2017 was a great year for short video apps in China. Domestic competition was fierce, it became a Red Ocean for investors, and the Chinese market became too saturated, companies gradually turned to overseas emerging markets trying to replicate miracles under the Blue Ocean strategy.
The seaweed dance, a recent Internet dance craze, is not only all the rage in China, but has gained popularity among young people in other countries as well.
As written in previous analysis, Southeast Asian countries have a large population, a similar culture to China, and a huge potential user base; all of this makes them the natural test market for Chinese companies going aboard. Moreover, thanks to the experiences gained by launching Chinese tool apps abroad, video apps have much to build on top of when it comes to expanding to overseas market.
In the latest list of the top 12 video apps in Indonesia, half are Chinese.
Tik Tok and Kwai Go in China and abroad
The competition between Tik Tok and Kwai Go, two of the most popular short video platforms in China, is now extending abroad. As Kwai Go failed to attract users in first and second tier cities in China, it is hoping to attract more users abroad. Kwai Go entered other markets at the end of 2016, while Tik Tok, an app under the Chinese unicorn Bitedance Inc. (better known as Toutiao) started their overseas operations last May. The two differs in their globalization strategies in that Kwai Go prefers to develop the apps themselves while Tik Tok relies on the combination of developing their own apps and acquiring others through their parent Toutiao.
In the past year, Toutiao has purchased three short video companies to pave way for their globalization. Last February, Toutiao bought Flipgram, a U.S. short video platform. In November, Toutiao acquired Musical.ly, a Chinese social video app, and in February this year, Toutiao spent another $300 million to purchase Faceu, a Chinese AR selfie app. These acquisitions strengthened product advantages of Toutiao and increased their distribution channels as well.
Data show that although Kwai Go ventured abroad earlier than Tik Tok, it is the latter that leads in Southeast Asia, topping the charts in Indonesia, Thailand, Malaysia, Singapore and Cambodia. Kwai Go only outperforms Tik Tok in Vietnam and the Philippines.
Google Trends also show that Tik Tok’s rapid rise in popularity started at the end of last year, and most of their key words are associated to the local key opinion leaders (KOLs). On the Indonesian version of YouTube, there are only a few Kwai Go videos, and the most popular ones have only around ten thousand views. By contrast, Tik Tok not only has its own official Indonesian YouTube channel, but also has many collaboration videos with local KOLs that have garnered over a million views. On top of that, there are a lot of Tik Tok user generated content on Instgram. It shows that Tik Tok has done a great job in the marketing and localization of their product, and knows how things must be done differently in different regions.
In addition to Tik Tok, the global version of the Chinese short video app Douyin, Toutiao has the global edition of another one of their popular Chinese app Huoshan, or literally “fire mountain”, going into the Southeast Asian market this year. They chose the name “Vigo Video”, and it has already entered Indonesia and Thailand earlier this year. Now Vigo Video is among the top five apps in video category in Indonesia. The move by Toutiao to have two apps concurring the international market at the same time demonstrate their ambition for an overseas expansion.
Chinese companies work hard overseas
In the global video app industry, there are two Chinese veterans worth mentioning that are used for video editing: VivaVideo (小影) and VideoShow (乐秀). Although the two apps are not well-known in China, their performance overseas cannot be underestimated.
VivaVideo and VideoShow are some of the earlier apps to venture abroad. They have been exploring the global market for over three years now, and their users are mostly based in Latin America and Southeast Asia. VivaVideo currently ranks in the top five spots for popular video apps in many regions, while VideoShow ranks around the 10th place. European and the US companies prefer perfecting one function of the APP, but young users in the emerging market like all-in-one products. Therefore, Viva Video and Video Show attract a large number of users as they integrate many functions such as video editing, beauty cameras, and data-saving sharing for videos.
At the beginning of this year, VivaVideo announced in China their transition from a tool-focused all to an community-focused one. Judged from existing content in the VivaVideo community, it has better quality than both Tik Tok and Kwai Go, though less in number and in interactions. Instead the strategy of seizing the masses in the countryside first and then attract urban users, VivaVideo first grasped the small group of high quality users, cultivate user habit, establish their ecosystem and then gradually expand to other user groups.
The challenges and trends of going global
• Long way to go in generating a profit
Presently, the business model of video products overseas is the same as inside China. It is about attracting users through content and marketing, enhancing user loyalty through communities, drawing a large amount of traffic and then generating a profit. The main ways for video apps to generate revenue are following: advertising, e-commerce and taking a portion of the money users pay to live streamers. However, how to accurately match the video content creators with advertisers is still an unresolved problem in China. This problem is made more difficult in the overseas market where the market space limited, with fierce competition coming from Facebook, YouTube and other big companies. There is still a long way in generating any profit for the apps.
• Improve local operations
Generally, companies in the Internet space expand in overseas market in the following steps: first, test the market remotely through the Internet. If a product attracts a certain number of users, the company then will establish local offices in the region. For products based on content, a stronger localized operation is necessary. It might be easier to tackle only the Indonesian market, but things get messy when you’re trying to promote products in multiple regions, where there exist different languages, KOLs, content and advertising ecosystems. In order to achieve success, the content platform must pay attention to operations. It must integrate with the local offline ecosystems, and fully understand the political, cultural and economic conditions of the target area.
• complementarity and integration among different functions
User retention will become the core issue for these short videos apps after they become popular.
The complementarity and integration between short videos and live broadcasting may help the answer to the user retention and the profit problems. Short videos and live broadcast both target young users. The content of short video is more consumable, while live broadcasts have stronger user loyalty and profitability. Short video apps could connect to live broadcasts, and convert the traffic from short videos to live broadcast. Also, the app could achieve in-depth interactions with the users via live broadcast, and thus take a portion of the money users give to the live broadcasting hosts on the platform. Adding on another social function, the apps could build an entire ecosystem within the platform.