Short Video Market Shows Strong Growth Momentum

By Jenny HU

W ith the rapid development of the mobile internet era and the technological progress in the network infrastructure， the short video content market is developing rapidly. After years of development， short videos have become a part of most peoples daily life， according to the Special Research Report on Competition in Chinas Short Video Leading Market in 2020-2021 released by iiMedia Research. The number of short video users in China has grown significantly， exceeding 700 million in 2020， and is further expected to increase to 809 million in 2021.

Douyin and Kwai have supreme advantages in the field of short videos

With the popularization of mobile terminals and the speeding up of the internet， especially with the application of 5G， the cost of mobile internet traffic has effectively been reduced； at the same time， the continuous development of short video technologies such as AR and VR are improving the short video user experience， constantly enriching its present forms. Short and fast transmission contents with a large amount of traffic have been gradually favored by the major platforms， fans and capital. With the emergence of the online celebrity economy， a number of high-quality User-Generated Content （UGC） producers have gradually emerged in the video industry. Sina Weibo， Miaopai， Kwai and Toutiao have nudged their way into the short video industry.

Kwai and Douyin stand out among the numerous short video platforms. According to iiMedia Re- search， 70.9% and 52.3% of Chinese short video users surveyed said they used Douyin and Kwai respectively. According to analysts from iiMedia Research， Douyin and Kwai have supreme advantages in the field of short videos. Kwai started early with a deep user base， and has actively developed its e-commerce and game live streaming businesses， becoming a typical representative of the head players. Although Douyin has only been developed for a short amount of time， it has a strong momentum and looks likely to catch up. There are a large number of KOLs registered on Douyin with a strong capacity for product selling and publicity. Douyin has also become the short video platform with the largest number of users.

As a leading player in the field of short videos in the hot industry， Douyin has rapidly widened the gap in its user scale with its strong user loyalty. In 2020， Douyin was the most used short video app in all regions across China. The southern region saw the highest usage rate of Douyin， while the northeast region favored Kwai. According to the data from iiMedia Research， Douyins user base has grown from 236 million in January 2019 to 490 million in November 2020， widening the gap compared with Kwais user base.

In terms of monthly income， Douyins users are “richer”， according to the data from iiMedia Research. There is a certain difference between Douyin and Kwai in terms of the proportion of users with high and low incomes. Users with a monthly income of less than RMB 5，000 account for 73.8% of Kwais users， while accounting for 66.1% of Douyin users. In November， Douyins users with a monthly income of more than RMB 10，000 accounted for 11.3% of the total， while Kwais was only 6.4%. This shows that the current leading short video platforms are dominated by low and middle income users， but Douyins coverage of high-income users is improving and its users consumption potential is greater.

In terms of content， according to the 47th Statistical Report on the Development of the Internet in China （hereinafter referred to as the CNNIC Report） released recently by CNNIC， short video platforms permeate and integrate with one another. First， long video platforms are actively developing their short video business in order to attract users and traffic. The involvement of major long video platforms encourages the production of high-quality short video contents in various ways to increase the proportion of short video contents and increase user loyalty. For example， iQIYI launched its short video content community“Suike” and made full use of its rich IP content advantages to fully empower creators. Tencent Video has been incorporated into WeChat to nudge into the short video business by relying on WeChats huge user base and social advantages. Furthermore， short video platforms have begun to get involved in the comprehensive video business， and attempts have been made to launch “micro dramas” and “micro shows” that are more compatible with its own platform before gradually entering the field of long videos. Short video platforms improve user retention time by constantly adjusting the maximum video shooting time for users and launching long video programs in cooperation with professional teams， which is also more conducive to the production of high-quality content. For example， Douyin allows 15 minutes of video shooting after uploading videos of 15 seconds， 1 minute and 3 minutes. Kwai also launched long video programs produced by professional teams in 2020， with a focus on social documentaries and online movies.

Growing pressure for short video platforms to nudge into e-commerce

As a leading platform in the short video field， Kwai is actively seeking capitalization and an IPO is coming soon. According to the data disclosed in its prospectus， although Kwais revenue continues to grow， its profits showed a loss， displaying an obvious case of “increased revenue， despite not making profits”. Its revenue growth depends on high costs and there may be risks in the longterm development of the enterprise.

However， Douyin is growing very fast. It not only has a huge advantage in terms of user base， but has also been making breakthroughs in its business models recently. With the application of 5G technology， short videos are expected to play a more important role in mobile terminals， and the future development of the short video industry will depend on access to social functions. If Douyin officially launches Douyin payment and improves its social functions in the future， it is expected to continue to widen the gap with other platforms in the short video industry depending on its various resource advantages.

