Huayu 05, our science fiction movie universe

Chapter 612 Galaxy's Mobile Internet Bridgehead

In fact, although Xinghe Group also has internet businesses such as Taopiaopiao.com, Xingkong Video, and Xingyue Chinese Website, in the public's and the market's perception, Xinghe Group has always been a cultural enterprise.

It may not be a traditional cultural enterprise, but its genes or the impression it gives people are undoubtedly similar to those of Huayi Brothers, China Film Group, Enlight Media, and Orange Sky Entertainment.

The only difference is that Xinghe Group has some internet background, making it one of the youngest and most up-to-date cultural enterprises in China.

Therefore, when people talk about domestic internet companies, they often overlook Xinghe Group. Even though their ticketing platform is number one in the entire network, they are expanding into offline group buying and community service businesses. When it comes to the internet, people still think of BAT (Baidu, Alibaba, Tencent) first.

But this year, 2018, the situation seems to be somewhat different.

Among traditional internet companies, the one with the strongest cultural attributes is undoubtedly Tencent, one of the "Big Three".

Because its core business, besides social networking, consists of games, novels, and video websites.

In particular, in the past two years, Tencent has invested the most in video websites and content among the three companies. It is leveraging its traffic and network advantages to launch an attack on the upstream cultural sources.

Now it has clearly encountered a competitor, namely Xinghe Group, which occupies the upstream of the cultural and internet industry chain and is also preparing to expand downstream.

Among these, the "Black Myth: Wukong" project recently announced by Galaxy Group is undoubtedly the one that makes Tencent most wary.

After all, among Tencent's many businesses, the importance of games is self-evident.

Now, Galaxy Group has made another breakthrough in this area, creating a domestic AAA masterpiece like "Black Myth: Wukong," which is undoubtedly an attempt to step on Tencent to rise to the top.

The key issue is that Tencent is powerless in this matter, because AAA games are not something Tencent can develop at will, nor can they guarantee a return on investment.

This is a huge gamble, and a large amount of investment could very well go down the drain. Given Tencent's current situation, it's difficult for them to commit to this endeavor.

Besides gaming, the expansion of another project of Galaxy Group has not only made Tencent nervous, but also forced the other two Internet companies in the Big Three to pay attention to this rapidly developing business.

As of April 2018, the number of active users on mobile internet short video comprehensive platforms and aggregation platforms reached 4.72 million and 1.61 million, respectively.

Of these, Douyin's user base accounts for three-fifths of the entire mobile short video platform.

According to data released by a mobile application data analysis company, Douyin, which was established two and a half years ago, continues its rapid growth momentum.

In 2018, it became the number one short video social networking application on iOS in terms of installations.

At the beginning of this year, TikTok added 6500 million global users on the App Store and Google Play, representing a year-on-year growth rate of 275% compared to the same period in 2017.

It is worth noting that TikTok has also become more popular among overseas users.

Whether in North America, Europe, Japan, South Korea, or Southeast Asia, TikTok can be seen everywhere nowadays.

Especially in Africa, with the popularity of OPPO's low-end phones, TikTok, which is directly installed on the phones, has also gained a large number of African users.

In China, Douyin is trending towards becoming a nationwide app.

按照星河集团后台的信息数据统计，每天中午的12点至13点，晚间时段的18点至19点、21点至24点，已经成为了抖音最为活跃的高峰期。

Just looking at this data, you can see that Douyin is occupying a large amount of users' "fragmented time".

These time periods are undoubtedly during users' lunch break, commute home from get off work, and evening rest.

This also means that, apart from going to work, users spend almost all day watching short videos on Douyin.

With users spending their free time on Douyin (TikTok), it means that their time for other activities is being squeezed out, and traffic to other apps is decreasing, with Tencent's apps being the most affected.

Furthermore, Douyin occupies more than just the time of young people.

According to backend data, by 2018, Douyin had become a mobile internet cultural product appealing to all age groups.

Thanks to OPPO's rapid development and low-price strategy, the Douyin app installed on many senior-friendly mobile phones has also attracted many older users.

Users of different age groups also have different preferences for shooting and watching short video content.

Young people born in the 90s love taking selfies. Pretty girls who used to cost money to see are now dancing for them on Douyin (TikTok).

People born in the 80s like to film hand gesture dances; the dynamic rhythms get them hooked.

