China's Livestreaming Market Depicting the New Normal - One emerging role Three business models Six limelight players 2020 May
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
China’s Livestreaming Market
Depicting the New Normal
One emerging role
Three business models
Six limelight players
2020 May
About EqualOcean EqualOcean is an information service provider and investment research firm that aims to become a global platform for industrial innovation. We strive to make technology inclusive, accessible and transparent. Founded in October 2018, EqualOcean is an international branch of EO Company, a leading Chinese tech media and investment research organization that is headquartered in Beijing and has offices in Shanghai, Shenzhen and New York.
Contents 4 Introduction 5 Highlights 8 Chapter 1: What’s behind China’s livestreaming craze? 9 The pushing hand behind China’s livestreaming industry 12 An MCN case study: Yowant Network 15 Chapter 2: Is livestreaming a ‘gold rush’ for everyone? 16 Live e-commerce 19 Livestreaming on short-video platforms 23 Livestreaming gaming 27 Chapter 3: A flash in the pan or well-grounded trailblazers? 28 Live e-commerce: Taobao vs. Pinduoduo 33 From videos to live streaming: Douyin vs. Kuaishou 39 Live gaming ventures: Douyu vs. Huya
Introduction
Undoubtedly, livestreaming in contemporary China has gone viral. Penetrating everyone’s life, bringing
instant contact from far away, creating overnight celebrities out of urban amateurs and village farmers.
Although it is no longer a new invention, it has just started to revolutionize people’s modern lifestyle into a
brand-new normal.
In 2019 the user scale in China’s livestreaming market hit over 504 million, at a 10.6% annual growth rate.
The fast-growing number of users has birthed a multi-billion-dollar market, projected to reach CNY 100
billion by 2023.
Two engines have created this promising market: one is the MCN industry, the professional content
producers. They are creating a cyber civilization in livestreaming, in a joint effort with KOLs (Key Opinion
Leaders). From text to animation, video, from static images to 3D streaming, VR interactive experience,
MCNs have been generating high-quality content based on ever-progressive technologies such as 5G and
virtual reality.
The other pulling force comes from the commercial derivative market of livestreaming, a market worth
trillions in potential value with three major heavyweight online businesses: e-commerce, short-video
platforms and e-sports.
Take live commerce, for example. Two of the most celebrated live e-commerce KOLs, Viya and Li Jiaqi,
who attracted 30 million viewers last Double 11, have raked in CNY 2.7 billion (USD 389 million) and CNY 1
billion (USD 144 million) in online sales respectively.
The COVID-19 pandemic is causing an economic slump worldwide but, paradoxically, is considered a
golden time for livestreamers. In the future, it seems that no B2C business will be able to win without
entering into the livestreaming broadcast.
Starting from analyzing the rising role of MCNs, this report dissects the three major ‘livestreaming +’ e-
businesses models, followed by three pairs of corresponding contrasts in e-commerce, short-video
platforms and e-sports. From a practical perspective, EqualOcean hopes to enlighten our readers with
unique angles and independent research.
Wang Butao Mengyao Zhang
Analyst Analyst
Retail Healthcare, Retail
butao@equalocean.com mengyao@equalocean.com
Zhang Fan
Co-founder
zhangfan@equalocean.com
The authors wish to thank Luke Sheehan and Yusuf I Tuna for their editorial support
4
Highlights
The livestreaming-derived market in China into numerous kinds of businesses, which
grew to CNY 61 billion in 2019, with a projection makes it hard to classify it as an independent
of a 12% CAGR till 2023. industry.
Multi-channel networks (MCNs) are the But it has had a widespread impact on nearly all
‘pushing hand’ behind the rising market, with B2C businesses, adding sizeable value to the
6,500 active platforms in 2019. As some consumer market.
categories reach saturation point, they are
Thus EqualOcean here focuses on three
attracting flocks of eager users to an entirely
industries that are most affected by and
new branch of China's online ecosystem.
intertwined with livestreaming: e-commerce,
Livestreaming is a medium that can be blended short-video streaming and e-sports.
Chinese livestreaming market is projected to reach over CNY 100 billion in
2023, at an expected 12% CAGR*, with live gaming owning over 40% share
Market size in CNY billion and user scale in million
User scale Live gaming Livestreaming in other business
16A-19A 17.6% 84.9% 29.1%
20E-23E 5.5% 31.1% 13.4%
590
570
550
530
500
460
400
+12% 103
310
92
82
+39% 73 40
61 34
52 24 29
44 18
8 13
23 63
49 53 58
3 36 38 43
20
2016 17 18 19 20E 21E 22E 23E
Note: *Compound annual growth rate. The live-streaming market size refers to direct deal value created on the livestreaming shows, including monetary value
of virtual gifts, advertising activities and other incomes. Livestreaming gaming refers to game-themed live-streaming shows, covering cyber game
commentaries and live game broadcast. The market size data excludes the market size of lives-stream e-commerce.
Source: Qianzhan Research, iiMedia Research, Leading Industry Research, EqualOcean analysis
5Live e-commerce is by far the most effective but face more intense traffic competition.
monetization mechanism for livestreamers.
Taobao Live (the livestreaming service under Kuaishou anchors the KOL-centered online
Alibaba’s e-commerce platform) is an culture; meanwhile, Douyin is accelerating
independent platform serving online shopping. various livestreaming products.
Pinduoduo, a USD 58 billion upstart that is Livestreaming video-game players rely more
nipping at Alibaba’s heels, has added a on virtual gifts in the livestreaming shows.
livestreaming function on its e-commerce app. Douyu and Huya have dominated the market,
owning over 90% of it. Huya had more willing-
Short video platforms benefit from an to-pay users than Douyu till 2019 Q2, based on
overlapping user group with livestreaming apps, a highly-engaging and interactive community.
The business outlines of three major ‘livestreaming +’ e-businesses
E-commerce Short-video E-sports
E-business
institutions
‘ Livestreaming + ’
KOLs MCNs
Professional Amateurs Video-gamers
Content providers
Traffic generation
Advertising Virtual gifts
Revenue models
Live e-commerce
Monetization
Users
6Q1 2020 Livestreaming Industry Landscape
E-commerce Short-video E-sports Pan-entertainment
Applications
Enterprise services
Education
Sports
Content production
Hosts Agencies UGC / PUGC / PGC Copyrights
Celebrities Amateurs
Video-gamers KOLs
Telecommunications Payment Cloud services Hardware
Infrastructure
7Chapter 1
What’s behind
China’s livestreaming craze?
