Tik Tok has entered the deep waters of local life!

Douyin has finally made a move on local life. Why is Douyin so obsessed with local life? This article analyzes and explains the reasons why Douyin is obsessed with local life layout and the difficulties it faces. Recommended for people who are interested in APP operation.

Douyin’s dream of local life is gradually becoming a reality, and the market structure of local life may be divided into three parts in the future!

Tik Tok couldn’t help but take another step towards local life.

Recently, according to Tianyancha, Douyin quietly established a travel agency - Chengdu Haikuotiankong Travel Agency Co., Ltd. From the equity penetration chart, the former is a wholly-owned subsidiary of Chengdu Photosynthetic Signal Technology Co., Ltd., while the latter is a wholly-owned subsidiary of Beijing ByteDance Co., Ltd.

Source: Tianyancha

The establishment of a travel agency is obviously part of Douyin's efforts to build a local life ecosystem. Judging from veteran local life players such as Meituan, Dianping, Qunar, Ctrip and even Amap, tourism is an important piece of the puzzle that makes up the local life ecosystem.

Zhang Nan, CEO of Douyin Group, said at an internal meeting that users can not only open Douyin to browse content when they are bored, but also use it to shop, choose restaurants, make travel plans, buy air tickets and book hotels. From this point of view, Douyin, which already has the three major advantages of traffic, content and social networking, is bound to choose to develop tourism business in order to win the local market.

1. Douyin focuses on local life

TikTok is undoubtedly the most successful unicorn company in China and even the world in recent years. The "2022 Mid-Year Global Unicorn List" released by Hurun Research Institute shows that TikTok ranks first among the world's most valuable unicorns with a valuation of 1.3 trillion yuan, surpassing Musk's SpaceX and Ant Group.

The reason why TikTok can remain at the top of the global unicorn list is that it has the potential to connect the lives of billions of users. This is also the ultimate goal of all "portal platform" giants such as Tencent, Alibaba, and Baidu - to become the ultimate portal to connect people's lives. SpaceX and Ant Group can only function in the single fields of aerospace and Internet finance. Therefore, TikTok's valuation has remained high over the years.

At present, Douyin has the basic conditions to become a link in people's lives. Tik Tok, the overseas version of Douyin, has been downloaded 4 billion times worldwide, ranking first in the world, and accounts for one-third of all social media users. According to the latest statistics, by 2023, TikTok's active users may exceed 1.5 billion. With more than 800 million Douyin users in China, its user base will exceed 2 billion, making it a well-deserved Internet traffic portal.

Douyin has become the world's largest Internet platform in just a few years, and the main reason for this is its powerful content and social attributes. Short videos have lowered the threshold for people to share content. They can share what they have learned, the little things in their lives, and also share food and beautiful scenery on Douyin. Compared with Meituan and Amap, which are full of tool attributes, its social attributes make it easier to plant grass, so in theory, Douyin can become an important entrance to all aspects of life, such as food, travel, and shopping.

From the user's perspective, more and more people are trying to find food, order takeout, buy movie tickets, and buy travel tickets on Douyin. Guosheng Securities' research shows that Douyin's merchant occupancy rate in the store business has begun to climb. In the samples of three business districts, the number of Douyin merchants has accounted for about 34%, 26%, and 10% of Meituan, which is a good start for Douyin's local life business.

Douyin's focus on local life began in 2021. In the second half of this year, the local life business changed its leader. The product manager Seven was replaced, and the live broadcast manager Han Shangyou began to serve as the head of Douyin's local life. In December, he was promoted to a first-level department (on par with commercial products, interactive entertainment communities and other departments, but the project priority is the highest P0 level).

Since then, Douyin has been running wildly on the road of finding the puzzle of local life. At the beginning of 2022, Douyin first gave catering group buying an important entrance on the Douyin homepage, and then built its own direct sales teams in multiple cities; in October, Douyin Local Life established its base camp in Chengdu, and successively launched a series of tools such as Douyin Lai Ke, which facilitates merchants to manage background data, huge local push for merchants' paid products, Douyin Linker, which serves service providers' operating platforms, and Douyin Xiaobang, which improves the digitalization of merchants; at the end of the year, Douyin further increased its exploration of local life and launched the takeaway function.

Although Douyin is still in its infancy in local life and its exploration does not seem to be going smoothly, according to relevant media reports, Douyin Food Delivery has given up the goal of achieving 100 billion GMV this year and has shifted its current strategic focus to running business processes in more ways. Judging from the recent layout of the tourism business, Douyin is still working hard on local life.

2. Why is local life so difficult?

In 2011, after ending the 3Q war, Tencent concluded a far-reaching conclusion - traffic and capital are Tencent's core capabilities. Relying on this "golden rule", Tencent has been invincible in the Chinese Internet in the past 10 years, relying on traffic in the left hand and capital in the right hand. Traffic and capital have also become the means used by Chinese Internet companies.

Let’s take a look at the way Douyin attacks local life, from which we can also see the shadows of traffic and capital.

Traffic is Douyin's biggest asset, and it is also Douyin's biggest reliance for daring to tackle the tough bone of local life. In 2020, Douyin established a local direct business center and launched a preferential group purchase portal to officially enter the local life track. However, due to the low profit of group purchase merchants and the high cost of Douyin video shooting, merchants are extremely reluctant to settle in. At this time, Douyin attracts merchants to settle in by supporting traffic for store exploration experts (launching a store exploration group contribution list).

However, after solving the problem of merchants' low willingness to join, Douyin still needs to solve the problem of users' purchasing motivation. Generally speaking, as a content social platform, Douyin will recommend video content that users are interested in, which is equivalent to a preliminary screening of users. However, people usually watch videos aimlessly on Douyin, and their desire to buy related products is much lower than that of directly searching for related products on platforms such as Meituan. Therefore, Douyin has used its second sword - low prices, through a lower platform commission and subsidies for consumer group purchase coupons, to achieve the purpose of attracting consumers to buy at low prices.

It is true that attracting merchants, attracting users, and building a local life recursive system all require a large amount of traffic and capital, but traffic and capital are only the basic threshold for entry into the local life market, not the key to success. According to relevant reports, the current conversion rate of Douyin group buying GMV to actual write-offs is only 50%-60%, while the write-off rate of active search-based group buying such as Meituan, Amap, and Dianping is over 90%.

Judging from the development trajectory of Meituan, the industry big brother, there are only two problems to solve in order to thrive in local life: the first is to help merchants make money, and the second is to improve users’ consumption happiness.

In the former case, Meituan mainly relied on the inherent perception formed by consumers in the early stage - come to Meituan for food, drink and entertainment, and then relied on its market dominance and extremely powerful delivery system to make merchants profitable, although the profit is constantly decreasing as the platform costs are getting higher and higher. In the latter case, it relies on the extremely high merchant occupancy rate and powerful delivery system to solve the pain points of consumers in terms of the breadth and speed of demand, thus further consolidating its position in connecting consumers' lives.

As of now, Douyin seems to understand this truth. From e-commerce to food delivery, from movie tickets to travel, Douyin has been continuously increasing its breadth in local life since 2022 to meet the happiness of consumers; at the same time, Douyin has also shifted its focus to running business processes in more ways, one important point of which is to help platform merchants make profits.

Judging from the change in behavioral strategy, Douyin’s dream of local life is gradually becoming a reality, and the market structure of local life may be divided into three parts in the future.

Author: Editorial Department of Community Marketing Research Institute

Source: WeChat official account: "Community Marketing Research Institute"