Behind the WeChat “circuit breaker”: Video account commercialization is in the middle game

WeChat Video Account has begun to systematically promote the reform of the commercialization process. The author of this article analyzes this process from three aspects: content expansion and pan-China, advertising revenue increase, and video account e-commerce. Let's read it together.

As the leader of domestic social networking, WeChat has been around for twelve years. In the eyes of its designer Zhang Xiaolong, WeChat has always been a "restrained" product: "WeChat has always followed a good design principle, so we don't do many things that affect the design aesthetics." It can be said that on the eve of the explosive growth of mobile Internet, WeChat has achieved great success by balancing simplicity and efficiency.

Twelve years later, short videos have become the main form of content delivery, and WeChat has also launched video accounts to tap the huge potential commercial value of short videos.

After the commercialization of Video Accounts began to accelerate, its policy promotion also began to gradually reveal its "ambition" . The "two actions" foreshadowed a huge change in the WeChat commercial ecology: On the one hand, in June this year, the cooperation of public accounts was unified into the official platform, and the relevant content and accounts that were not released through Tencent's official advertising platform would be restricted; on the other hand, Tencent's advertising platform began to fully promote the entry and began to systematically promote the reform of the commercialization process.

Obviously, WeChat is relying on Tencent Advertising to establish an official backend for advertising cooperation, so that all cooperation on the platform can form a unified outlet. These two actions not only indicate that the commercialization of WeChat is accelerating, revealing the high hopes that Tencent Group has placed on WeChat, but also mean the "beginning" of the era of full commercialization of Video Account.

So, behind the scenes of WeChat’s “circuit disconnection”, how has the commercialization of Video Account progressed?

1. Expansion and generalization of content

There is no doubt that the content ecology of video accounts is the basis for commercialization. However, in the beginning, the short video content of video accounts has not formed a relatively mature ecology.

Compared with Douyin and Kuaishou, the early video accounts were more inclined to general information and general knowledge content, and lacked entertainment attributes. Its early content path was also mainly directed through the top public accounts, and it survived the cold start period relying on its basic public account base.

It was not until March 2021 that WeChat changed the rule that 30-second videos could only be posted in Moments through Weishi to allow them to be posted directly through WeChat Video Account. Relying on the WeChat ecosystem and key support, Video Account ushered in a period of rapid development. Tencent's 2021 financial report shows that the average usage time and total video playback volume of Video Account in 2021 more than doubled year-on-year.

During this period, the growth of video accounts mainly relied on online concerts. After Westlife, video accounts have never stopped hosting online concerts. From 2021 to 2022, video accounts have successively hosted performances by singers such as Mayday, Leslie Cheung, Cui Jian, Jay Chou, and Luo Dayou. One carnival after another constantly refreshed the record of video accounts, and also allowed Tencent to win back a game in the field of short videos.

However, it should be pointed out that the large amount of transferred content and the lack of a certain number of top creators within the ecosystem are still problems that the video account content ecosystem cannot avoid. This means that the stickiness between users and content creators is not strong, and stable traffic cannot be guaranteed.

It was not until the last year that the content ecosystem of Video Accounts has gradually expanded. In addition to concerts and information, emotional, humorous, life, and beauty videos also account for a large proportion, and there are top creators emerging in each track.

By observing the WeChat Video Account Rankings released by Crawley in the past three months, we can see that in the humor and comedy vertical category, @小李飞叨-李洋, @搞笑孟文明 and other experts continue to be stable at the top of the list, and the content index remains high; in the beauty vertical category, @杨苏苏ya, @懂行的纱纱 and other top experts have also achieved relatively stable content results. In addition, the video account has also formed a preliminary expert content ecosystem in vertical categories such as cute pets, food, games, and fashion.

From the data, we can also find "evidence" of the continued growth of Tencent's content ecosystem. At the 2023 WeChat Open Course PRO, the official also revealed a set of data: in the past year, the number of video account authors with 10,000 fans has increased by 4 times, the number of daily active creators and the average daily video upload volume have doubled year-on-year, and user consumption time has increased by 3 times.