A dig into China’s Multi-Channel
Networks (MCNs) craze
MCNs are the pushing hand behind the momentum of
China’s short video platform players.
How’s this imported concept able to gain stronger growth
than its overseas counterparts? Will this trend benefit all
parties, or it will eventually turn out to be a giants’ game?
8The pushing hand behind China’s livestreaming
industry
Livestreaming e-commerce has been the most UGC refers to User Generated Content and PGC
buzzing topic in China’s consumer market in means Professionally Generated Content.
recent years. Giant players like Taobao,
In this section, we will look into the MCNs,
Pinduoduo, JD.com, RED, Douyin and Kuaishou
which bridge all these parties into an industry
are joining the trend, one after another.
chain.
Though a nascent market, live e-commerce in
China has been showing such enormous
potential that 2020 is considered likely to be the What is MCN?
‘normalization’ year for this practice.
The phrase ‘multi-channel network’ was first
However, the whole industry chain is more used by YouTube to describe an organization
complicated than a livestreaming studio. which works with video platforms and channel
Factories, brand merchants, KOLs, multi- owners, offering assistance for the latter in
channel networks (MCNs), e-commerce and areas such as cross-promotion, capitalization,
UGC PGC platforms have together created an funding and partner management.
ecosystem behind the shows.
China’s MCN industry evolved to a new growth stage, with over 6,500
participants in 2019
Development of China’s MCNs
# of MCNs
Emerging Stage Growing Stage Blooming Stage Evolving Stage
Many advertising We-media matured; E-commerce and Diversified MCNs
companies transferred e-commerce related content platforms and live e-commerce
to MCNs, few were MCNs started to incubate supported MCNs’ gained traction.
from We-media* influencer brands; expansion; short videos
6,500
Taobao launched live e- and livestreaming
commerce. surged.
5,000
1,700
420Despite an imported concept, MCNs in China growth power for the MCN. From the
have been growing at a remarkable speed. In downstream or consumer end, China’s online
2012, there were fewer than 100 MCNs in China livestreaming users reached 504 million by 2019,
but the number surged to 6,500 by the end of with an increase of 10.6%, by iiMedia.
2019, by Guosheng Securities.
In response to this surging user base, many
What makes the Chinese case unique is that, companies tried to integrate livestreaming into
besides monetization for KOLs, MCNs in China their businesses. Among them, short video and
also train livestreamers themselves and are e-commerce platforms are two of the most
involved in content development. During the effective tools. According to Everbright
process, they take responsibilities including Securities, the live e-commerce gross
technical support, user management, platform merchandise value (GMV) totals generated by
resource management and daily operations. Taobao, Kuaishou and Douyin were worth CNY
250 billion, CNY 300 billion and CNY 40 billion in
More than a professional high-quality content
2019 respectively.
provider, MCNs also play an indispensable role
in monetizing livestreaming traffic. Take live e- Moreover, the rapid growth of short video
commerce as an example, they connect brands, platforms has bred a large group of users as well
factories, platforms and KOLs. as KOLs.
Despite the vital role they play in the entire In China, around 90% of KOLs work from the
livestreaming value chain, the rising upstream supply end and generate countless content
and downstream divisions also fuel tremendous items for the brand merchants contracted under
MCNs, accelerating the momentum of the latter.
MCNs play an indispensable role in the live e-commerce industry chain
Industry chain of livestreaming industry*
DIY live e-commerce
Live e-commerce
promotion Fo
llo
MCNs KOLs wu
ts pd
uc Sign contract & KO
Lm
a te
rod provide training ark
s
p
S ell etin
g
Online Generate Generate Traffic
Brand stores content content distribution Consumers
merchants
a l
Ope de
n e Close deal
onl os
in e st Cl
ore
s
E-commerce Short video E-commerce
platforms platforms platforms
Redirect
*The industry chain of livestreaming can be associated with businesses including online game, social networking, education, etc. Here we are demonstrating the
case in live e-commerce.
Note: The orange arrows are scenarios happen in short video platforms; the grey arrow is the scenario happens in e-commerce platforms.
Source: Everbrirght Securities, EqualOcean analysis
10Livestreaming channels share an increasingly larger user base with short-
video platforms
User scale and forecast of China’s online livestreaming market, 2016-2020e (in millions)
Livestreaming users
Livestreaming Short-video
Short platforms
video platform users
The popularization of the 4G network
boosted the short video industry
722
107%
627
504 526
501
Taobao launched live 456
e-commerce function 398
310
242
153
2016 2017 2018 2019 2020e
Growing overlapping user base between two user groups
200-400 400-500
< 100 million million million
Note: IoT = Internet of Things. The data on 48 financing rounds ranging from angel/seed investment to late-stage funding were used; the dollar volumes raised in 11
of these events remain undisclosed as of January 22, 2020.
Source: iiMedia.cn, EqualOcean analysis
What is the MCN business model? MCNs, on the other hand, are more reliant on
the commissions generated from the sales
MCNs are evolving at an unprecedented speed.
during the livestreaming shows. The supply
They have been focusing more on internal
chain management capability is crucial in terms
operation efficiency and building core
of product selection, promotion and after-sale
competency, trying to diversify their services
management. Currently, as MCNs are still at an
and to gain more monetization channels.
early stage, it’s hard to say which business model
The MCN business model in China has has more potential for growth than another.
developed into three types: e-commerce
However, the monetization efficiency of live e-
focused, advertising & marketing oriented and
commerce MCNs is significantly higher than that
extensive content production.
of advertising focused players. Moreover, the
The advertising and content-anchored types of scale of GMV single users generated during live
businesses provide various capitalization e-commerce shows is far more significant than
channels, which include product promotions, that of other approaches. Therefore, we will
IP licensing and copyright management, as well focus on the MCNs in the live e-commerce
as paying for the content. E-commerce - focused industry and dig deeper.
11An MCN case study: Yowant Network
Why to keep tabs on Yowant? served Baidu, Tencent, NetEase and other
Internet players, matching different marketing
Two of the most celebrated KOLs, Viya and Li
needs to the right resources.
