Li Feng Column 15 | How Long Can Live E-Commerce Stay Hot?

This is issue 15 of the column. I'd like to explore traffic anxiety with you, and the business behind it.

In recent years, buzzwords around traffic and e-commerce have proliferated. This year's hottest: live-streaming commerce and private-domain traffic. In my view, these buzzwords are all methodologies for solving traffic anxiety. Looking back at the past eight years of internet traffic evolution and the businesses that grew from it, I've found some interesting patterns and facts worth sharing.

In this article, we'll examine:

• Is influencer e-commerce a sustainable business model?
• How have media and traffic shifts shaped e-commerce?
• What's the relationship between traffic and business — Weibo and Xiaomi, WeChat Official Accounts and knowledge monetization, short video and beauty? Why is the hardest thing for consumer-facing companies now that even after picking the right category, they must merge product, content, and advertising into one thing, and make it suitable for the fastest-growing media type in terms of user time?
• How have barriers between tech giants created a distinctly Chinese traffic economy?

I hope this brings fresh perspectives. Welcome to share your thoughts at the end.

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/ 01 /

The Traffic Anxiety Behind Startup Buzzwords

In venture capital, we face new buzzwords daily — sometimes before you've figured out what one term means for you, the next one appears.

From 2015 to now, we've seen influencer e-commerce, new retail, unmanned retail, social e-commerce, mini-program e-commerce, community group buying, live-streaming commerce, short-video commerce, membership e-commerce, and more.

Undoubtedly, each wave creates new value, offering startups traffic opportunities or new models. But not all buzzwords are equal in value. Put bluntly, some opportunities are merely阶段性 (phase-specific).

Recently many CEOs have come to discuss "private-domain traffic." Whatever the underlying business model, it certainly offers phase-specific红利 (dividends). The question is: what's its ceiling? Put yourself in an ordinary user's shoes. In today's information explosion, how many brand groups would you join? How many brand-only official accounts would you subscribe to for shopping?

All these buzzwords are methodologies for solving traffic problems. Strip back to business itself, and there's only one thing: sustained value creation. Specifically in consumer retail, the model is remarkably simple and hasn't fundamentally changed — it's determined by supply-demand relationships and supply chain efficiency.

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/ 02 /

The Unified Law Behind Traffic: Shifts in User Time Allocation

To solve traffic problems, first recognize the unified law: when user time allocation shifts significantly, the recipient of that shift enjoys traffic红利 (dividends). Whether that's a messaging app, WeChat Official Accounts, short video, long video, interactive video, or movies and TV series.

Behind this lies a simple, universal but hard-to-use core fact: the sole purpose of all business is to occupy your time. Among all variables about people, the only one that cannot increase is the fixed 24 hours per day. For example, if you're at a talk right now, you can't be shopping elsewhere.

Let's review the past eight years of "user time allocation shifts" and the commercial opportunities they created.

1) 2011: User time shifts to Weibo

In 2010–2011, Weibo was definitely the media platform occupying most of your time. You'd see everyone around you, in all settings, swiping through 50 posts in their Weibo feed. The first accounts to break through were big V influencers and accounts like "One Hundred Thousand Bad Jokes." Weibo's format was perfectly suited for killing time — it carried short, novel, quirky, witty content well.

For companies, Weibo was an excellent real-time short-message platform for user interaction. Xiaomi used it best. It seized Weibo's红利 (dividend) period, and in its first two years, frequently used short posts for product launches, software update notifications, collecting user feedback, handling complaints — broadly, interacting with users.

Jiangxiaobai also benefited from Weibo红利 (dividends). Its best brand传播 (communication) was the bottle and the clever phrases on it, which matched Weibo's image-and-short-text format and the media usage habits it had cultivated.

Later, Weibo's efficiency gradually declined — 30 of 50 posts would be about the same thing. If you didn't follow many people, you'd run out of new content after a few swipes. Of course, now when you open Weibo, you're probably not looking at "One Hundred Thousand Bad Jokes" but at hot news and entertainment gossip. Weibo has become the main阵地 (battleground) for entertainment and trending news.

2) 2012–2013: Shift to Moments and Official Accounts

In April 2012, WeChat launched Moments. Initially it was more efficient than Weibo — you felt you'd discovered treasure, spending more and more time scrolling. Soon, Moments faced the same challenge as Weibo: severe content homogenization and declining efficiency.

Four months later, just as Moments felt nutritionally deficient and inefficient, WeChat launched Official Accounts. People with knowledge who could write came rushing at you — you were thrilled.

Especially from 2014 to early 2015, you must have subscribed to numerous Official Accounts. Of course, you've probably unfollowed many now, keeping only a few.