People born in the 70s prefer to take pictures of landscapes, and their rustic aesthetic has shifted from WeChat groups (where people say "we are a loving family") to Douyin (TikTok).

As for the elderly born in the 60s, they like to use Douyin (TikTok) to film cute children and leave precious memories for their grandchildren.

In addition, it's not just ordinary people who use Douyin; due to its unique propaganda attributes, Douyin, like Weibo, has become a choice for many official media outlets to voice their opinions.

As of April 2018, a total of 5724 government accounts and 1334 media accounts had made their debut on Douyin. This short video app, launched by Xinghe Group, has become a new platform for the dissemination of government and media information due to its multiple advantages, including timeliness, vividness, large amount of information, and precise distribution.

Among them, @SipingPoliceAffairs became the government account with the most followers, with its Douyin followers exceeding 10 million and its pinned video receiving over 54 million likes.

The People's Daily ranked first among media accounts with 793 million followers and received over 1.7 million likes in 2017.

In addition, in 2017, Douyin leveraged its app features to collaborate with multiple cities, using live-streaming to help impoverished counties escape poverty and achieve prosperity. It also encouraged more young people to rediscover traditional culture and attracted government and media accounts to record stories of the times through short videos.

It can be said that nowadays, the leisure time of the vast majority of people has been completely occupied by Douyin.

Songs like "Let's Learn to Meow Together," "A Short Letter, A Long Affection," "Desert Camel," "Jiong Jiajia," "Why Am I So Good-Looking," "Twinkle Twinkle Little Star," and "Let Me Be Your Eyes" filled their ears.

This surge of traffic has not only created a large number of new-era internet celebrities, but also boosted the value of Douyin and its users, making it the strongest trump card in Xinghe Group's hands, surpassing Taopiaopiao.

Douyin's unique "culture + traffic" attributes have undoubtedly become the best springboard for Xinghe Group to transform from a cultural enterprise into an internet enterprise.

This is similar in nature to the "Big Entertainment Plan," which helped Tencent expand from an internet company into a cultural company.

Therefore, the rise of Douyin has undoubtedly put enormous pressure on BAT (Baidu, Alibaba, Tencent) players.

Seeing Xinghe Group expanding its territory in the mobile internet field, companies such as Tencent, Baidu, and Alibaba have also increased their investment and layout in the short video field.

In 2017, BAT (Baidu, Alibaba, Tencent) poured money into the short video field, with the three companies investing nearly 30 billion yuan in subsidies alone within a year. As many as 15 short video apps received this financial support.

Moreover, after launching a large number of apps, the three BAT companies (Baidu, Alibaba, and Tencent) also did not hesitate to "throw money" into the short video market.

According to incomplete statistics from Xinghe Group's market information department, there were as many as 34 financing deals in the short video sector in 2017, with Tencent leading the largest investment, followed by Baidu and others. As for subsidies, BAT (Baidu, Alibaba, Tencent) began subsidizing the short video sector as early as 2016, with amounts reaching billions of yuan.

However, despite the massive investment from BAT (Baidu, Alibaba, Tencent), none of the dozens of short video platforms can compete with Douyin, the "Galaxy System," in terms of either MAU (monthly active users) or user time.

As the saying goes, "If you are slow at one step, you will be slow at every step." Thanks to Wang Hao's visionary perspective, Douyin, which was strongly promoted by Xinghe Group, has already built a wide moat for itself after three years of dedicated development, thanks to its core big data intelligent push algorithm.

The short video market may not have high barriers to entry, but to achieve the precise video distribution and such an exaggerated user retention rate like Douyin is something that Tencent's copying methods simply cannot accomplish.

At least in the eyes of many investors, Xinghe Group's Douyin has an absolute first-mover advantage, leaving the three BAT companies behind in this field.

The three BAT companies probably never expected that they, with their absolute advantage in traffic, would one day be overtaken by Xinghe Group through short videos.

Nowadays, in the mobile internet field, both Alibaba and Baidu have recognized the reality and have begun to withdraw from the short video field, no longer investing more money to burn and seize the market.

Only Tencent remains, still not giving up, seemingly intending to continue its battle with Galaxy in this field.

Wang Hao, after reading the company's internal report, was not particularly surprised by this.

In the past, Tencent's WeChat and QQ served as the primary gateways to internet traffic, holding an absolute dominant position in the market.

