On May 24th, Kuaishou Technology released his first-quarter 2021 results.

Overall, Kuaishou Technology's total income in the first quarter was 17.019 billion yuan, an increase of 36.6 percent over the same period last year, with an adjusted net loss of 4.9 billion yuan. Among them, there are two pieces of information worth noting.

First, the revenue share of the three carriages of live broadcast, e-commerce and advertising (online marketing services) has changed significantly.

Specifically, the revenue from online marketing services reached 8.6 billion yuan, an increase of 161.5% over the same period last year, and the contribution to total revenue exceeded 50% for the first time. Live rewards, once the main revenue pillar, retreated to second place, contributing 7.25 billion yuan in revenue, accounting for 42.6 percent of revenue, down from 72.3 percent in the same period last year. Revenue from other services, including e-commerce, reached 1.2 billion yuan, an increase of 589.1% over the same period last year, accounting for 7.1% of revenue. The GMV of live e-commerce reached 118.6 billion this quarter, an increase of 219.8% over the same period last year.

Judging from the data, Kuaishou Technology's advertising business has grown significantly, and the revenue of live broadcast and other services (including e-commerce) has declined to a certain extent compared with the previous month. However, with the change in the contribution proportion of the three carriages, Kuaishou Technology's overall gross profit margin increased to 41.1% from 34.2% in the same period last year, an improvement.

Second, in terms of users, the average number of daily active users of Kuaishou Technology's China app and Mini Program reached 379 million, an increase of 26.4% year-on-year and 20.0% month-on-month. The number of daily active users averaged 99.3 minutes per day, an increase of 16.5% year-on-year and 10.5% month-on-month.

In other words, in the first quarter of 2021, Kuaishou Technology's revenue structure improved and user stickiness increased. What made Kuaishou Technology change?

Some industry insiders believe that the 8.0 revision of Kuaishou Technology in September 2020 is compatible with two browsing modes: double-column point-and-click and single-column upward drop, which requires the platform to balance public domain traffic and private domain traffic, which may have an impact on revenue structure.

How Kuaishou Technology handles public and private domain traffic has always been the focus of attention from the outside world. In this earnings call, Kuaishou Technology CEO Suhua said, "the behavior of users determines the proportion of public domain and private domain respectively. Further commercialization is also carried out under this choice. At present, the effect of e-commerce will be better in the private domain, and the effect of advertising in the public domain will be better. "

Not entangled between these two plates, this quarter, Kuaishou Technology carried out a series of adjustments and reconstruction in the content ecology. On the one hand, satisfy and retain users with more professional and refined content, on the other hand, expand a variety of cash channels to enable creators to make money on the fast hand.

In this process, from obtaining increments to operating stock, Kuaishou Technology is grasping the old iron in his hands to further improve the business ecology and improve the cash efficiency.

The change is still happening, and all the effects are just beginning.

How to retain users with content?

In this financial report, the data about users sends two messages: it is not easy for the number of users to grow, but users are more willing to stay.

According to the data, the average number of daily active users of Kuaishou Technology's app is 295 million, up 16.6% from the same period last year, 8.9% from the previous month, and 520 million monthly active users, up 5% from the same period last year and 9.2% from the previous year. Kuaishou Technology Kwai, SnackVideo and other overseas products also made some achievements in the first quarter, with the average number of monthly active users in overseas markets exceeding 100 million and further growing to more than 150 million in April 2021.

In terms of usage time, the average daily use time of Kuaishou daily active users increased to 99.3 minutes from 85.2 minutes in the same period last year, an increase of 10.5% month-on-month.

At the same time, Kuaishou Technology's cost of getting customers has increased significantly, and Kuaishou Technology's sales and marketing expenses reached a record high of 11.66 billion this quarter. In other words, the cost of obtaining visitors for a single daily active user in the first quarter was 485.6 yuan, nearly tripling from 172.2 yuan in the same period last year.

To some extent, this is related to the changes in the environment of the Internet industry, the volume of traffic, and the cost of getting customers from large Internet companies is generally on the rise.