Jiaqi , who attracted 30 million viewers last
Double 11, have raked in CNY 2.7 billion (USD In the following two years, it entered into the
389 million) and CNY 1 billion (USD 144 million) mobile game market, serving as third-party
in sales respectively. operator and advertiser, leveraging its advantage
in distributing channels.
The MCNs who possess (have signed contracts
with) over 90% of the KOLs are the real force Two years after that, Yowant established a
that generates hype and sales to support the matrix WeChat official account, covering e-
rising medium. commerce on consumer products, beauty and
skincare education and others from 2017 to 2018.
It is one of the most representative MCNs in
The business model of ‘pay for content’ started to
China.
come out in revenue.
On Kuaishou’s platform, the MCN company
After 2019, the company started to concentrate
named Yowant stands out, having retained the
on social e-commerce and to train Internet
number one ranking since May 2019.
influencers though short video platforms and
At present, Yowant has built co-operations with other e-commerce platforms.
Douyin (the Chinese version of TikTok),
These rapidly evolving business strategies of
Kuaishou, Taobao Live and other well-known
Yowant coincided with the development of the
streaming platforms.
MCNs in China recent years, which is one of the
It has more than 50 influencers and has signed reasons for its current leading position among
more than 10 celebrities, including Wang Zulan 6,500 counterparts.
and Zhang Bozhi – two well-known Hong Kong
How are Yowant’s numbers?
movie stars. As of 2019, the company boasts 150
million fans, over 10 billion accumulated video In March 2018, the Shenzhen-based listed
views and more than 2.5 billion monthly company Saturday acquired 88.57% of the shares
exposures. of Yowant for CNY 1.8 billion (USD 284 million).
Saturday paid CNY 474 million in cash and the
Besides, the company began to monetize its
rest of the CNY 1.314 billion in shares.
short video content in September 2019 and had
achieved CNY 3 million in average daily sales by An announcement from Saturday also showed
December. that the two parties signed an agreement
promising that the recurring net profit of Yowant
How does Yowant grow?
attributable to shareholders of the parent
Founded in November 2010, Yowant positioned company in 2018, 2019 and 2020 should be no
itself as a digital marketing solution provider less than CNY 160 million, CNY 210 million, and
and has been improvising its business to keep CNY 260 million, respectively.
surfing the top of the market wave.
In 2018, the recurring net profit of Yowant
From 2013 to 2014, its main business was exceeded the promised amount of CNY 8.369
Internet-based advertising distribution. It million, with a completion rate of 105.23%.
12WeChat-related revenue caught up in the revenue share in 2017
Revenue structure of Yowant (in CNY million)
Advertising Game distribution and promotion WeChat accounts to operation WeChat distribution
895
16
656
585
153
112
773
396
300
270 418
116
173
126 106
4 55 30
2013 14 15 16 17 18.1-10
Note: *Foshan Saturday Shoes (002291:SZ) acquired Hangzhou Yowant Network in October 2018 and closed the deal in 2019. The public data shows Yowant’s
financials till October 2018.
Source: Yowant, EqualOcean analysis
Yowant is projected to achieve CNY 260 million in 2020, at a 23.8% Y-o-Y* rate
Recurrent net profit of Yowant (in CNY millions)
Net profit
profit (in mn CNY) Net profitrate
Increase increase
% rate (%)
300
184.7% 260
250
210
216
200
168
150
92.3%
100 68.6%
40.0%
59
50 35
25 25.0%
13 23.8%
0
2014 2015 2016 2017 2018 2019
2019E 2020E
Note: *Y-o-Y – year-on-year
Source: Yowant, EqualOcean analysis
13Any worries? Last but not least, as the live e-commerce model
is exploding, problems have surfaced, especially
The rapid development of short video platforms
in terms of the quality and after-sales service of
in China has fostered a large number of users
the goods brought through the live-streaming
who are accustomed to watching live broadcasts
show period. EqualOcean believes that in the
and short videos; meanwhile, it has incubated
future, MCNs with more resources and
thousands of influencers who can turn their
connections with suppliers and brand merchants
Internet traffic into profits. These individual
will be more advantageous.
influencers are more agile and flexible to
innovate new businesses, by taking the MCNs that dig into one or several product
advantage of their own aggregated traffic. verticals, such as apparel, jewelry or cosmetics,
will possess more bargaining power and will be
But risks coexist with opportunities. From the
more likely to profit.
development experiences in other countries,
the bargaining power of MCNs is low on both Despite all the risks, there will be at least some
sides. That makes MCNs a weak link in the leading companies that emerge from the crowd.
whole industry chain, especially compared with
In November 2019, the company set up a CNY 5
the Internet content juggernaut as a whole.
million fund called ‘Cradle’ (which is
Therefore, when the competition between the homophonic with the company’s Chinese name)
platforms ends, the reshuffle of the MCN to ensure that consumers can buy goods via its
industry will accelerate. live broadcasts. If the products are problematic,
the fund will be applied in compensation.
More importantly, the capability of producing
good content is the core competitiveness of an In addition, Yowant set up a special live
MCN. Winners will stand out by constantly broadcast customer service team to ensure a
providing quality content. Current MCNs are trouble-free after-sales service for consumers.
facing the conundrum of a lack of talent, as the The fund is the first such venture among players
top KOLs are a scarce resource for all players. in their sector.
The cost of attracting influencers or training
them will also be crucial for an MCN’s future.
14Chapter 2
Is livestreaming a ‘gold rush’ for
everyone?
An overview of popular
livestreaming profit models
Livestreaming has found its way into
e-commerce, online gaming and entertainment,
impacting B-players and consumers.
Taobao Live, Kuaishou, Douyin, Huya, etc.
These online businesses develop in diverse manners.
15Live e-commerce
KOLs are generating new layers of the e-commerce market
Live e-commerce is a new term coined to These influencers, or key opinion leaders (KOLs),
describe the combination of livestreaming and are raising waves in a new economy. In China’s
e-commerce, characterized by customized KOL economy, KOL e-commerce is one of the
shopping experience, decentralized traffic and most promising segments. According to
frequent real-time interactions. EqualOcean analysis, the e-commerce GMV
driven by KOLs attached to all these online
Compared to traditional e-commerce, live e-
platforms grew at a compound annual growth
commerce brings social property and rich
rate of 119.8%, from CNY 700 million in 2013 to
content, transforming a simple buyer-vendor
CNY 79 billion in 2019, and is projected to grow
virtual relation platform into an influencer-
at 35% from 2019 to 2022.
centered ecosystem.