It can be seen that Video Account is now entering the "vertical category deep cultivation period". Different from the initial cold start period, Video Account at this stage will undoubtedly focus more on cultivating various vertical content tracks, allowing influencers with high-quality creative abilities to stand out and grow into vertical category leaders, and achieve both user stickiness and commercial value through the influence of high-quality content.

Judging from the attributes of the platform, Video Account does have its own differences. Compared with other platforms, it has both "people" and "content".

On the one hand, short videos in video accounts can be disseminated socially among friends, groups, and friend circles. Because of their social relationships, people have greater interest in and stronger motivation to watch the recommended content, which leads to stronger stickiness. On the other hand, WeChat has more user behavior data. With the enrichment of video account content categories, the rapid growth of user usage time, and the continuous accumulation of data, WeChat's understanding of "content that users are interested in" may have more advantages and potential than some video platforms.

However, WeChat's efforts to deepen its content development cannot be taken lightly. According to Zouma Finance's calculations, the financial report shows that the DAU of the video account grew by double digits in the second quarter, and the average daily usage time of a single user increased by almost 100%. This may mean that the growth rate of the video account DAU is within 20% compared with last year, and the average daily usage time of a single user is about 50 minutes.

For reference, Kuaishou has about 360 million daily active users, with an average daily usage time of about 125 minutes, and an average daily total usage time of about 750 million hours, which means that the average daily total usage time of Video Account has reached 60% of Kuaishou's last year. The average daily usage time of Douyin users is even longer, at 2.5 hours.

From the perspective of the depth of content verticals, Douyin and Kuaishou are obviously one level higher than Video Account in terms of the number of top bloggers, the number of fans and the amount of interaction; from the perspective of the diversity of content formats, in addition to short videos, Douyin and Kuaishou also have content sections such as short dramas, pictures and texts, variety shows, and entertainment live broadcasts. Video Account either lacks these content formats (such as variety shows) or the order of magnitude is greatly different (such as entertainment live broadcasts).

It can be seen that although Video Account is catching up, there is still a clear gap between the maturity and activity of the content ecology and other short video platforms. How to make breakthroughs in more content categories, form more top IP accounts, and let users spend more time on Video Account is where the Video Account team still needs to make breakthroughs.

More importantly, the video account needs to find its own "mental label". Just like watching Douyin for entertainment, going to Kuaishou, and watching the two-dimensional world on Bilibili, the video account needs to find a reason for the public to actively open it and immerse themselves in it.

2. Content drives advertising revenue growth

The improvement of the video account content ecosystem has brought about an increase in user usage time, and user usage time is the most core indicator for measuring the platform's advertising and ecological value, without a doubt.

According to Tencent's 2023Q2 financial report, Tencent's advertising revenue increased by 34% year-on-year to 25 billion yuan in the second quarter. Video account advertising was also disclosed for the first time, contributing more than 3 billion yuan. The financial report also attributed the growth to the evolution of machine learning capabilities and the commercialization of video accounts. Tencent's chief strategy officer pointed out in the earnings call: "We are in the early stages of monetization and deployment of advertising for video accounts." It can be seen that in the future Tencent will gradually increase the advertising loading rate, which will also make the monetization channels of video accounts in various dimensions more open.

Image source: Dolphin Investment Research

The growth of data is inseparable from the strong promotion of the government. Since last year, Video Account has frequently launched various support policies to expand the market, launched various creator incentive plans on the content side, and provided official traffic packages. This year, Video Account has launched a new creator profit-sharing plan and paid subscription system. The upgraded advertising system can also automatically identify video content and hang appropriate advertisements in the comment area, which are all conducive to creators to increase their income.

On the commercial monetization side, we have made multiple updates around video account information flow advertising, video account stores, and video account live broadcasts, opening up various capabilities to serve creators. This year, the "Creation Profit Plan" was launched, and video accounts can provide corresponding commercial service support for creators at different stages.

