This website requires JavaScript.
E-Commerce

Toutiao versus Kuaishou: How Female Consumers Triggered War Among Chinese Unicorns

Oct 29, 2018 by Yun Nie
Toutiao versus Kuaishou: How Female Consumers Triggered War Among Chinese Unicorns

Several Chinese unicorns are now engaged in an intense tussle to win over the attention of female consumers.

While each one hopes to beat the other, the strategy employed by most of these giants is strikingly similar. The companies develop women-oriented UGC (user-generated content) communities to gather a pool of prospective like-minded female consumers and then link these communities to the e-commerce arms of the companies.

The formula seems to have paid off well for some. Others have joined the bandwagon in the hope of striking gold.

Kuaishou, China’s biggest social video-sharing platform, for instance, built a thriving community by developing an e-commerce app named doutian.me (豆田) two months ago. The app targets women who tend to share their life stories, photos, and short videos on the internet.

Interestingly, Jinri Toutiao, the country’s most popular news aggregation platform too could not resist falling for the fad. They also launched a similar app called Xincao (新草) before the China National Day, aiming at the same group of female users. The featured content of the app includes household objects, food, and other topics considered close to the hearts of Chinese women.

However, Kuaishou and Toutiao are relatively latecomers in the sector. Giants like Meituan-Dianping (美团点评), an online group-buying service provider, and Meitu (美图), a photography-based technology company have been in the fray for quite some time now.

Meituan-Dianping improved its app in May to incorporate a variety of women-preferred content, such as fashion, and beauty products. Meitu, by comparison, added online social community functions in the same month, encouraging female users to post their beauty tips on the platform.

The question that begs asking is how women did women trigger a war among Chinese companies?

Xiaohongshu: the first winner

The answer perhaps lies in the success enjoyed by Xiaohongshu (小红书), a social and e-commerce platform for imported luxury goods that is currently touted as the number one Chinese app in women-focused e-commerce sector.

Xiaohongshu, whose name means “Little Red Book”, has built a highly-engaged community of savvy users, particularly young Chinese women, who research and review products extensively on the app.

Users use the Pinterest-like app when they are interested in a beauty product and would like to learn about others’ experience before purchasing it. Having gone through the consumers’ posts, buyers can usually click the brand hyperlinks in the page which directs them to Xiaohongshu’s e-commerce section for the product consumption. The platform, therefore, has developed a closed shopping cycle on luxury items. (See the following illustration).

https://cdn.thepassage.cc/filters:quality(70)/public/image/2018/10/29/Chart1.png

For Chinese women, Xiaohongshu is highly addictive not only because it is an e-commerce platform where they are able to review, shop, and share popular items, but more importantly, it is a trusted source of advice particularly for those scourging the virtual world for beauty tips.

The “Xiaohongshu model” has made it one of the most popular and successful apps in China, with more than 100 million registered users and 30 million monthly active users as of May 2018, a 40% growth since 2017. Moreover, it was valued at USD 3 billion, after its Series D funding round in June.

But what is female users’ role in the app’s success? A report about Xiaohongshu’s user demographics published in tech news website TechNode may provide the answer.

According to the article, most Xiaohongshu users are post-90s urban females who value quality, have relatively high consuming power, and premium tastes. Furthermore, the app was attracting a lot of repeat visits from the users, 17% of whom were opening it “six or seven times per day”, co-founder Charlwin Mao said in an interview to Wired magazine in 2016.

More noticeably, Xiaohongshu had a predominantly female audience (88%) in 2017. (See Chart below).

https://cdn.thepassage.cc/filters:quality(70)/public/image/2018/10/29/Chart2.png

The company’s sales revenue in 2017 was CNY 6.5 billion (USD 936 million) and it was expected to leapfrog to 12 billion (USD 1.73 billion) in 2018, Chinese news aggregator 36kr.com (36氪) reported.

A rough estimate says female audience contributed nearly USD 824 million to the app last year. If the estimate is correct, the amount is expected to increase to USD 1.5 billion this year.

The windfall profits generated from the largely female userbase stimulated other Chinese companies’ appetites. Toutiao, Kuaishou, Meitu, and other firms, following the “Xiaohongshu model”, built women-focused virtual community in succession.

Another explanation as to how female consumers managed to trigger a war among the companies is boosting monetisation. Driven by Chinese women’s consumption power, Toutiao, Kuaishou and other profit-oriented ventures attempted to expand market and their monetisation opportunities.

In fact, Kuaishou and Toutiao have already entered the track of seizing monetisation chances in the past few years. The two companies realised that the UGC community was more likely to evoke users’ desire for consumption. Thus, both of them tried to monetise by combining UGC and e-commerce platforms.

In June this year, Kuaishou launched “Kuaishou shop” that allowed anchors to open online stores on the platform. The purchase links show up in the anchors’ short videos and live streaming pages and redirect fans to enter the Kuaishou stores. Similar but earlier to Kuaishou, Toutiao initially cooperated with e-commerce firms like Suning and Taobao to increase traffic, but the app soon released its own e-commerce mall in May, following the same monetisation method as Kuaishou.

Toutiao and Kuaishou harvested sweet fruits from their existing UGC community. Relying on the flourishing community around UGC, Kuaishou was believed by many to be the fourth largest social app after WeChat, Weibo and QQ, TechNode commented. Similarly, Toutiao was viewed as China’s most popular news and content app, with more than 120 million people spending an average of one hour and 13 minutes on it every day.

Yun Nie

Yun Nie is a New York-based tech reporter. She focuses on India-China financial market, global IT giants and technology-centric market trends. She can be reached at Yunnie@thepassage.cc.

Follow Yun Nie