The market size of KOL-based e-commerce is projected to grow at a 35% CAGR*,
to reach CNY 194 billion in 2022, over 35% of total Internet KOL economy
Market size in segments of Internet KOL economy, CNY billion
CAGR CAGR
13-19 19-22E 548
KOL-based E-commerce 119.8% 35% +23%
Other KOL business 149.1% 22.7%
451
361
270
+138% 181
93
68 194
40 144
107
2 7 79
33 53
1 2 7 17
2013 14 15 16 17 18 19 20E 21E 22E
71% 2019 29% 35% 2022E 65%
Note: *Compound annual growth rate. The Internet KOL economy covers various business modes, including e-commerce, advertising and marketing services,
virtual gifts from fans and knowledge sharing and etc.. KOLs here refer to those professional KOLs.
Source: Frost & Sullivan, Qianzhan Research, EqualOcean analysis
16Key drivers behind livestreaming e-commerce brings consumers monetary discounts and
product vendors more prospect buyers, on the
Extant short-video platforms have cultivated a
other hand. From the user perspective,
content-anchored virtual community with high
livestreaming e-commerce generates not only
volume traffic and a sophisticated
monetary values but also intangible ones
telecommunication industry. One major push
through high-quality content and entertainment
comes from the steadily growing trend of live-
satisfaction.
streaming audience, with a four-year 14% CAGR
adding up to a user amount of 524 million in Last but not least, livestreaming e-commerce is
2020 from 2016, according to iiMedia and an optimal solution for most MCNs to monetize
Everbright Securities. content resources. Besides online commerce,
they can profit from advertising and selling IPs
The other game-changing driver resides in the
(intellectual properties). Traditional MCNs may
disruption of the marketing and distribution
still heavyweight advertising based on the to-B
chain in e-commerce. The product suppliers are
networks, while most livestreaming MCNs have
most likely one livestreaming show away from
pivoted to e-commerce as the primary revenue
target consumers. A simplified selling channel
source.
Live e-commerce creates monetary values by simplifying distribution channels
The value creation of live e-commerce and the mechanism of cost-effectiveness in live e-commerce
Brand merchants
Cost-effective purchase
Wholesales
Live
e-commerce
value creation Franchise Franchise
Entertainment
Contents
KOL live- Direct-sale
E-commerce Franchise
streaming show shops
Consumers
Source: Everbright Securities Research, EqualOcean analysis
17An escalated people-goods-scenario relationship All players are not seriously lagging each other
in the traffic splits, an arena dominated by live
E-commerce transfers offline selling scenarios
streaming platforms and MCNs. The supply
to online, making buying happen everywhere at
chain service providers deliver the right goods
any time. It is a move from space to surface that
to the right KOLs, profiting from commissions.
makes the purchase easier while losing part of
the information. The livestreaming can On the other side, the offline showrooms where
preserve the merits of the online model while KOLs broadcast essentially constitute a
creating a chance for interactions. commercial real-estate business. As more KOLs
become professional MCN-backed, the offline
Another update is the emerging role of MCNs as
showroom supply and selection of goods are
traffic centers in the consumption circle. The
more significant for operating performance.
total number of registered MCNs exceeded
5,000 in 2018, but only fewer than 6% generated The year of 2019 saw a GMV of over CNY 300
over CNY 100 million each in their 2018 billion on livestreaming e-commerce. The e-
revenue, according to Topklout Data. They commerce generic type is facing frequent
export professional content and improve the challenges from aggressive traffic-rich Internet
shopping experience, gaining a private fan giants.
pool.
Fighting for traffic is only the start; a robust
Increasingly relying on KOLs, consumers are deployment on the supply chain will be needed
getting less active in product research. For all for many players, keeping them competitive till
livestreamed e-commerce, a more intense the next transformation.
tussle has been arising in the supply chain.
China’s live e-commerce market size is expected to target CNY 23.6 billion, on
a 520 million live-show app user scale in 2020
Market size in CNY billion and user scale in million
CAGR*
16-20E
User scale 9%
Live e-commerce 520
103%
504
460
400
23.6
+103%
13.2
8.1
2.8
2017 18 19 20E
Note: *Compound annual growth rate.
Source: Everbright Securities Research, EqualOcean analysis
18Livestreaming on short-video platforms
The rise of the short video industry is bringing regarded as a technical challenge or strategic
the knowledge economy to a new peak. It also turn-around for players in China’s short-video
provokes creators to provide more valuable and industry. The rationale to promote this
informative content. To occupy one’s mind in a technique is more to consider. Kuaishou, the
fragmented time, watching short videos is an live-show pioneer, experienced an astonishing
optimal format, consuming only a few minutes, traffic boost after 2016. So did other players -
while entertaining audiences sufficiently. Douyin and Xigua (also known as ‘Watermelon’)
Video followed the suit.
FastData and Questmobile, two data monitor
applications, show that short videos generally Undoubtedly, the short-video market has
cost 22.3 hours per monitored user in June 2019, educated a large potential user group on
taking a mean total of 1.8 hours from other livestreaming – it has created an ‘indifferent
entertainment activities such as online videos, user group.’ Chinese short-video platforms have
music, reading and mobile games. become the third-largest traffic gateway to the
Internet world, with a 71.5% penetration rate in
A soft landing on the livestream arena
September 2019 by Questmobile.
The incorporation of livestreaming is not
A fast-growing short video user pool is driving the short-video market size to
grow to CNY 211 billion in 2021, nearly threefold the livestreaming size
Market size in CNY billion and user scale in million
800
722
627
501
398
Users: 310 M 550
504 526
456
242
153
211
150.6
100.7
Market size 46.7
CNY 1.9 billion 5.5 73 82
44.1 51.6 61
22.9
2016 17 18 19 20E 21E
CAGR*
16-21E
28% 25% Short-video user 40%
Livestreaming users 12%
2018
Short video market size 57%
Pan-video**
47% Livestreaming market size 29%
Note: *Compound annual growth rate. **The pan-video refers to those online videos excluded from short videos and livestreaming. The livestreaming market size
covers livestreaming-related businesses from various e-platforms, including e-commerce, e-sports, short-video platforms and etc. The short-video market size
cover all short-video platforms, such as Kuaishou and Douyin.