On the macro side of the industry, the overall Internet advertising market is currently in a recovery period after the cold winter. According to the "2023 Internet Advertising Market Semi-annual Report" released by QuestMobile, the scale of the Internet advertising market in the first quarter of 2023 reached 145.22 billion yuan, a year-on-year increase of 2.3%, and the market scale in the second quarter reached 159.34 billion yuan, a year-on-year increase of 8.1%. Of course, the core is still the active content ecology. The launch of a series of combined punches and the warming of the overall environment have enabled video account advertising to achieve significant growth.

From the perspective of the source of advertising revenue, the advertising revenue from video live e-commerce cannot be ignored. According to Tencent management, the GMV scale of video live e-commerce has reached an annualized level of tens of billions, and the year-on-year growth rate in the second quarter was 150%.

It is worth mentioning that although the current transaction scale of mini programs is a hundred times that of video account live e-commerce (it was announced to be "trillions" in 2022), the commercial value of video account live e-commerce may be far greater than mini program e-commerce of the same scale, because for merchants, video account live e-commerce is to attract new customers and is more about incremental business, while mini program e-commerce is more about attracting existing customers to private domain transactions and is more about retention.

Today's video accounts have become a powerful public domain entrance for content, e-commerce, and live broadcasting, and the "atomic components" ecological approach has become a unique advantage of video accounts. Compared with platforms such as Douyin, video accounts can accumulate their own user assets and link public accounts, corporate WeChat and other touchpoints to manage the entire life cycle of users, such as encouraging users to repurchase multiple times and recalling lost users.

In short, after obtaining more commercial monetization through advertising, Video Account chose to give money to creators to stimulate the creation of more good content. It has made many updates around Video Account information flow advertising, Video Account stores, and Video Account live broadcasts, opening up various capabilities to serve creators.

In the foreseeable future, the growth trend of advertising revenue of video accounts is relatively certain, and there is still a lot of room for growth.

3. Video e-commerce: potential is accumulating, but the mentality still needs to be cultivated

One thing that is certain is that video account e-commerce is now being highly anticipated, and many people believe that it is no less profitable than Douyin in the past. It is also an important pillar for the future commercialization of video accounts.

The reason is that video accounts not only have a few public domain traffic dividends, but also have long-term value in the public-private domain linkage gameplay, and the market has given it a lot of room for growth in the future. According to the video account industry service platform Baizhun, the video account e-commerce GMV will reach 300 billion in 2023. Some professionals in the industry have even estimated this target to be 400 billion.

But rationally speaking, video account e-commerce is still in the basic ecological construction stage. On the one hand, the current video account ecosystem lacks top anchors such as Li Jiaqi, Luo Yonghao, and Simba, which leads to the GMV created by video accounts during shopping nodes such as 618 and Double 11 being weaker than other platforms. A case in point is that in 2020, when Luo Yonghao started broadcasting on Douyin, the annual GMV reached 50 million yuan.

On the other hand, the consumer groups of video account e-commerce are still limited. Looking back at the whole of 2022, the best-selling consumer categories on video accounts are clothing, food and beauty. Jewelry and jade, elderly clothing, health and nourishing products, tea, agriculture, rural areas and farmers, etc., which are of interest to many elderly people, are very popular in the video account live broadcast room.

Observing the current video account e-commerce ecosystem, it can be clearly seen that "store broadcasting" occupies the mainstream, there are not many top anchors who have "broken out of the circle" , and the live broadcast e-commerce ecosystem is still in its early stages.

Under such circumstances, merchants' attitudes towards investing in video accounts are divided into different factions: one group sticks to the original channels but pays attention to the development of video accounts; another group has begun to test the waters with the idea of ​​"occupying a pit"; and the last group takes the video account as an opportunity to overtake in the last corner and goes all in.