Today, our subscriptions basically fall into these categories: content in professional areas you like/follow from sources you trust; content from credible WeChat official accounts; in-depth long-form reporting; content that resonates with your spiritual needs.

可以说 (It can be said that) the Official Accounts红利 (dividend) wave has largely peaked. When users shifted to WeChat Moments and Official Accounts, who monetized the commercial traffic? And who has persisted and thrives to this day?

During Official Accounts' development, a new industry perfectly suited to its long-form content emerged: knowledge monetization.

When Official Accounts started with joke content dominating, Luo Zhenyu's Luoji Siwei (Logical Thinking) stood out with 60-second motivational voice messages. After all, users don't only want jokes.

Luo's valuable insight was not stopping at one content format or depth. He quickly captured users' next-stage needs. After voice content, Luoji Siwei launched systematic book introductions, then built the Dedao app with systematic online column courses, and now extends to offline "Dedao University." Its content iterations perfectly corresponded to the evolution of media forms and changing user demands across two cycles.

可以说 (It can be said that) almost every media shift begins with joke content and ends with systematic泛知识 (general knowledge)传播 (dissemination) — education.

3) 2018: Shift to short video

From 2018, users began allocating massive time to short video, following comedy entertainment accounts and videos from handsome guys and pretty girls.

Beauty makeup took off. It caught the wave of makeup demand becoming younger and more大众化 (mass-market), and coincidentally hit the short-video era. Short video is the most favorable way to showcase beauty products. In just dozens of seconds or even seconds, you can compare before-and-after looks, even left-face-made-up versus right-face-bare. As a result, brands can easily merge advertising content and sales into one thing. Put plainly, it's like adding shopping carts in Douyin.

Not just beauty — many consumer companies found optimal product showcasing in Douyin and other short-video platforms. Take Saturnbird Coffee, which FreeS Fund invested in at Pre-A and followed through two subsequent rounds. This Double 11, Saturnbird surpassed Nestlé to become the first domestic brand topping Tmall's coffee rankings. (For detailed coffee industry analysis, see The Category Logic Behind the Buzz — Coffee Industry Investment as Example)

Saturnbird improved coffee manufacturing, dramatically increasing solubility so powder dissolves easily in hot water, ice water, milk, or other liquids — restoring a good cup in seconds. Its mini Lego-like coffee cup packaging also catches the eye. Both its preparation process and packaging are easily visualized and richly expressible through short video, making it highly shareable. (Behind the visible marketing, Saturnbird's core competitiveness remains supply chain — we'll unpack this in a dedicated article later.)

The visual appeal perspective matters. It also explains why clothing sold best when Taobao started — clothing is the product most suited to text and image explanation and display.

As a conclusion, the hardest thing for consumer-facing companies is that even after picking the right category, they must still merge product, content, and advertising into one thing, and make it suitable for the fastest-growing media type in user time.

Undoubtedly, on short-video platforms, user consumption won't ultimately stay with handsome guys and pretty girls. So here's a question to explore: what possibilities does short video hold for the future? What types of businesses might emerge?

One possibility I see: just as the Official Accounts红利 (dividend) period produced Luoji Siwei (later Dedao), a content company that evolved with user needs and behavior migration, theoretically the short-video era should also produce泛教育 (general education) companies fitting short-video's传播 (dissemination) format. Because almost every media shift brings泛知识 (general knowledge) and泛教育 (general education) opportunities. If such companies can imbue products with泛娱乐化 (general entertainment) or gamification, interactivity — even better. Of course, this is just one possibility.

4) Shift to domestic TV dramas and films

Though entertainment investment is quite cold now, and people say celebrities are having a hard time, there's a small trend: user time and money spent on domestic TV dramas and films has been increasing.

Specifically, young users who previously watched almost exclusively American and Korean dramas began spending more time on domestic dramas from 2014–2015. Beyond TV dramas, recognition of domestic films has also grown. From roughly late 2017–2018, domestic films' share of user movie spending rose significantly. This year, perhaps over half of films users saw in theaters were domestic — unimaginable three or four years ago.

Citing data from entertainment大数据 (big data) provider EntGroup: as of 17:00 on December 6, 2019, mainland China had 80 films grossing over 100 million RMB, with 41 domestic films (over 50%); 15 films grossing over 1 billion, with 10 domestic (67%). Additionally, 4 of the top 5 box office films this year were domestic.

When users invest more time in domestic TV dramas and films, there's traffic红利 (dividends) here too. Three Squirrels "caught" this break. In 2016, just as user time was shifting to domestic dramas, before their commercial value was fully realized, Three Squirrels placed product integrations in hit dramas like Ode to Joy — initially costing just several hundred thousand RMB plus a daily crate of snacks for the crew. (For other Chinese-style opportunities Three Squirrels seized, see Li Feng Column 14: Why Thank Chinese Manufacturing?)