Source: iiMedia Research, Questmobile, Founder Securities, EqualOcean analysis
19From virtual to real: industry chain orient traffic into game-themed business since
mobile game apps share a similar user base with
The platform economy connects demand and
short-video platforms. But the pressure from the
supply. In the case of the short-video platform,
livestream gaming platforms is not easy to
as a form of the knowledge economy, content
ignore. Virtual gifts in live-streaming shows are
creators on the upstream consist of MCN
getting more popular due to a KOL-centered
institutions, cyber celebrities and media. The
culture. These virtual gifts will be converted to
core role of these platforms is to regulate all
real money split between live-broadcast anchors
these contents and monetize the aggregated
and the platform.
traffic. As the graph seen below, there are
typical four transformations to monetize traffic. Indeed, for content platforms, obtaining and
operating is just the start. Only with a
In the current business scenarios, advertising
sophisticated traffic ecology can they seek more
and e-commerce are two heavyweights and the
business opportunities to unleash the
latter is growing fast. It is easy for platforms to
consumption potentials.
Advertising and e-commerce are the most effective ways to monetize traffic
on the short-video platform
Content production
(MCNs, Internet celebrities, media)
Short-video platform
(Traffic generation and distribution)
Livestreaming
Advertising E-commerce Gaming
shows
User number, Host popularity,
Content quality,
advertisement cost, emotional
goods price, KOL’s
usage time, cognition,
credibility
advertisers willingness to pay
Users
Source: Founder Securities Research, EqualOcean analysis
20A battle for people, for content As illustrated in the industry chain before, the
upstream content creation is the competition
On this heated short video playing field, over 30
focus behind all those dazzling videos and flashy
relevant streaming apps in eleven factions are
live-stream shows.
sparing no effort, with the widely known
factions of Tencent, ByteDance, Alibaba and Regardless of the detailed marketing tricks and
Baidu all in play. particular content distribution mechanisms,
original and quality content injects new blood
As more Internet giants continuously join in this
and attracts traffic to the platform. This aspect
scuffle, the focus of the competition transfers
can be measured by the MCN quantity and the
shifts from dynamic traffic to static core users,
KOL quality.
or retention rate and user stickiness.
MCN institutions in China’s Internet industry
Douyin and Kuaishou took the lead in DAU
totaled 6,500 in 2019, over 40 times the amount
(Daily Active Users) in January 2020, far
in 2015. Now they are the most crucial content
surpassing their peers in the BAT (Baidu,
producers in the short-video business.
Alibaba and Tencent) factions.
The years of 2018 and 2019 saw fast MCNs and
Obviously, Kuaishou is the best at user
KOLs sprawling to conquer major streaming
activation and retention, with an 84.4% seven-
sites. This year, 2020, is expected to see the
day retention rate, closely followed by 81.7% for
fittest survive in the reshuffle time.
Douyin and other ByteDance-school apps.
ByteDance apps and Kuaishou have more active and loyal users than rivals
backed by Tencent and Baidu
Monthly active users (MAU) in thousand and one-week retention rate (%), by selected apps, by 2019
One-week retention rate MAU
82% 84%
71% 72%
52% 51%
34%
551
493
271
172
119
66
14
Douyin Xigua Huoshan Kuaishou Wesee Haokan Quanmin
Note: One-week retention rate is the percentage of people who continue using the app over a week. Douyin, Xigua Video (also known as Watermelon Video),
Huoshan are Apps in the ByteDance product portfolio. Haokan and Quanmin, two short-video Apps, are launched by Baidu. Wesee is backed up by Tencent.
Source: Founder Securities, EqualOcean analysis
21Douyin has the greatest potential for content production with access to over
60 thousand KOLs and 1 thousand MCNs, closely followed by Kuaishou
The number of KOLs (in units) on top short-video platform, 2019 April China’s MCNs split, by short-video platform
Douyin 60,484 Douyin 1,000 +
Kuaishou 52,362 Kuaishou 600 +
Miaopai 20,024 Wesee 280 +
Huhoshan 10,012 Miaopai 240 +
Note: KOL = Key opinion leader, MCN= Multi-channel network. China’s short-vide MCNs are projected to outnumber 5000 in 2020.
Source: iiMedia Research, EqualOcean analysis
In the pyramid KOL structure of traffic CaasData pointed out that a fan number of 300
distribution, the few flagship KOLs run a traffic thousand is the survival threshold for a content
pool of over 100 million fans. producer, and 3 million the hardest step to
advancement. Throughout 2019, 18% of short
The middle-class KOLs (with fans of between
video talents lost fans.
300 thousand and 3 million) are the most
aggressive participants, growing at the fastest In the business world, cash is king. Similarly,
Total 6500
pace. (2019) when it comes to the virtual platform economy,
traffic is (at least) the governor. As public
Over half of KOLs are unfortunately at the
audiences get more informed and pickier, with
bottom of the ‘food chain’ – i.e. in danger of
ever more alternatives on offer, it is an
losing traffic at any moment and being kicked
undeniable fact that the golden rule for KOLs is
out with a low fan number.
to generate high-quality content continuously.
Super KOLs with the largest fans pool (over 10 million), accounted only 0.38%
of total KOLs, grew 52.08% in number during the first half of 2019
The number percentage of differently-ranked KOLs and their seven-month growth rates in July 2019
Super KOLs (>10M) 0.38% +52.08%
Top KOLs (3-10M) 2.51% +58.2%
Above-average KOLs (1-3M) 10.88% +62.61%
Below-average KOLs (0.3-1M) 31.42% +73.22%
Tail KOLs (Livestreaming gaming
The video game livestreaming market overview
Video game livestreaming in China has been The following three years (2015-2018) witnessed
through four stages. the burst of video game livestreaming. With the
help of capital firms, over 120 streaming
Starting from 2013, this new form of
platforms were competing at the same time. The
livestreaming made its appearance via the hot
excess platforms drove up the video streamers’
multiplayer online battle arena (MOBA) games
price and the market entered a feverish stage.
such as DOTA 2 and League of Legends. At the
same time, relatively mature online chatting Since 2018, this industry has gradually matured.
apps like YY and video platforms such as The competition and departure of platforms also
ACFUN in China assisted its emergence. brought vitality to the market. Tencent has
invested in Douyu and Huya, and the rapid
From 2013 to 2014, the infrastructure policy in
growth of the two has effectively driven the
China enabled the livestreaming industry with
growth of the overall market scale. The industry
high brand quality, accelerating this video game
is more standardized and regulated, heading in
sector’s revenue to grow with a three-digit
the direction of healthy competition.
percentage speed.
