Short video economics: The history of human business is the history of time plunder

The emergence of short videos has greatly affected our lives. So, how do we outline the outline and ecological landscape of the short video industry? In this article, the author attempts to interpret the short video economy from the dimensions of player maps, distribution models, etc. Let's take a look.

The ups and downs of economic cycles are hidden in the office buildings in the center of the city.

In contemporary business, every time the cycle fluctuates, the white-collar jobs surging in the city buildings will change. In the past 20 years, the elevators of the buildings in the central CBD of the city have welcomed and sent off various foreign company elites, programmers in large factories, and financial migrant workers...

At that time, the new generation of people behind the glass curtain wall were gradually switching from business elites to urban beauties. The core office area was no longer a conference room, but a grid live broadcast room with mobile phone cameras. Enterprises also changed from a variety of firms to one live e-commerce MCN agency after another.

According to the "China Online Performance Industry Development Report - Live Streaming and Short Videos" report by Nandu Big Data Research Institute, the employment opportunities created by live streaming and short videos in 2022 exceeded 100 million people.

When the short video economy begins to occupy the main stage of the era and has a far-reaching impact on our lives, no matter how we define it, it is a wind wall that cannot be bypassed when we discuss the current industrial economy.

As the opening chapter of a series of short video studies, this article will outline the industry in a minimalist way and lay a common sense foundation for subsequent in-depth research.

1. Player Graph

According to traditional economic industries, participants in short videos can also be divided into upstream, midstream and downstream.

Upstream: Content Creation Providers

In a narrow sense, the supply side of short videos is very simple, including ordinary users, celebrities, a large number of MCN agencies and a small number of media companies (self-made variety shows, long videos) under the UGC model.

Generally speaking, all upstream companies that serve content creation are suppliers. In addition to users and MCN agencies in a narrow sense, they also include marketing service providers that serve the delivery and operation links, outsourcing companies that serve content production, and so on.

Midstream: Platform technology and traffic providers

In a narrow sense: the midstream of the short video industry is the technology platform providers led by ByteDance, Tencent, and Kuaishou, which serve as a bridge to connect the supply and demand sides.

Broadly speaking: companies that serve the platform, such as third-party technology providers, or traffic distribution service providers like ByteDance, or logistics and supply chain companies that serve platform e-commerce all belong to the midstream of the short video industry.

Downstream: users, merchants

There are two main threads in the downstream:

The traditional demand side, that is, ordinary C-end users, may be casual entertainers with entertainment needs as the main focus, or users with information needs as the main focus, or consumers with consumption needs who need to shop and search through short video platforms.

The demand side of the channel mainly refers to merchants, who provide promotional traffic through the platform, content creators provide content traffic, and live streaming e-commerce satisfies channel traffic, thereby meeting the marketing needs of merchants.

After integration, we can get the "player" map shown in the following figure:

Figure: From the perspective of content, the upstream and downstream of the short video industry, source: Jinduan Research Institute

According to statistical data from the Nandu Big Data Research Institute, as of 2022, there were 24,000 MCN agencies, with a total of 150 million anchor accounts, and the total number of accounts and users creating content exceeded 1 billion.

2. Allocation Mode

The upstream and downstream relationships of short video players are as described above, but as a business, this industry has completely different upstream and downstream relationships from a financial perspective.

Taking Kuaishou as an example, according to its prospectus, revenue is mainly divided into three parts:

1. Advertising revenue mainly from online marketing;
2. Live streaming income in the form of virtual gifts, rewards, and commissions for bringing goods;
3. E-commerce revenue mainly comes from live streaming e-commerce and shelf e-commerce.

From the perspective of cash flow, the supply side of short videos mainly comes from TO B product suppliers (brands, distributors, etc.). The influencers catalyze traffic and pay the platform for the cost of buying traffic, promotion costs, MCN agency content costs, etc. The final monetization channels are nothing more than live streaming and advertising, and the merchants are the ones who pay the bill in the end.

Therefore, whether it is live streaming e-commerce or content creation advertising monetization, the two lines are: upstream merchants - midstream institutions, experts, platforms, service providers - downstream user consumers.

Only the virtual business of pure live broadcast rewards (not buying traffic for traffic value) is upstream content creation experts, MCN agencies - midstream platforms - downstream entertainment consumers.

Figure: Taking into account the upstream and downstream of the industry where capital flows, source: Mob Research Institute

So how is cash flow distributed in the industry?