Later, advertisers flocked to domestic drama integrations. With too many integrations, users became immune to植入 (product placement) ads, and prices rose dramatically — the红利 (dividends) were long gone.

To summarize, studying traffic红利 (dividends) requires attention to three aspects:

First: shifts in user time allocation.

From user time allocation shifts, you can 100% see traffic changes. In 2011, you began shifting time from apps to Weibo. Later you spent more time in WeChat Moments and Official Accounts. A year ago, much of your time went to short video.

Second: monetization of new media platforms.

After large-scale user time shifts, the media form users employ has changed significantly. However, typically when user time shifts fastest is precisely when new media platforms monetize poorly. They're still in growth phase; the platform needs extensive experimentation to monetize migrated user time. Whoever enters early to exploit user time allocation shifts for monetization, and does so in a传播 (shareable)-friendly way, gets the biggest opportunity.

Third: categories and services adapted to new media.

When a traffic type reaches瓶颈 (bottleneck), categories and services best suited to that media's传播 (dissemination) get monetization opportunities — typically previously underserved categories. Beauty makeup, already validated in the short-video era, is one example.

/ 03 /

How to Judge a Buzzword's Commercial Value?

Using "Influencer E-commerce" as Example

Chinese influencer e-commerce emerged around 2014, when it was 100%红利 (dividend) from user time allocation shifts. On Weibo, beyond "One Hundred Thousand Bad Jokes," users finally found KOLs related to lifestyle and quality they cared about — they were thrilled.

The infrastructure for influencer e-commerce was also maturing. In April 2013, after Alibaba invested in Weibo, the efficiency of connecting Weibo to e-commerce improved dramatically. Before this, KOLs struggled to sell — they posted content on Weibo, then users had to actively search for Taobao shops, causing massive流失 (churn).

The question: if there's always phase-specific traffic红利 (dividends), why didn't influencer direct connection to e-commerce, making the entire链路 (chain) more efficient, lead to many more Ruhan-style "influencer e-commerce first stock" IPOs, or create dozens of "SMZDM" (What Is Worth Buying)?

Behind this question lies another: how big is influencer e-commerce's commercial value, and how to judge it?

Early on, top influencers like Zhang Dayi mainly sold self-owned brands. Now influencer e-commerce more resembles advertising or live-streaming commerce — think today's hottest Austin Li and Viya. The main difference between early and current influencer e-commerce: early was influencers selling their own products; now it's more influencers helping users discover good things and new brands.

Compared to early TV shopping, live-streaming commerce empowered by mobile internet has greater想象空间 (room for imagination). Internet video development somewhat validates this想象空间 (room for imagination). When Netflix was in DVD rental, it only reached US domestic users. After transitioning to streaming, Netflix began reaching global users, with revenue surging; Asia-Pacific became Netflix's fastest-growing region in membership and revenue over the past three years.

However, TV shopping took years of intense competition before settling on categories and audiences suited to it.

By analogy from common sense, ultimately not all categories will suit live-streaming display, and only a small portion of people will rely on short-video era "boutique shopping guides" for purchases.

Because consumers are constantly maturing. They inevitably move from knowing nothing, to buying what everyone or trusted people think is good, to buying what they themselves think is good. No one stays permanently in stage one or two. For example, after we've all bought dozens or hundreds of pieces of clothing, only a minority will still follow various KOLs for clothing choices.

From this perspective, social e-commerce and mini-program e-commerce backed by WeChat will face similar challenges to live-streaming commerce. In each new traffic wave, the number and scale of intermediary and导购 (shopping guide) businesses that can be accommodated are limited. The key to breaking through: either become truly meaningful e-commerce, or provide users with greater, longer-term value. An interesting fact: not long ago, Austin Li, whose main business is "bringing goods" (带货), also revealed plans to create a personal brand.

China's consumption upgrade journey is still short; the US has completed two rounds. After two rounds of user education, they mostly know what they want. Most US KOLs who generate media traffic sell self-owned brands, not as带货商 (sales agents). Examples: Rihanna's Fenty Beauty and Kylie Jenner's Kylie Cosmetics. (For more on China's consumption upgrade, see Li Xiang × Li Feng: 200 Million New Urban Residents' Consumption Awakening — Who "Harvests" It?)

Why couldn't Austin Li sell non-stick pans? It shows Chinese users are maturing. They trust his cosmetics expertise, recognize he understands women's psychology, but can't believe he's a pan expert or knows cooking.

