What kind of answers did Bilibili and Xiaohongshu give in terms of "commercialization"?

Most content communities will face certain commercial challenges in the process of development, such as Bilibili and Xiaohongshu. However, the two have explored different directions on the road to commercialization. Bilibili has chosen to return to content to a certain extent, while Xiaohongshu has chosen to embrace the live broadcast business more actively. How to interpret the exploration of commercialization of these two content communities? Let's take a look.

Bilibili has not learned from Douyin, but Douyin has already set its sights on Bilibili. Recently, Douyin quietly launched "Qingtao", a video platform for young people's interests and knowledge, and began to benchmark Bilibili. In April last year, Bilibili just learned from Douyin and launched Story-Mode, which became a new growth point for advertising revenue. But obviously, Story-Mode did not solve Bilibili's commercialization dilemma, so recently Bilibili has started a series of new adjustments and once again launched a charge towards commercialization.

On March 10, Zhiwei reported that Bilibili is considering canceling the playback data displayed on the front-end and instead measuring the spread of the video based on the idea of ​​"user time consumption".

Prior to this, Chen Rui, CEO of Bilibili, said in a financial report conference call in early March that "Bilibili will increase the DAU/MAU ratio in 2023. It is currently 28%, and we should increase it to 30%. This means higher user activity, higher user stickiness, and greater user commercial value."

Xiaohongshu is also working hard on commercialization. On the same day as the Bilibili news, LatePost reported that Xiaohongshu upgraded its live broadcast business to an independent department, with Gintoki (nickname) responsible for unified management of live broadcast content and live broadcast e-commerce. Prior to this, Xiaohongshu's live broadcast business belonged to the business group of the second-level department under the community department.

Whether it is the organizational structure adjustment of Xiaohongshu or the changes in the display of the front-end data of Bilibili, the essential intention is commercialization. It’s just that Bilibili’s path is to return to content, while Xiaohongshu is conducting more active commercial exploration.

Before this, Zhihu and Douban, as pioneers in the commercialization of community platforms, did not provide satisfactory answers. As content communities, they also face the problem of balancing content and commercialization. After many attempts, Bilibili and Xiaohongshu finally chose two different attempts. What answers can they hand in?

1. The ambiguous commercialization of communities

Although Bilibili has always emphasized commercialization, it has taken cautious steps, and this caution sometimes even seems a bit awkward.

For example, during the Double 11 event in 2022, Bilibili launched live e-commerce. In order to motivate UP hosts, it posted a "Live E-commerce UP Host Recruitment Incentive Plan" on its homepage. However, the related reward was only 50 yuan. Compared with the incentive policies of JD.com and Taobao during the Double 11 event, which easily reached millions, it does seem a bit stingy.

Even during the Double Eleven period, Bilibili did not provide a first-level entrance for live streaming sales on its homepage. Instead, it was quietly placed on the second-level page of the "Live Streaming" channel, and it could not be found unless you looked carefully.

Of course, this kind of awkwardness is not only reflected on the platform, but also on the UP hosts of Bilibili.

Also on Double Eleven in 2022, many anchors participating in live streaming sales on Bilibili did not promote the products as actively as on other platforms. Instead, they simply posted product links in the live broadcast room. They played games as usual and sang as usual, with no intention of promoting the products at all.

In fact, UP hosts are also afraid that promoting products will damage their reputation. After all, if the products are not sold but a batch of fans are lost, then the loss will outweigh the gain.

This kind of thing is not without precedent on Bilibili. During the 618 period in 2022, the Bilibili UP host "Daxiang Ge Lai Le", who had 5 million fans, lost nearly 200,000 fans after live streaming and selling goods, which is something many UP hosts do not want to see.

Therefore, from the platform to the UP host, Bilibili’s caution towards commercialization stems from the long-standing contradiction in the community platform - community atmosphere and commercialization.

In recent years, topics such as "Zhihu's degeneration" and "Bilibili has lost its original intention" have been constantly discussed under the impetus of community "fundamentalism" and have always been an invisible threshold for Bilibili's commercialization.

Just like Bilibili's awkwardness, Xiaohongshu, also a community platform, is equally ambiguous in its commercialization.

Since its commercialization in 2019, Xiaohongshu has been encouraging MCNs to invest on the platform and establishing the Dandelion and Juguang platforms to regulate the cooperation between brands and content creators.