Short video platforms keep innovating their business models. On the one hand， short video platforms have become an innovative type of new media marketing platform， but on the other hand， they have embraced new growth points with the usage of live streaming. According to the data from iiMedia Research， Chinas short video market reached RMB 140.83 billion in 2020， and will continue to maintain a high growth trend， with the expectation of hitting nearly RMB 200 billion by 2021. iiMedia Research analysts pointed out that with the popularity of short videos and the increase in their number of users， the leading platform has gradually developed into a super application of the internet and boasts a huge amount of traffic. This also strengthens the expansion of business models， with the development of the model combining short videos and live broadcasts with e-commerce showing the strongest momentum. However， in order to enter the e-commerce arena to sell goods， short video platforms do not have advantages in terms of the supply chain and after-sales services， and other e-commerce platforms add great competitive pressure.

Third-tier and lower cities have become the main source of the short video marketing market

Short videos have become a major form of entertainment as they are more attractive and save time， according to the Research Report on Market Prospects and Investment Opportunities in Chinas Short Video Industry released by the China Business Industry Research Institute. Internet users are spending more time watching short videos， creating a huge demand for short video content production. At the same time， major online platforms are offering financial subsidies and user traffic to incentivize the production of high-quality short videos， as short videos can attract large audiences and generate cash opportunities. More talent entering the short video content production market is also conducive to improving the overall quality and attractiveness of short videos. In addition， the short video content production market has developed a mature value chain. In particular， the emergence of MCN， from concept development planning to content production， provides comprehensive and professional support for short video content producers and further identifies appropriate advertisers and network platform resources.

Professionally generated content and professional user-generated content are becoming increasingly popu-lar due to their expertise and rich resources. Multichannel networks have emerged to assist content creators by creating quality content that appeals to particular audiences. Short video platforms such as Douyin and Kwai have recently begun to increase their requirements on content production capacity and qualification facilities of multi-channel networks so as to create an entry threshold.

According to the report by the China Business Industry Research Institute， new users are increasing in the third-tier and lower cities. Compared with 2017， 58.6% of new users of short video platforms in 2018 came from third-tier and lower cities. The income and consumption levels of residents in these cities also have great potential to improve. The consumption expenditure of urban and rural residents grew by 6.8% and 10.7% respectively in 2018， while the disposable income of urban and rural residents grew by 7.8% and 8.8% respectively. The expansion and increasing demand of short video consumer groups in third-tier and lower cities will become the main source of growth for Chinas short video marketing market.

Short video enterprises are confronted with regulatory risks when going global

In the meantime， short video applications are rapidly occupying overseas markets， but they also face regulatory risks. Since 2016， short video platforms have attempted to go global， starting from emerging markets such as East Asia and Southeast Asia， and gradually expanding into North America and Europe with rapid progress.

Mobile internet fans are growing fast in Southeast Asia， thanks to the improving internet infrastructure. Thailand， Vietnam and Indonesia， for example， had more than 380 million internet followers as of 2017， growing at a compound annual growth rate of 27.6% from 2013 to 2018. With a total population of more than 400 million people and the rapid expansion of 4G network coverage， these three countries promise tremendous potential for the development of short video platforms. Chinas leading short video platform is expanding into Southeast Asia. For example， in 2018， TikToks total overseas Monthly Active Users （MAU） was more than 100 million， with approximately 10 million of these users coming from Thailand and more than 15 million from Indonesia. Data shows that in the first half of 2020， TikTok was downloaded 626 million times worldwide， ranking first in the world， and generating USD 421 million in revenue within the Apple and Google systems， ranking third in the world. Kwai has launched different short video applications such as Kwai and Snack Video for different overseas markets， which are currently performing well in the markets in South Korea， Russia and Vietnam. Despite the rapid development of short video applications in the overseas markets， they also face certain policy risks. In the future， the strategy of Chinese short video enterprises to go abroad still needs to be adjusted according to international circumstances， as well as the laws and regulations of the host countries.

As the commercial operation of short videos is maturing， strategic planning in the payment field has become hot. Starting from 2020， the user scale of short videos grew rapidly， and each short video platform intensified its efforts in the payment field to form its own closed loop for e-commerce transactions.

Short video platforms entering the field of payment will further improve the ecological distribution. In 2020， Bytedance and Kwai successively obtained payment licenses through acquisition， forming a closed loop of e-commerce business. First， the favorable development momentum of e-commerce has put forward higher requirements for the cooperation between payment and products and operations. For Kwai and other platforms， e-commerce business is one of their core forms of businesses and payment is an important link in any e-commerce business. The use of third-party payment services for short video platforms not only increases compliance costs， but also affects the user experience. Expanding their own payment services is a guarantee for the future development of short video platforms. Second， payment business is conducive to subsequent refined operation and business expansion of the platform. With the payment business， a platform can accumulate a large amount of user data， on the basis of which the platform can better depict its user base and merchant portraits and carry out targeted product pushing and marketing. In addition， when relying on payment business， short video platforms are expected to convert single payment transaction users into users of other financial products， which will enhance user loyalty while also increasing revenue.