KUAISHOU-WR has made a breakthrough

Author | Liu Baodan

Editor | Zhang Xiaoling

On the 650th day after taking over as KUAISHOU-W CEO, Cheng Yixiao made his second public appearance.

On August 10th, at the 2023 KUAISHOU-W Photosynthesis Creator Conference, Cheng Yixiao announced a set of data. In the past year, over 22 million people have earned income on KUAISHOU-W, totaling nearly 90 billion yuan. The number of creators earning income has increased by approximately 2 million.

Influencers, users, and products constitute the e-commerce ecosystem of KUAISHOU-W. At the e-commerce conference in May, Cheng Yixiao expressed the concept of trusting e-commerce for the first time. It means allowing consumers to discover affordable and good-quality products that suit them on KUAISHOU-W through trustworthy anchors (creators) and content. Creators are at the core of this concept.

Cheng Yixiao's strategy seems to be effective. After 12 years of losses, KUAISHOU-W achieved profitability in the first half of this year. Despite facing strong competitors such as Taobao, JD.com, Douyin, and Xiaohongshu, KUAISHOU-W has carved out a path for itself.

However, e-commerce competition has entered a more intense stage, and KUAISHOU-W also has many hidden concerns. Cheng Yixiao is far from being able to relax.

Rise

Cheng Yixiao, who took over as CEO from Su Hua just over a year ago, has almost created a miracle.

On July 31st, KUAISHOU-W announced a positive profit forecast. In the first half of this year, KUAISHOU-W expects a net profit of no less than 560 million yuan. In the same period last year, the net loss was about 9.43 billion yuan. This is the first time KUAISHOU-W has achieved profitability since its establishment, and it is achieved on the basis of previously losing hundreds of billions.

In 2020 and 2021, KUAISHOU-W recorded losses of 116.6 billion yuan and 78.1 billion yuan respectively. In 2022, KUAISHOU-W's loss was 13.7 billion yuan, which was significantly reduced compared to before. However, no one could have expected that profitability would be achieved just over a year later.

KUAISHOU-W attributes the turnaround to the growth of its user base and the prosperity of its ecosystem, strong monetization strategies, and continuous improvement in operational efficiency.

According to insiders at KUAISHOU-W, after Cheng Yixiao took office in October 2021, turning losses into profits became the main action plan.

The most fundamental change he made was to strengthen KUAISHOU-W's e-commerce business. He insisted on leading the team personally, making KUAISHOU-W and Douyin a powerful new e-commerce platform, and taking away many users from Taobao and JD.com.

In January of this year, KUAISHOU-W launched the "Chuanliu Plan," which involves influencer distribution and brand self-broadcasting linkage. By creating a money-making effect, more influencers are attracted to join, which is KUAISHOU-W's logic for user growth. At the same time, influencers serve as the hub connecting users and products, bridging the gap between content and the "general shelf" field. For Cheng Yixiao, a creative genius, not only does he provide content, but he also deeply involves himself in the trading process, making him a creator in the entire field.

In 2022, KUAISHOU-W's annual GMV exceeded 900 billion yuan. In the first quarter of this year, the GMV continued to grow by 28.4% YoY to 224.8 billion yuan. KUAISHOU-W is also one of the few e-commerce platforms that dare to disclose their performance during the 6.18 shopping festival, as most others either declined or experienced only slight growth.

During the 6.18 shopping festival, KUAISHOU-W saw a year-on-year increase of approximately 40% in order volume and a 30% increase in the number of buyers. The GMV of branded products grew by over 200% compared to last year.

Dongwu Securities predicts that KUAISHOU-W's GMV in the second quarter will increase by 34% YoY to 255.2 billion yuan. If it maintains high growth in the second half of the year, its annual GMV will exceed one trillion yuan.

Guotai Junan believes that based on the unique e-commerce ecosystem built on a trust system, KUAISHOU-W's GMV is expected to reach 1.8 trillion yuan by 2025.

In addition, starting from the first quarter of 2023, KUAISHOU-W began to receive commission income from the distribution of creators, which will contribute to the future growth of e-commerce revenue.

At the creator conference, KUAISHOU-W announced that it will invest over 400 billion yuan in traffic support in the next year, helping creators achieve revenue of over one trillion yuan.

Hidden Concerns

By seizing the rise of live-streaming e-commerce and leading KUAISHOU-W to quickly achieve profitability, Cheng Yixiao has won a round.

However, for KUAISHOU-W, profitability is not enough to establish a solid foundation. After all, in the e-commerce world, it is still a "small player" compared to Alibaba's GMV of 8.3 trillion yuan, JD.com's 3.47 trillion yuan, and TikTok's 1.5 trillion yuan. KUAISHOU-W still has a long way to catch up.

KUAISHOU-W faces significant challenges and pressure. In recent years, the user growth of KUAISHOU-W has continued to slow down. The daily active user (DAU) growth rate was 50% in 2020, but it has dropped to 13.3% in 2022, the same speed as TikTok. However, TikTok has a DAU of 850 million, while KUAISHOU-W has not yet reached the milestone of 400 million.

In the first quarter of this year, KUAISHOU-W's average DAU growth rate was 8.3%, already in the single digits.

During the first quarter performance meeting this year, Cheng Yixiao expressed confidence in achieving a quarterly DAU of over 400 million in the second half of 2024. Obviously, it will be difficult to reach 400 million this year.

Furthermore, most of KUAISHOU-W's loyal users come from third, fourth, and fifth-tier cities. According to QuestMobile data, in May of this year, KUAISHOU-W users accounted for 58.8% in third, fourth, fifth-tier, and lower-tier cities, close to 60%. Slow user growth combined with regional distribution constraints may hinder the commercial expansion for brand clients. In addition to advertising and e-commerce, Cheng Yixiao is very optimistic about the local life sector. It is indeed a huge market. Data shows that the scale of China's local life service market is expected to reach 35.3 trillion yuan by 2025.

Last year, KUAISHOU-W upgraded its local life business to an independent department and conducted trials in Shanghai, Chengdu, Shenzhen, Qingdao, Shijiazhuang, and Harbin in the first half of the year.

However, the local life sector has become a fiercely competitive battleground. Meituan, Douyin, Taobao, WeChat, and Xiaohongshu have all entered this market. Douyin has already started to challenge Meituan's dominant position. KUAISHOU-W does not have any special advantages.

It is worth mentioning the overseas business. This year, KUAISHOU-W has been more cautious in this area, reducing losses, but the business has not improved. In comparison, Douyin, Alibaba, and Pinduoduo have achieved rapid internationalization. Especially Douyin's overseas business (mainly TikTok) achieved a revenue of 16 billion US dollars last year, and Alibaba's international business led by Jiang Fan has also shown initial results. Temu and SHEIN under Pinduoduo have entered a fierce competition stage in North America.

When it went public in early 2021, KUAISHOU-W was once the darling of the capital market. As the first stock of short videos, KUAISHOU-W's market value quickly soared to 1.74 trillion Hong Kong dollars in a short period of time. However, it experienced a decline for half a year and now its stock price hovers around 65 Hong Kong dollars, with a market value of only 16% of its peak.

Even though KUAISHOU-W has turned losses into profits, the capital market has not responded significantly. KUAISHOU-W still needs to show more advantages.

For Cheng Yixiao, he has entered the most tempting e-commerce game in China. Every move in the future is both an opportunity and a hidden trap. The upcoming e-commerce market is a fierce battle for existing market share. Cheng Yixiao still needs to prove that he is truly capable of taking KUAISHOU-W further.