But on the other hand, Xiaohongshu has always restricted the commercial content of these placements.

Bizarbo quoted a brand promotion manager as saying that the traffic of commercial content reported to the platform and not reported to the platform usually differs by 30% to 40%. In addition, Xiaohongshu will also mark some normal commercial content with the "brand owner" logo. Even if the transaction with the brand is non-cash, the word "sponsored" will be displayed in the lower right corner.

But even so, Xiaohongshu, which naturally has the attribute of promoting content, has a more commercial atmosphere than Bilibili.

According to Xiaohongshu data, about 30% of the notes on the platform currently contain product information, and this is still a relatively low estimate because not all product sharing will contain brand information. Qu En, head of Xiaohongshu's commercial products, said: "In theory, 40%-50% of the notes on Xiaohongshu are about different products in life."

But every family has its own problems, and Xiaohongshu also has many problems of its own. For example, although everyone regards Xiaohongshu as a platform for planting grass and a search engine for solving life problems, only a few people actually stay on Xiaohongshu to consume.

Data from Xiaohongshu shows that 60% of daily active users actively search on Xiaohongshu every day, with an average daily search volume of nearly 300 million times. However, for MCN agencies, they need to use data from other e-commerce platforms such as Taobao and JD.com to feedback on the effectiveness of advertising on Xiaohongshu.

Many times, the consumption habits of Xiaohongshu users are usually to check guides on Xiaohongshu while placing orders on JD.com and Taobao.

In addition, the traffic of Xiaohongshu is also unstable. Top bloggers cannot guarantee that each piece of content will have basic traffic, but small and medium-sized bloggers can occasionally produce hot products due to recommendations or other reasons. This phenomenon also brings troubles to advertisers' placements.

A long-time advertising professional on Xiaohongshu told ZiQuandant: "It's quite awkward now. Xiaohongshu bloggers generally have very poor data, but brands have requirements for data, which makes us very uncomfortable."

Looking back at Bilibili, its commercialization problem is not only due to its hesitant actions, but also because its previous revenue growth largely relied on breaking through the circle, that is, driving revenue growth through the growth of user numbers, DAU, and MAU.

"Self-Quadrant" reviewed B Station's financial report data from 2019 to 2022 and found that B Station's revenue growth is highly correlated with the growth of monthly active users. Therefore, in the past two years, B Station's most important task has been to "break the circle."

However, although this approach is effective, it relies to a certain extent on high-cost marketing investment. Therefore, after reducing marketing expenses, there will be pressure for growth to decline.

For example, in 2021, Bilibili's sales and marketing expenses in a single quarter were close to RMB 1.8 billion. However, in the third and fourth quarters of 2022, Bilibili reduced its promotion expenses, bringing the figure back to RMB 1.2-1.3 billion, a year-on-year decrease of 25% and 28% respectively. But the cost of doing so is that Bilibili lost 6.6 million monthly active users in the fourth quarter of 2022 compared with the previous quarter.

Xiaohongshu and Bilibili are obviously aware of these problems, so they have not stopped trying new things in the past two years.

For example, in April 2022, Bilibili launched the vertical screen advertising product Story-Mode, and began to approach Douyin and Kuaishou. In July of the same year, Bilibili experienced personnel adjustments. Liu Binxin, the former head of the commercialization center and the main site commercialization center and vice president, resigned; Liu Zhi, vice president of Bilibili and the former head of operations, will be responsible for the commercialization center system and the main site commercial center, and the marketing center will be in charge of general manager Wang Xu.

Later, in an internal meeting in the third quarter of the same year, Bilibili redefined its core strategy for the next three years: growth-centric, community-first, and dual-driven by ecology and business. For the first time, commercialization and community ecology were given the same positioning.

Xiaohongshu also began internal testing of the first-level video entrance at the beginning of this year, replacing the "Shopping" originally placed in the bottom navigation bar with video, and "Shopping" retreated to the second-level entrance and was placed in the top sub-navigation bar.

In early March, Xiaohongshu's splash screen ads began to support redirection to Taobao brand activity pages. Prior to this, Xiaohongshu adjusted the external link redirection rules several times, and finally completely cut off Taobao external links in 2021, and began to try to build its own e-commerce. Now that Xiaohongshu has reopened external link redirection, it may also be a manifestation of embracing commercialization.