Users define his professional degree and characteristics in the beauty makeup direction. Austin Li = lipstick = beauty makeup ≠ non-stick pan.

Current domestic influencer e-commerce and live-streaming commerce operate more at the media business level recommending products. Their efficiency gains come from direct connection to e-commerce's data-driven approach. This is an undeniable era factor.

The brutal reality: all media traffic changes and user time allocation changes are temporary.

If 8 out of 10 people around you are talking about a term, advertisers have already noticed it with贪婪 (greed). You should discover the next undiscussed term with value洼地 (depression). As Peter Thiel advised: "You should be wary of these hot words because hot words are the opposite of secrets — they're what everyone already understands."

/ 04 /

The Distinctly Chinese Traffic Business

In China's traffic business drama, commercial giants play indispensable, heavily inked roles. In China, there's typically a barrier between high-monetization-efficiency platforms and traffic platforms. For example, Baidu didn't let Taobao crawl images and price information; likewise Alibaba didn't let Baidu do so. When Weibo launched, it didn't allow Taobao product links. WeChat and Taobao, WeChat and Toutiao have various mutual prohibitions — hence no shortage of fights.

Nothing like this happens abroad. Facebook doesn't block Amazon ads; Amazon doesn't prohibit Google from fetching its product links.

The disconnect and barriers between domestic commercial giants have created a category of distinctly Chinese traffic businesses.

In 2011, Weibo rose rapidly, becoming an important information channel for nearly half of netizens. After Spring Festival 2012, two traffic business companies saw data soar in near-identical growth curves, quickly starting fundraising. They did image e-commerce business, directing Weibo traffic into their own e-commerce platforms, then distributing traffic back to Taobao through images.

By end-2012, Tencent invested in one. In first-half 2013, Alibaba invested in Weibo; Weibo could directly link to Taobao, eliminating their barrier. By then, many users had shifted to WeChat; Weibo traffic had flattened, and directing traffic to Taobao was no longer efficient.

So these two companies turned to another open, massive traffic洼地 (depression): Qzone. For considerable time they were Qzone's top two advertisers.

In August 2013, Taobao launched severe封杀 (blocking) policies, cutting off the advertising traffic these two companies brought. They had to各自 (each) pivot to e-commerce. From traffic direction to e-commerce is a huge leap. Both companies' transitions were difficult. In 2016 they merged; two years later they went public.

These two companies were MOGU and Meilishuo.

Before merging, their ups and downs were tied to barriers between traffic platforms and monetization platforms. They launched because Weibo and Taobao didn't interconnect. After Weibo-Taobao connection, they exploited the Taobao-Tencent non-interconnection to find Qzone.

Post-merger, MOGU and Meilishuo's challenge wasn't whether they could do business together, but how to make users believe they had greater advantages than Taobao.

History repeats itself; barriers between giants as a typical Chinese commercial phenomenon will persist long-term. Weibo and Taobao had relatively small-scale barriers; Qzone and Taobao had medium-scale barriers; WeChat and Taobao's gap can be seen as a鸿沟 (chasm), because both commercial entities are behemoths.

Barriers between giants are phase-specific opportunities entrepreneurs can exploit. Community e-commerce and mini-program e-commerce relying on WeChat's ecosystem largely exist because Taobao can't access WeChat's platform. Pinduoduo also exploited this鸿沟 (chasm), rising through social e-commerce deployed within WeChat.

But two possibilities exist for breaking such barriers: one, giants themselves破冰 (breaking ice) to build bridges; two, user maturity fills in the沟壑 (gullies). Once either possibility materializes, entrepreneurs' dependent models face challenges in scale and sustainability.

Therefore, business models that exploit barriers between giants to start need to shift their commercial主轴 (main axis) to longer-term user value creation as early as possible. And solving user value problems is tied to China's macro-market development status, and to full-chain supply chain efficiency improvement. I'll share related thinking in upcoming column issues.

Summary

1 The sole purpose of all business is to occupy user time. When user time allocation shifts significantly, the recipient of that shift enjoys traffic红利 (dividends).

2 Consumers are constantly maturing. They inevitably move from knowing nothing, to buying what everyone or trusted people think is good, to buying what they themselves think is good.

3 If 8 out of 10 people around you are talking about a term, advertisers have already noticed it. You should discover the next undiscussed term with value洼地 (depression).

4 Influencer e-commerce, new retail, unmanned retail and other buzzwords are methodologies for solving traffic problems. Strip back to business itself, and there's only sustained value creation. The key to sustained value creation is tied to China's macro-market development status, and to full-chain supply chain efficiency improvement.

Today's Question

What possibilities does short video hold for the future? What types of businesses might emerge?

Welcome to leave comments sharing your insights.

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