Market size
The two most significant players in China –
Huya and Douyu – were separated from YY and According to Analysys, the market scale of
ACFUN respectively and became independent China’s livestreaming will reach CNY 73 billion
platforms. Meanwhile, the US e-sports and in 2020, while video game livestreaming will
video livestreaming player Twitch was acquired occupy a CNY 24 billion market share,
by Amazon in 2014 for USD 940 million, accounting for 33% of the total.
encouraging China’s capital to invest deeply in
the game-based livestreaming sector.
Video game livestreaming’s market size is projected to represent over one
third of the total livestreaming market
Percentage of live-streaming gaming of total livestreaming market size (in CNY billion)
Gaming Others
23 44 51 61 73 82 92 103
13% 18%
25% 30% 33% 35% 37% 39%
87% 82%
75% 70% 67% 65% 63% 61%
2016 17 18 19 20E 21E 22E 23E
Source: Qianzhan Research, iiMedia Research, Leading Industry Research, Analysys, EqualOcean analysis
23Who are the video game livestreaming users? Though the total market revenue growth rate in
2018 declined from the previous two years,
In 2019, the number of livestreaming users
video game livestreaming remains on a high-
reached 506 million. 320 million were video
speed track. Despite Analysys predictions (over
game livestreaming users, according to
11% increase rate), Shengang Securities expects
Analysys. Examining their distribution in China,
the market to maintain a five-year compound
we find that first and newly first-tier cities in
growth rate of around 20-25%, starting from
China represented over 50% of total users. Of
2019.
the 10 provinces that have the most users,
Guangdong province ranked first while Beijing However, the number of video game
and Shanghai were not in the Top 10 list. livestreaming users has been growing slower
year by year.
The driving force for the growth of live
broadcast users is the flow of continuously As the figures approach the ceiling of the total
updated online games such as MOBA, livestreaming users, companies should strive to
multiplying E-sports events and the up-trending convert more paying users and to increase the
short video platforms that are nipping Huya and average revenue per user (ARPU) as soon as
Douyu’s heels. possible.
User distribution of video game livestreaming in China, 2018
First and the newly first-tier cities’ users take over Top 10 provinces with the largest game livestreaming
50% of the total game livestreaming users users
First-tier cities
Tier 1* cities New
New first-tier
tier 1 cities Guangdong 13.51%
Second-tier
Tier 2 cities Third-tie
Tier 3 r cities
Zhejiang 6.40%
Others
Tier 4 and below
Sichuan 6.13%
11.54% 10.73%
Shandong 5.59%
Jiangsu 5.25%
18.35% Hunan 4.99%
Henan 4.59%
41.88% Hubei 4.45%
17.50% Hebei 4.15%
Liaoning 3.93%
China’s city-tier classification evaluates Chinese cities in GDP, political administration and population. Tier-1 cities are Beijing, Shanghai, Guangzhou and Shenzhen,
directly-controlled municipalities and provincial capital cities, each with an over USD 300 billion GDP and population of over 15 million.
Source: Analysys data
24The increase rate is slowing down as the user number reaches the ceiling
Number of video game livestreaming users in China, in million, 2014-2020e
User scale (in mn)
Users User increase
Increase raterate (%)
340
310
200.0%
260
220
133.3%
140
60 57.1%
20
18.2% 19.2%
9.7%
2014 2015 2016 2017 2018 2019 2020e
Source: iResearch, Shengang Securities, EqualOcean analysis
What’s the role of video game livestreaming in the whole industry chain?
For video game livestreaming platforms, their One thing that needs to be mentioned is the
role in the industry chain is to gather content evolving relationship between China’s video
and distribute it to target users. game livestreaming platforms and video game
developers. Frequent IP infringement is still an
The main upstream suppliers – or content
important factor that restricts the healthy
generators – include video game developers &
development of the livestreaming industry.
operators, e-sports events and livestreaming
However, few game developers and operators
hosts.
have proactively sued over the violation of the
They provide video game-related content, platform or the live streamers.
making it into videos and livestreaming shows
Most of the video game developers in China are
for the platforms. Platforms then pay them in
not hugely concerned over litigation – they
the form of intellectual property (IP) fees,
value the traffic brought by the livestreaming
livestreaming authorization fees and revenue
platform users more. Even if they are watching
sharing fees, etc.
an uncopyrighted video, they can still benefit
The downstream players, which are quite from the platform’s popularity.
simple in this case, are the users of the platform
Tencent announced cooperation with Chusho, a
– since the platforms are doing to C business.
Shanghai-based video game livestreaming
Users will watch live broadcast to learn game
platform, in November 2019, making Chushou
techniques or follow some star players they like;
the first of its kind to launch a content-based
in return, they will buy virtual gifts provided by
partnership with Tencent through a licensing
the platform to reward their streamers.
agreement. From ignoring copyright to seeking
Viewers’ virtual-gifts donation or user cooperation, one can see the gradual
contribution is one of the most critical revenues transformation of the industry in a healthy
of both the streamers and the platform. direction.
25Industry chain of video game livestreaming
Video game
developers &
Membership
operators
Authorization fee
Copyright Video game
Platform
livestreaming
users
Livestreaming authorization platforms
& IP permission
E-sports events
s
ee
gf s Advertising Content
in
ar ow revenues
Sh g sh
in
m
ea
s tr
ve
Li
Sign contract
Clubs & Advertisers &
Livestreaming professional e-commerce
hosts Push content video gamers platforms
Source: EqualOcean analysis
What’s the core competency? The profitability or monetization ability is more
related to the company’s development strategy
As content gatherers and distributors, the key
and operation level.
competence of video game livestreaming
platforms lies in two aspects: the capability of After feverish competition among hundreds of
attracting traffic and the ability to transfer video game livestreaming platforms, Douyu
traffic into profit. and Huya stand out due to the two above-
mentioned reasons.
The traffic increase essentially lies in the quality
of the content one’s platform provides. Whether In the next section, we will unveil the enigma
it is diversified in its categories, rich in behind these two players that form the duopoly
performing format and able to differentiate in the sector.
itself from other platforms are all significant.