This series of actions naturally has an effect. For example, Bilibili's total revenue in 2022 increased by 13%, and its value-added services in the fourth quarter increased by 24% year-on-year; for example, by the end of 2022, Xiaohongshu had a total of 173,000 brands from more than 200 countries and regions around the world.

But this is clearly not enough.

In the 2021 annual report conference call, Bilibili proposed to achieve break-even in 2024. However, judging from the 2022 annual report, Bilibili's revenue growth rate is much lower than before, and the momentum of business growth is obviously insufficient.

And Bilibili's losses are still expanding. In 2022, Bilibili's net loss was 7.5 billion yuan, an increase of about 10% from 6.8 billion yuan in 2021. At the same time, Bilibili's advertising revenue in the fourth quarter of 2022 was 1.5 billion yuan, which was still less than 1.6 billion yuan in the same period of 2021.

Similarly, Xiaohongshu's commercialization department is under great pressure. Zhaibo mentioned that Xiaohongshu's valuation has fallen by half in private transactions in the primary market because it has not made more progress in commercialization.

The full-year revenue target of Xiaohongshu's advertising department in 2022 is 24 billion yuan, more than double that of last year. However, throughout 2022, Xiaohongshu's user base doubled, but its commercial revenue only grew by 20%, which cast a big question mark on Xiaohongshu's commercialization.

Therefore, for both Bilibili and Xiaohongshu, commercialization has become a tough nut to crack in 2023.

2. One returns to content, the other embraces business

Throughout the year 2022, the commercialization of Internet platforms has not been easy.

Against the backdrop of the overall downward trend in Internet advertising, the "2022 China Internet Advertising Data Report" released by Zhongguancun Interactive Marketing Laboratory shows that in 2022, the size of China's Internet advertising market was 508.8 billion yuan, a year-on-year decrease of 6.38%, the first negative growth in nearly seven years.

Advertising is naturally the main source of income for Bilibili and Xiaohongshu. In the fourth quarter of 2022, Bilibili's advertising revenue was 1.51 billion yuan, accounting for 24.75% of its revenue. Xiaohongshu is more dependent on advertising. According to the "2021 Xiaohongshu Brand Research Report", advertising accounts for as much as 80% of Xiaohongshu's revenue.

Against this backdrop, Bilibili and Xiaohongshu need to demonstrate to advertisers the advantages and cost-effectiveness of advertising on their platforms more than ever.

On March 9, Bilibili Business Dynamics released a "Fireworks UP Master Preferred List", which matched different UP master cooperation targets for brands from three dimensions: the top must-have list, the super value preferred list, and the growing dark horse list. Then, Bilibili tried to cancel the front-end display of the playback volume and change it to the user's consumption time.

Both actions show that Bilibili has made up its mind to strike a balance between content and commercialization.

Canceling the front-end display of playback volume is essentially to encourage the creation of high-quality content, mainly medium-length videos, while filtering out low-quality content that attracts clicks with cover party titles. After all, in the front-end display based on user time consumption, medium-length videos have a natural advantage, while title party and cover party content usually enter and exit quickly, making it difficult to accumulate traffic advantages.

Bilibili has begun to return to content on the road to commercialization. As Chen Rui emphasized in the conference call: "Bilibili's foundation has always been the community and content ecology. No matter what development strategy we talk about, the community and content ecology are the foundation of Bilibili."

The Fireworks UP Master Preferred List is also a manifestation of the emphasis on content. The UP Master's IP is also accumulated through long-term high-quality content. This kind of content can provide advertisers with long-tail traffic exposure, which is more like the advertising delivery logic of long videos.

Bilibili is indeed trying to follow the path of iQiyi. In the past six months, it has continuously launched content such as "The Three-Body Problem" and "Chinese Tales". Although user reviews are quite divided, these contents have indeed brought huge traffic to Bilibili and further promoted the growth of revenue from value-added services represented by members.

Chen Rui stated in the latest earnings call that in 2023, Bilibili will no longer simply pursue DAU (daily active users) numbers, but will pay more attention to quality DAU growth, that is, higher user activity, higher user stickiness, and greater commercial value provided by users.

Ensuring high-quality DAU growth is essentially about serving users well, and the prerequisite for serving users well.

Author: Luo Ji, Editor: Zhuang Yan; Public Account: Zi Quadrant (ID: zixiangxian)

Original title: Caught in a commercial dilemma, do Bilibili and Xiaohongshu still have a way out?