On the other hand, the average daily use time has increased significantly, which represents the increment of platform users. This also reflects that Kuaishou Technology's past investment is to consider how to retain this group of users and explore user value through fine operation.

How does Kuaishou Technology retain users?

From the second half of 2020 to the first half of 2021, the short drama and won the CBA copyright, in addition to the previous UGC content, Kuaishou Technology in the semi-professional, professional, IP content, the layout efforts significantly increased.

First of all, in terms of short plays, in December 2020, Kuaishou Technology launched the Xing Mang Project to provide cash incentives and subsidies for high-quality short plays to attract semi-professional content creators to produce skits with a wider range of themes. and have established cooperation with rice reading, Chinese online and other online platforms to obtain copyright to provide the source of adaptation for content creators.

This "new species", which has been reversed many times in one minute, has a low viewing threshold, a large user base and direct results. According to the Ecological report of Kuaishou Technology skits in 2020, more than 2500 episodes have been broadcast on hand. According to the financial report, more than 200m users watch skits on Kuaishou Technology every day in March 2021. So far, Kuaishou Technology has a total of 60, 000 content creators, of whom 8000 have more than 100000 fans. When it comes to short plays, we can no longer get around Kuaishou Technology.

Secondly, sports is also the content section of Kuaishou Technology. In March 2021, Kuaishou Technology became the official live broadcast platform and short video platform for the CBA League (Chinese professional basketball match). The copyright cooperation covers not only the wonderful live events of the CBA season, but also the review of CBA classic events, and obtained the copyright of the second creation. This means that Kuaishou Technology users can not only watch the live broadcast of CBA events on Kuaishou Technology, but also comment and comment on their own live broadcast. The financial report shows that at the end of April 2021, compared with before the launch of CBA Live, the number of viewers of Kuaishou Technology sports increased by more than 200%.

Not only that, Kuaishou Technology officially announced on May 21 that he had won video-on-demand and short video rights for the 2020 Tokyo Olympic Games and the Beijing 2022 Winter Olympic Games, and won two more national rights to broadcast events.

Finally, in addition to providing content, Kuaishou Technology also improved the service of the tool. Since the beginning of this year, Kuaishou Technology has enhanced the Kuaishou Technology search function. The financial report shows that on average, more than 250 million users of Kuaishou Technology's app use Kuaishou Technology search every month.

Kuaishou Technology is using diversified, professional and upgraded proprietary content to retain users and extend their stay. In the earnings call, Suhua also showed confidence in user stickiness. He said that the duration of user use is "higher in April than in March and higher in May than in April." DAU accounts for about 57% of MAU and will continue to grow, rising to 60% in the future.

However, compared with UGC content, these specialized content requires capital investment, which is one of the reasons why the cost of sales increased to 10.032 billion, up 22% from the same period last year.

Exchange investment for user duration, enhance long-term value through content refinement operation, and provide reserves for Kuaishou Technology's future commercialization, e-commerce and other business realization. And how to control this input and long-term output ratio, Kuaishou Technology also has to solve this problem.

Let the creator make money

In the final analysis, compared to using professional content, UGC is the core for platforms like Kuaishou Technology to retain users. Kuaishou Technology, who insists on private domain traffic, retains the creator and activates the creator to retain users, and the most intuitive value of fine operation on the creator side is to let them make money.

This is also what the platform is exploring. According to the financial report, Kuaishou Technology added an average of more than 10 million content creators per month in the first quarter of 2021. In the 12 months from April 2020 to March 2021, nearly 24 million users earned revenue from Kuaishou Technology.

Kuaishou Technology's financial report revealed some new information on how to make money for creators.

The most conventional way is live reward, which is the basic disk. In addition to live broadcast of the CBA league, Kuaishou Technology also launched a 26-day non-stop "super broadcast" in February 2021, attracting more than 1.5 billion viewers. With the low tide of entertainment live streaming, although the total revenue of the live broadcast section slowed down in the first quarter, Kuaishou Technology's average monthly paid users of live streaming increased to 52.4 million, an increase of 3.1% month-on-month, and the average income of monthly paid users of live streaming increased 2.9% compared with the same period last year.