They also leveraged this massive traffic advantage to launch a devastating attack on their pursuers, making every move they made seem invincible.

Therefore, they are also the ones who understand best just how terrifying it is to control the traffic entry point in the mobile internet era.

The emergence of Douyin is undoubtedly an attempt to seize and consolidate traffic entry points from Tencent.

With this traffic in hand, Galaxy Group will have an extremely sharp weapon to wield in any area of ​​the mobile internet.

Therefore, in the upcoming round of IPO financing for Douyin, many well-known domestic and foreign investment banks and securities firms are flocking to it, hoping to get a share of the pie.

Of course, one important question facing Xinghe Group now is: what should be the valuation of Douyin's IPO?

Galaxy Group and investors are currently in discussions regarding this matter.

"Several investment institutions still have their own opinions on our valuation."

In the large conference room on the 6th floor of Xinghe Group, Wang Hao participated in an internal meeting on Douyin's IPO preparation and financing.

"What specifically?"

"The main focus is on the business model and how participants monetize their businesses."

The CFO in charge of Douyin's financing said this.

"We have also communicated with investment institutions on this matter. As a content output industry, the current business models for short videos are nothing more than three types: advertising, e-commerce, and paid content."

We are currently iterating and optimizing in this regard, with a focus on advertising.

According to data collected by the group, the national short video marketing market reached 140.1 billion yuan last year.

Our plan is to launch a trending topics list, MCN collaborations, the Star Chart advertising platform, and the Blue V program for businesses this year to further enhance the platform's advertising and marketing capabilities and drive up its valuation.

Currently, Douyin's first round of Star Map platform has signed 4 agencies as official service providers, responsible for receiving and operating influencer advertising orders, while 21 Douyin-certified MCN agencies have also joined.

In addition, the ads currently placed on Douyin are divided into two categories:
One type is CPC (cost-per-click), estimated at 2 yuan per click, 1 clicks would amount to 1 yuan, and the projected number of impressions would be 1000 million.

Another type is CPM (thousand impressions), estimated at 10 yuan/CP, 1000 times CPM is 100 yuan, and it is estimated to attract 1 million impressions.

Thanks to the accuracy of our information distribution, our advertising conversion rate is far superior to that of our competitors, and we expect our advertising revenue in 2018 to be between 300 billion and 500 billion yuan.

Based on this advertising revenue, TikTok's IPO valuation should be $850 billion.

The words of Douyin's CFO made Wang Hao frown.

Have you considered the impact of advertising on user experience?

His question left the several Douyin executives present looking at each other in bewilderment. In the end, it was the head of the technology department who stood up to answer.

"Advertising inevitably has an impact on user experience, but the current mobile internet traffic market has basically reached a bottleneck. Despite the slowdown in development, the company has maintained its leading position, so the impact of these advertising efforts is not a major problem for the company."

"You won't fight?"

Wang Hao didn't say much, but instead took out his phone, opened Douyin (TikTok), and started demonstrating.

He swiped twice, and an advertisement appeared on his phone.

After refreshing five or six more times, another ad appeared on his phone.

As you continue scrolling, the frequency of ads basically stays around 4 to 7 videos.

The meeting room was completely silent. No one was sure whether Wang Hao was satisfied with the frequency of the advertisements, so they could only wait in silence.

After Wang Hao closed the Douyin app, he looked at the executives in front of him and reiterated:
"I know that everyone has put a lot of effort into Douyin and holds a portion of the original shares. Naturally, we hope that Douyin's IPO valuation can be as high as possible."

But I hope that everyone here will not forget what the core values ​​of our Galaxy Group are!
Galaxy Group has always been a cultural enterprise. Our mission is to create happiness for the public, weave dreams for our users, and bring beauty to their lives!

On this point, even so-called commercial value must give way.

"Chairman Wang..."

The CFO opened her mouth to speak, but Wang Hao raised his hand to interrupt her.

"I know what you're trying to say. Douyin does indeed have a huge advantage in the short video market, just as you say, but that's no reason for us to let our guard down."

In my opinion, TikTok's challenges have never been domestic, but global.

TikTok's performance overseas is no less than that in China, and may even be better. We should take a longer-term view. At least TikTok is far from the point where it must be commercially launched.

Compared to this, what we should be considering is how to provide users with a better entertainment experience and how to help more video creators develop and progress!

(End of this chapter)