For merchants to directly realize cash (live streaming, Douyin stores or shelf TVs):

Based on Youzan and Internet data, as well as the cross-collation of various links in the monetization of short videos, we can roughly infer that the usual pure pit fee model for commodities is generally 20% of sales, and the commission ratios of different anchors are different. The commission of the pure commission model will be higher. On this basis, the platform takes a commission of 10%, and after the MCN takes the commission from the platform, it will take another 35% of operating costs.

According to estimates, if you purchase a product worth 100 yuan in the live broadcast room of a mid-level anchor, the MCN agency takes about 7 yuan, the platform takes 10 yuan, the anchor content author takes about 13 yuan, and the merchant takes 70 yuan.

Of course, the monetization of short videos is very complicated. Different MCN agencies, anchors, and even types of goods have different commission ratios, and some products also require traffic fees.

For content promotion:

There is no fixed commission ratio. There will be a certain commission through platform service providers (similar to Julebao Star Map). For non-platform docking, the main expenses are content creation costs and traffic fees, which are differentiated according to the value of the MCN agency and the influencer, and the fan traffic.

For live shows:

It is divided into two types: those with guilds and those without. According to data from Mob Research Institute, under the new model, the share of anchors without guilds is about 50%. The share of anchors with guilds is lower than that of anchors without guilds based on personal agreements, but their traffic operations are stronger.

Figure: Profit distribution of the live show model, source: Mob Research Institute

The above are the main upstream and downstream relationships and distribution models at the current short video funding level.

When we were studying the business model of short videos, we found that if a merchant wants to place an advertisement and opens a software like Julebao Star Map, you will see that in addition to traffic and fans, the mainstream unit of measurement for short video quotation is duration, which can often be summarized as 20 seconds, 1 minute or more, etc.

3. The history of human commerce is the history of time plunder

With a huge user base and a complex business model, why can short videos become the strongest wave of mobile Internet? We can actually get a glimpse of it from the context of technological and economic evolution.

The most core element in economics is time. Whether it is the macro-level cycles, the transactions that keep the economic machine running, or the obscure interest rates, compound interest and discount rates, the main influencing factor is time.

In agricultural societies , the unit of economic time is the "year". Spring is for sowing, summer is for labor and growth, autumn is for harvesting, and winter is for fallow and storage. The seasonal cycle has a profound impact on the economy of agricultural societies. Farmers arrange their production activities according to the seasons, and merchants adjust their trade strategies according to the seasons.

In industrial society , the unit of economic time is "week", which originated from the labor system in the West. Some scholars believe that one of the most core inventions of the industrial age is the precision clock. With the advancement of labor and logistics in the industrial age, machines are popular. The production relationship based on the week can just meet the productivity and consumption needs brought by industrialization. If you watch football, you will find that to this day, Britain, the center of the industrial revolution, still maintains the tradition of weekly wages.

In the Internet era , the economic unit has further evolved into "days". The main content of the earliest portals was updated on a daily basis, and white-collar workers sitting in cubicles usually planned and arranged meetings on a daily basis.

In the era of mobile Internet , with the development and popularization of communication technology, users can obtain instant information anytime and anywhere, and the economic unit has evolved into "minutes". The model of using days as the time unit has been swallowed up by mobile devices that update massive amounts of information, and the unit for dividing the proportion of user screen time has become minutes - and short videos are the epitome of "minute plunder".

Figure: Economic time measurement models in different eras, source: Jinduan Research Institute

Short videos can naturally extend from entertainment information platforms to commercial transaction platforms. From a business logic perspective, this is because the time segmentation is detailed enough, which allows the "compound interest" of time to be obtained - the value of each minute of each video is segmented, how many minutes each advertisement is, what is the effectiveness of each minute of each video, and how to increase user retention time through a balance between content and advertising (bringing goods).

This is one of the reasons why other content communities are difficult to monetize: whether it is long videos, portals, or graphic communities, it is difficult to break down the commercial value by minute. For example, on a portal website, one consultation carries one advertising space and generates one value.

Short videos can divide each user's time into countless small parts through algorithms and technology, and then calculate the commercial content for each part to realize monetization. In addition to charging customers for views and clicks, they can even charge customers for the time dimension. Naturally, they can undertake a large number of practitioners and business needs, becoming the strongest wave of business models in the mobile Internet era.

It is not difficult to infer from the above: if there is a new business model that can replace the volume of short videos, it is estimated that it will need to rely on new technology to charge users' time by the second. In other words, the disruptor of short videos will be a "second-level predator."

Of course, maybe we don't expect such an era to happen.

Author: Yaohua

Source public account: Jinduan (ID: jinduan006), providing intellectual property solutions for listed companies.