In addition, Kuaishou Technology also explored three new directions.

The first is to increase advertising revenue. According to the financial report, the video broadcast volume of advertising content of Kuaishou Technology's content creators has increased by more than 100% month-on-month, and the number of creator partners connected to Kuaishou Technology's marketing platform Magneto Juxing has doubled compared with the end of 2020. All of these data show that the creators on Kuaishou Technology have more opportunities to expose and generate revenue.

On this marketing platform created by Kuaishou Technology for linked advertisers, creators and Kuaishou Technology, according to the 2020 Magnet Star Creator Ecological value report, it has covered 42 vertical areas, such as entertainment, animation, talent, government affairs, and so on. can enable brands in different industries to find target circles and creators.

In the first quarter of 2021, the average online marketing service income per daily active user increased to 29 yuan from 12.9 yuan in the same period in 2020, indicating that the creator's advertising revenue has increased greatly.

This is due to Kuaishou Technology's investment in advertising, which is an important part of the development of its online marketing services in 2021 and has the opportunity to dock with more funds. Not only that, in 2021, Kuaishou Technology will also upgrade the "Kuaishou Technology Alliance", with content as the carrier, advertising and e-commerce as the means to promote the creators' advertising and e-commerce revenue directly.

E-commerce is another important way for creators to realize cash. Financial data show that live e-commerce GMV reached 118.6 billion in the first quarter, an increase of 219.8% over the same period last year, and noted that the contribution of private domains on the platform to the total value of e-commerce transactions far exceeded that of the public domain. Kuaishou Technology's investment is still increasing. In May 2021, Kuaishou Technology e-commerce marketing platform Magnetic Taurus was launched. Merchants can achieve the unity of account and budget capital pool, and can meet the demand of one-stop use of Kuaishou Technology's multiple promotion tools. Make the e-commerce business on Kuaishou Technology more convenient.

In addition, pan-life services (local life) is also Kuaishou Technology's focus on content ecology in 2021. The financial report said that at the end of the first quarter, more than 15 industries covered by Kuaishou Technology's local life content realized closed-loop transactions. In the trust economy based on private domain traffic, fast creators also have the opportunity to cash in areas of local life that can be used as a reference for users, such as travel, buying a house and buying a car.

Kuaishou Technology once tried to put a link to the address under the short-term video of some tourist attractions and online celebrity restaurants and found that the opening rate was very high. When analyzing the direction of Kuaishou Technology's layout of local life to Shenjing, an industry insider said that Kuaishou Technology's business may be different from the logic of local life service providers such as Meituan in the future. Based on Kuaishou Technology's private domain and UGC characteristics, anchors attract users through personal settings and short video content, giving full play to the advantages of "trust economy", which can not only avoid some supply chain and offline costs. Some kinds of transactions don't even have to be done through the platform.

There are a large number of such examples on Kuaishou Technology. For example, lawyer Zhao, who has shared legal knowledge on Kuaishou Technology since 2017, has established a close relationship with his fans, who asked him to write a divorce agreement at a discount from one or two thousand yuan to one or two hundred yuan. In addition, large-value goods such as cars, real estate and homes can also be traded through Kuaishou Technology. Kuaishou Technology's well-known car anchor, "the second Brother said cars," sold 288 cars at one time in a group purchase organized in 2019. Because of the favorable price, some people even drive hundreds of kilometers to ask him for help.

This kind of trust economy based on fans and creators is becoming the main direction for Kuaishou Technology to tap the potential of users. Earlier, there were media reports that Kuaishou Technology's local life service was in the grayscale testing stage, which also means that the platform is preparing for it. In the future, more industries and more professionals will have the opportunity to form a business closed loop in Kuaishou Technology.

The underlying Logic of Kuaishou Technology's Business

Leaving users and making money for creators is the result of Kuaishou Technology's commercialized operation based on the underlying logic of private domain.