26Chapter 3
A flash in the pan or
well-grounded trailblazers?
A comparative insight into three
pairs of live streamers
This chapter looks into six livestreaming e-businesses,
contrasting their histories, business models and performance.
E-commerce Taobao and Pinduoduo
Short-video platform Douyin and Kuaishou
Video gaming Douyu and Huya
27Live e-commerce: Taobao vs. Pinduoduo
In China’s e-commerce industry, Taobao has more popular e-commerce outfits, such as
been in an impregnable position since its Mogujie, Suning and JD, joined this traffic-
inception in 2003. Boasting many ‘first-ever’ booming initiative.
titles, it is never shy of testing innovative
A direct benefit brought by this new alive
business ideas to provide the next boost.
element is a clear rise of user stickiness and
Meanwhile a younger game-disrupter,
activity, resulting in a higher conversion of
Pinduoduo, which showed up in the arena in
liquidity.
2015, cut into the e-commerce qualifying
competition by redefining the role of social After a first attempt at livestreaming, Taobao
factor in the value chain. officially launched a ‘Taobao Livestreaming
Platform’ in May 2016, featuring celebrities and
As the two e-commerce giants are eyeing the
stars for more online visits. The promotional
next mainstream breakthrough, some
festival ‘Double 12’, a Chinses year-end online
livestreaming-based fusions are taking shape.
shopping festival, in 2018 took the craze to a new
Focusing on ‘livestreaming + ecommerce,’ this
level, in which over 70,000 live--streaming shows
analysis starts from the history and market
that year generated over a doubled GMV
position and moves down to the contrast
compared to 2017’s amount.
between their livestreaming approaches.
The 2019 Spring Festival witnessed the arrival of
The start in the early 2016
the app ‘Taobao Live’ on major app stores, which
The very first combination of livestreaming and became the primary channel on ‘Double 11’ (an
e-commerce in China was introduced by online shopping festival initiated by Taobao,
Taobao in March 2016 when the giant was followed by other e-commerce giants) with a
undertaking a content-oriented marketing new record of over CNY 20 billion GMV on a
strategy. In the following two to three years, single day.
The livestreaming industry matures as e-commerce and social media players
keep joining in
The livestreaming evolutionary driven by continued participation of e-commerce and social media players
Taobao Live Suning JD.com Pinduoduo
Started trial Launched built-in Started to promote Made an attempts of
operation of live livestreaming goods in live real-time online
E-commerce streaming in March function on the app streaming in August selling in November
in July
2016 2017 2018 2019
Mogujie Kuaishou Douyin Tencent
Social media
Launched the Integrated online Opened online Opened a WeChat-
livestreaming mode selling with its shopping cart based livestreaming
in March livestreaming function in service ‘Kandian’ in
community December November
Source: 2020 White Paper of Taobao Vendors, Everbright Securities
28Operation data Taobao now houses the most popular anchors in
the livestreaming field, including individuals and
Taobao is still in a dominating position in
the institution-backed names. As of February
China’s e-commerce with an unbeatable GMV of
2020, on the platform are over 1,000 MCN
CNY 5.73 trillion and annual active users 711
institutions registered, covering 4,800 KOLs. Top
million as of 2019. The group-buying-centered
20% MCN institutions (around 140) contributed
Pinduoduo also performed well last year with
almost 75% of Taobao Live’s traffic and 80% of
over CNY 1 trillion annual GMV and second
GMV, showing a clear Pareto Principle-like
highest annual active user amount of 585.2
tendency. The leading anchor Viya backed by
million, with over 90% GMV annual growth
the MCN organization Qianxun drove a CNY 2.8
rate.
billion GMV in 2018, as the white paper states.
This young e-commerce is challenging the other
According to Taobao’s Live-streaming New
two titans: Taobao and JD.com.
Economy 2020 Report, the live channel served
When it comes to livestream-driven online over 400 million online users, including 40%
shopping, the two players show different poses. more users who spent over one hour in watching
The live-streaming model of Taobao is now a live streaming on average.
very mature traffic-aggregating platform vis-a-
In February 2020, the new registered online
vis other peers’ livestreaming efforts, orienting
shops based on live-stream shows outnumbered
a constant stream to the e-commerce site and
the amount in January by 719%, a soaring
resulting a contribution of CNY 100 billion in
increase impacted by the COVID-19 pandemic.
2018, around 1.81% of Taobao’s total GMV.
Taobao Live is projected to grow GMV at a 73% CAGR* to CNY 300 billion in
2020, nearly tenfold the scale of Duoduo Live
GMV (Gross Merchandise Value) in CNY billion
CAGR* Taobao Pinduoduo Taobao Live Duouo Live
18-20E 13%. 82% 73% N.A.
7,000
Taobao’s GMV without Taobao Live
Pinduoduo’s non-livestreaming GMV 4.3%
6,400
3.1%
6,700 1,561
~8.0%
1,007
5,523 6,200 ~6.0%
472
1.8% 0.0%
5,423 946 1,436
472
2018 19 20E
Note: *Compound annual growth rate. Taobao Live is a livestreaming APP embedded with e-commerce service, a stand-alone product in Alibaba’s e-commerce
ecosystem. Duoduo Live is a built-in function channel on Pinduoduo APP, providing live-streamed videos to promote goods. Duoduo Live is assumed 2%
penetration rate of Pinduoduo’s total deal value in 2020.
Source: 2020 White Paper of Taobao Vendors, Pinduoduo’s financial report, LatePost, EqualOcean analysis
29Over 80% streamers on Taobao Live engaged in e-commerce in 2019
December
Live streamers split on Taobao Live, December 2019
43.3%
Vendor hosts*
41.7%
15.0% Talent & vendor hosts***
Talent hosts**
Note: *Vendor hosts refer to those hosts who own their individual online shops. **Talent hosts refer to those hosts attract fans by showing their talents. ***Talent &
vendor hosts are talent hosts who also engage in online selling businesses and take advantage of accumulated fans.