As far as the current video e-commerce gameplay is concerned, tapping into natural traffic, making good use of advertising, and linking public and private domains are the three major means that merchants need to pay attention to. In terms of obtaining natural traffic, high-quality content, cost-effective products, and good after-sales service guarantees are the conditions for obtaining more natural traffic.

In terms of advertising traffic, although the traffic of video accounts is not as accurate as other mature e-commerce platforms, merchants can filter the traffic and direct it to the private domain, and do the refinement and sedimentation themselves. On this basis, if merchants can do a good job of linking the public and private domains, they can also better maximize user value and complete a deeper commercial value realization and traffic closed loop.

According to Jian Feng, CEO of WeChat ecosystem service provider Zero One Digital, before live streaming, brands can use private domain operations such as public accounts, Moments, and communities to direct users into the live streaming room, directly skipping the cold start period; during live streaming, use the live streaming tools available on the video account to retain users, extend viewing time, and promote orders; after live streaming, convert new users to private domains to prepare for the next live streaming, forming a closed loop. This has become the standard process for some businesses to conduct live streaming e-commerce on video accounts.

When it comes to the operation of the live broadcast room of the video account, it can actually be measured by "people, goods, and venue", and the strategies of different categories are also quite different. For example, in the jewelry category, setting up multiple welfare products and passing them one by one is a common strategy, the purpose is to let consumers feel the maximum cost-effectiveness, and at the same time they can choose products according to their own preferences.

In the sports shoe category, the route of single product hit is more effective. One merchant said in an interview: "The demand for sports shoes is not so personalized, especially for the older age of the video account users. The key is breathability, soft soles, and versatile design, as long as the greatest common divisor of the needs is met."

Tencent President Martin Lau said in a 2023Q1 conference call: "For video live e-commerce, the most important thing is to ensure that the transaction ecosystem is of high quality. If a large number of users buy low-quality goods or some high-profit goods for merchants at one time, they will basically spend all their money on advertising rather than product quality, which is not good for the overall ecosystem."

It can be seen that building a good infrastructure and achieving the optimal balance between user experience and merchant return rate are the goals pursued by video account e-commerce. For merchants, mastering private domain operation skills and understanding the user ecology of video accounts are the current priorities.

One thing we have to admit is that in 2023, video account e-commerce may be one of the very few e-commerce platforms that still has traffic dividends. One possible reason is that some of the current video account users have not been deeply educated by the market, and there are still some users who have not been exposed to live e-commerce. They are truly incremental users.

But as the other side of the mirror, this also reflects that the mentality of video account users in e-commerce shopping still needs to be cultivated. The current video account content ecology is still dominated by the consumption of short video content, and there are not many public domain traffic entrances for live streaming. Therefore, it will take some time to cultivate the overall GMV of video account e-commerce and user shopping habits. Therefore, the better mentality for entering the video account may be "long-term operation and continuous iteration", and adjust the configuration of "people, goods, and venues" according to changes in the ecology.

4. Don’t miss the next “train”

Orient Securities' research report analysis once pointed out that its estimated ultimate goal of the video account advertising loading rate can reach 10%, but this process is relatively slow. It is predicted that the video account advertising loading rate in Q4 of 2023/2024/2025 will be 2.8%, 3.8% and 4.8% respectively.

This year, Video Account has set itself a goal of 400 billion GMV. Pressure from competition and the macro environment has prompted it to keep accelerating. In this rapidly changing ecosystem, there is one main line that remains unchanged - based on the control of user experience, Video Account's requirements for "quality" exceed its desire for scale.

Undoubtedly, the video account is like a "high-speed train" about to depart, and everyone wants to get a ticket to enjoy the early dividends. Whether it is advertising or e-commerce, the video account has been explored for a long time since its "debut", and when the "qualitative change" will occur may be the focus that players should pay attention to.

As an industry insider said, the purpose of deploying video accounts now is not to miss future opportunities. If you wait until everything is mature before entering the market, not only will it be too late, but the benefits will also be gone.

Author: Ji Nan, Source: WeChat public account: "TopKlout"