Yan Qiang, senior vice president and head of content operations of Kuaishou Technology, said at Kuaishou Technology's photosynthetic creators conference in April that live e-commerce, pan-life services, community and social networking were Kuaishou Technology's three key breakthroughs this year. At this conference, the heads of content, e-commerce, advertising and other sections have repeatedly stressed the purpose of helping creators to make money.

What does it mean for Kuaishou Technology to let the creator make money?

"if you try to help the creator make money, you will actually realize Kuaishou Technology's own profit," an industry source told Shenjing. According to the general realization logic of the UGC platform, in addition to commercial advertisements based on the public domain, live broadcast reward was once the main source of income for platforms such as Kuaishou Technology, but since the development of commercialization, e-commerce and the recent layout of local life in 2018, targeting high-quality content IP, the platform has opened up multiple tracks, not only to provide creators with cash flow channels, but also to optimize Kuaishou Technology's revenue structure.

In 2017, 2018 and 2019, the income of Kuaishou Technology Live Section was 7.9 billion yuan, 18.6 billion yuan and 31.4 billion yuan respectively, accounting for 95.3%, 91.7% and 80.4% of the total income. In the first quarter of 2021, live broadcast revenue reached 7.3 billion yuan, down 19.5% from the same period last year and 7.6% month-on-month. The proportion of live broadcast revenue dropped to 42.6% from 72.3% in the same period last year. The reduction in the proportion is also related to the accelerated development of platform advertising, e-commerce and other businesses. Now it can be said that Kuaishou Technology has taken off the hat of "live broadcast company", while the three carriages of live broadcast, e-commerce and advertising are more stable.

The online marketing service was the first to replace live streaming as the mainstay of Kuaishou Technology's income. Revenue from online marketing services rose to 8.558 billion from 3.273 billion in the same period last year, accounting for 50.3 per cent of total revenue, according to the financial report. By optimizing the algorithm of the advertising system and improving the delivery accuracy, Kuaishou Technology brand advertising has increased significantly, and the increase in advertising revenue is also related to Kuaishou Technology's expansion of cooperation with content creators to create customized content for advertisers. However, in the advertising revenue sector, how to maintain a balance between public and private domain traffic will continue to test Kuaishou Technology.

As for e-commerce, Kuaishou Technology's pull-out of live e-commerce remains relatively low as a whole, but the revenue share of the "other services" section of e-commerce, which includes e-commerce, has risen to 7.1 per cent from 1.4 per cent in the same period last year. In fact, according to the above industry insiders, Kuaishou Technology live e-commerce is still in the stage of releasing water for fish culture, and the most important goal of the platform is growth and ecological activity.

Kuaishou Technology e-commerce has also maintained a good momentum. Live ecommerce GMV reached 118.6 billion in this quarter, up 219.8 per cent from a year earlier, and it is worth noting that Kuaishou Technology's small stores accounted for 85 per cent of total e-commerce transactions on the platform, up from 53 per cent in the same period in 2020. At the same time, Kuaishou Technology integrates the resources of the supply chain and creates a good thing alliance, whose e-commerce transaction volume accounts for the total e-commerce transaction volume of the platform, which has doubled from the previous month. This shows that Kuaishou Technology e-commerce has taken another step forward from the internal cycle of "creator-production-user consumption-service creator".

After broadening the income dimension of creators, Kuaishou Technology's gross profit margin increased significantly, to 41.1% from 34.2% in the same period last year. The financial report mentioned that the percentage of live broadcast revenue in total revenue decreased due to the expansion of online marketing services and e-commerce business, which in turn led to a decrease in the cost of sales as a percentage of total revenue.

After the 8.0 revision, Kuaishou Technology continued to tap new business opportunities in the private domain in terms of content operation and cash.

Creators use content and people to retain users, build trust to form independent communities, and the platform provides more ways to realize the value of private traffic. Kuaishou Technology is stepping into a healthier business ecology.