerce users." The above-mentioned insider added.

According to JOY, due to the concept of buyer e-commerce, many of the live buyers with more than 1,000 fans he has contacted are not mature as a whole. "When talking about products, they emphasize the atmosphere too much, and their understanding of mass products is very limited. The information reinforcement is not in place, and the conversion effect is also average."

Moreover, the progress of Xiaohongshu's e-commerce infrastructure is still relatively slow. "There are problems with docking, live streaming, and after-sales service. For example, the problem of displaying Xiaohongshu's discounted prices was not solved until last year's Double Eleven. Before that, it couldn't even display the price after the coupon, and could only display the price at checkout."

For this reason, even if JOY's brand simultaneously tries live broadcasting, performance advertising and other links on Xiaohongshu, it is still difficult to use the conversion effect on the site to evaluate the effectiveness of the grass-roots content. "The data source on the site is very single. Even most Xiaohongshu users keep the habit of searching and purchasing outside the site after seeing the grass-roots content, so there is a lot of spillover, so it is impossible to achieve a closed data loop."

Similarly, a daily chemical brand service provider told Doujiao that although the brand has already deployed self-broadcasting on Xiaohongshu, the effectiveness of the grass-planting will still be measured by the jump data of the official flagship store outside the site.

Taking into account the various concerns of brands, at the end of last year, Xiaohongshu proposed the construction of the "Grass Planting Data Alliance", with the aim of connecting the front-end grass-planting link and the transaction conversion link of major platforms. According to official information, the alliance has five partners including JD.com, Vipshop, Douyin, Qunar, and Meituan, with more than 1,000 participating brands.

However, such overseas conversion data can only provide guidance in the general direction. It is still very difficult to achieve truly refined population asset sedimentation like Taobao, Douyin, and Kuaishou, and to create a clear and traceable grass-planting conversion model.

In the past year, Xiaohongshu's daily and monthly active users have achieved significant growth. According to data officially disclosed at its latest business conference in March this year, Xiaohongshu's monthly active users reached 300 million and the number of bloggers exceeded 80 million. And it is obvious that its commercialization is in an accelerated stage, with significant growth compared to 2022.

Unfortunately, the large number of new users did not break the existing ceiling of big brands in the red ocean track such as beauty, fashion, and maternal and child products. Xiaohongshu, which emphasizes "certainty of planting grass", is far from meeting the needs of mature brands to deepen their presence in the existing population in terms of data capabilities. At the same time, for a large number of blue ocean brands that come with enthusiasm, their shortcomings in developing e-commerce, open-loop ecology, and data attribution also hinder the establishment of a standard business model and affect their budget scale.

It is precisely because of these constraints that, despite the growth of Xiaohongshu's commercialization, it has not achieved the same "synchronous growth" as its DAU.

“Perhaps we can only hope that Xiaohongshu’s e-commerce will experience rapid growth and create a complete closed-loop ecosystem. This will truly connect the data side and clarify the integration of planting and harvesting within the site.” An insider sighed.

No one can say that Xiaohongshu does not have such determination. In January this year, the frequent changes in the senior management of Xiaohongshu's commercialization team may be a signal for further efforts.

But can Xiaohongshu, which is always "a step behind", achieve a rapid explosion in the e-commerce field? How much time will the fiercely competitive market give this platform? No one has the answer.

Author: Guo Jian; This article is written by the operator author [剁椒TMT], WeChat public account: [剁椒Spicy], originally created/authorized to be published on the operator, and any reproduction without permission is prohibited.

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