Source: Taobao Content E-commerce business unit, Tao List, EqualOcean analysis
The almost doubled penetration rate (the ratio the goods and the scenarios. Taobao Live and
of livestreaming-driven GMV to the platform Pinduoduo choose a different traffic-cored
GMV) drove a gross merchandise value of over model according to their own strengths.Besides a
CNY 200 billion in 2019. built-in livestreaming function on its e-
commerce app, Alibaba has a stand-alone live-
The later entrant Pinduoduo takes a different
stream platform.
strategy by utilizing its unique advantages on
the supply end. Unlike Taobao which puts a Taobao Live is an independent app in
heavy emphasis on KOLs, celebrities and MCN- cooperation with its e-commerce peer Taobao.
backed profiles, Pinduoduo invites symbolic This product portfolio structure indicates that
models or even government officials relevant to Taobao Live is a traffic-centered platform that
the recommended products or target industry. generates traffic, distributes accumulated traffic
and converts traffic to merchandise value. In
In April 2020, the NBA star Stephon Marbury
Taobao Live’s value model, KOLs are the main
gave his first live-stream show on Duoduo Live
engine that keeps the chain running to generate
channel during the ‘10 Billion RMB Subsidies’
revenues.
promotion period. The ‘Civic Governor Live-
show’ for the fresh product livestreaming The KOLs are not necessarily attached to certain
brought up over 180 million completed deals, goods or an online shop, but it is flexible to
resulting in a figure of over 16.7 million online choose what products to recommend. One KOL
consumers following the local small-medium has direct exposure to a group of online
enterprises. shoppers who share similar considerations
before making the buying decision. KOLs on
Different business logics behind one similar
Taobao Live have evolved into a pyramid
model
structure, with a peak of influential 22 anchors,
As illustrated in Chapter 2, the ‘livestreaming + a middle layer of between one to two thousand
e-commerce’ business exhibits a unique pattern and bottom part of over 15 thousand as of 2019,
that pivots to three core elements: the people, as reported by CaasData.
30Pinduoduo defines the role of livestreaming in is very likely to end up with online shoppers
its customer journey as a traffic aggregator and investing huge amount in MCN agency fees.
a decision booster. Duoduo Live, the live- Then the so-called C2M-based e-commerce will
streaming channel of Pinduoduo, is only an be less attractive to those source suppliers.
add-on built on the original e-commerce app,
Thus, online users experience quite different
instead of a centralized entry for a traffic pool.
customer journeys on these two platforms. On
It is designed to be a traffic distributor with
Taobao Live, viewers - mostly fans of KOLs - first
decentralized access to the online shops
see the professional MCN anchors introduce a
providing live-streaming shows.
variety of goods. Crammed with full-screen
The rationale behind this design is that the reviews and real-time interactions, they may
built-in function can better serve Pinduoduo’s press the button and buy some things they
C2M (customer-to-manufacturers) as its previously didn’t want. To achieve a higher
essential business logic. The success of the conversion, Taobao Live needs to not only have
online traffic harvester can be credited for two more access to the initial audience, but also
strategies different from all others: firstly, the maintain increasing shopping stimulus during
social network for demand creation. Secondly, the livestreaming rooms. To obtain wider initial
the simplified supply on the value chain. A form exposure, this is where Douyin and Kuaishou
of real-time interaction improves join in, which this report will assess in the next
communications between consumers and section.
sellers.
On Pinduoduo, some group-buying discounts or
The livestreaming is more an option for social referrals may have already triggered
Pinduoduo’s shops because businesses of potential shoppers to search relevant goods
different scales see the trade-off between traffic before watching promotional livestreaming. The
boosting and competition cost differently. If anchors, or amateur KOLs, are mostly product-
opening a virtual area for traffic competition, it relevant or even sellers themselves.
Taobao Live and Duoduo Live show a different logic chain in connecting their
business elements
Professional KOLs Products
Products Amateur KOLs
Fans Online users
Purchase Purchase
Note: Professional KOLs refer to popular anchors backed by MCN institutions and famous celebrities invited to promote products on Taobao Live. Most
professional KOLs don’t have online vendors. Pinduoduo’s amateur KOLs are generally represent the benefits of online vendors, with some vendors themselves,
local farmers and country officials.
Source: Qianzhan Research, HKExnews, CIC, EqualOcean analysis
31For example, county chiefs or farmers promote buyers and sellers. Compared to Taobao Live,
local specialties and farming goods, or young Pinduoduo’s livestreaming by default cannot
mothers introduce baby cradles and milk bring extra traffic, but can accelerate the
powder. Pinduoduo uses livestreaming simply decision-making process for extant users,
as a decision-making facilitator by bridging resulting in a higher conversion rate at less cost.
A comparison of Taobao Live and Pinduoduo Live in a SWOT matrix
Capability to Online stores face More traffic (higher Fierce MCN
establish an increased cost on volume and competition (losing
independent app and MCNs, forced to stability), easier small-medium
operation leverage professional access to third-party MCNs, who later
MCNs MCNs move to PDD)
Strengths Weaknesses Opportunities Threats
C2M strategy (less Lagging behind the Livestreaming won’t Facing escalated
cost for both buyers livestreaming trend, conflict with its own challenges for online
and sellers), 10 insufficient capability unique traffic- traffic (uprising
Billion RMB to establish own traffic oriented model livestreaming and
Subsidies (consumer- pool (social network), MCNs can bring
friendly profile) won’t directly face virality-like craze)
suppression from
aggressive peers
Source: EqualOcean analysis
What is next?
released its 2020 annual strategy, supporting
In the ‘livestreaming + e-commerce’ model, it is
small-medium live rooms with resources worth
worth considering two topics: online traffic and
of CNY 50 billion, to establish over 100 MCNs
consumption conversion. At the advantage of
with over CNY 100 million GMV each.
an influential social base, Pinduoduo is trying to
solve intra-platform live communication to Based on the robust advantage of suppliers,
escalate purchasing rates. Taobao is seeking all- Pinduoduo may deepen its C2M strategy, by
in-one solutions, starting from expanding cooperating with governments, local
traffic. The increasingly fierce competition may manufacturers and farmers. Though it has a
bring pains for online malls who are forced to successful group-buying mechanism, the live-
consider investing in livestreaming, and middle- streaming momentum seemingly outperforms
bottom KOLs who are at risk of losing traffic. the group-buying mode.
Taobao is expected to further weigh in on the Faced with ongoing challenges in traffic
role of livestreaming. To improve conversion competition, Pinduoduo should either follow its
rates, Taobao Live may further diversify the peers to survive in a KOL-anchored e-commerce
product categories in live streaming to reach arena, or experiment with another traffic-
out to target customers more efficiently. It also imported logic before it is too late.
32You can also read
