Internet & Tech

Pushing the (red) envelope

Kuaishou takes centre stage as sponsor of this year’s CCTV Gala show

Tong-Liya-2019-w

Tong Liya: Gala hosting debut

Because of the Wuhan coronavirus outbreak, the mood over Chinese New Year has been sombre. The week-long holiday, traditionally a time when people gather with their families and friends, saw shops and restaurants close down and cinemas shut (see WiC480). The limited options for fun and entertainment opened up more space for a traditional favourite, however. “Apart from news updates about the virus, the only thing that is left is the Spring Festival Gala,” Entertainment Unicorn lamented.

In fact the annual spectacular from state broadcaster CCTV has suffered from savage criticism in recent years for falling behind the times. This year the producers tried to give it more of a makeover, replacing the older guard with more youthful newbies like Tong Liya (the first actress to host the gala in its 37-year history, according to state TV). Also gone were the skits involving xiangsheng crosstalk (a longstanding fixture at the show).

In their place were performances from young pop icons like Xiao Zhan and Xie Na (both appeared in our Top 30 KOLs list; see www.weekinchina.com/kol).

The hard work paid off. Ratings hit an all-time high of 1.23 billion across livestreaming and TV broadcast channels, according to Xinhua. For comparison that was more than 10 times the standard audience for the NFL’s Super Bowl, and more than 50 million more viewers than for the same event last year. (All of which represents a welcome turnaround for CCTV since ratings for the Gala had slipped continuously between 2017 and 2019.)

Kuaishou will be relieved too. Back in November, the Tencent-backed short-video platform announced that it had teamed up with the state broadcaster as its “exclusive interactive partner” for the four-and-a-half-hour event. This gave the company the right to send out virtual hongbao – ‘red envelopes’ of cash that people hand out during the festival as a gesture of good fortune. These inducements were expected to draw substantial traffic to Kuaishou’s short-video app. Additionally the platform enjoyed exclusive management rights over the commercial and promotional campaigns leading up to the gala (see WiC476).

Last year Baidu signed a similar deal to become exclusive partner of the event. This saw the search giant giving away as much as Rmb900 million ($130 million) of virtual hongbao to viewers.

Kuaishou wanted to make a bigger splash, declaring that it would be handing out as much as Rmb1 billion of hongbao. The costly marketing initiative, the short-video platform announced, was part of its efforts to increase its reach to 300 million daily active users (DAU) by early 2020, up from 200 million as of last May.

“The effect of the Spring Festival Gala has surprised the internet giants. The show, which reaches all ages and all corners of the country, has become the centre stage for a product that wants to reach a wide audience,” reckoned 36Kr, a tech portal. “Three years after WeChat appeared on the Spring Festival Gala, everyone from 70 year-old seniors to preschool children, whether they were in first-tier cities or the most remote towns in the countryside, were using their mobile phones to scan and pay.”

According to Kuaishou’s statistics, there were an incredible 63.9 billion user engagements made through its app during the CCTV Gala’s live broadcast this year, the highest number in the history of the TV show. Most of these were prompted by people watching and liking videos to get a chance to win cash. About 2.2 million people managed to get their hands on ‘red envelopes’ with amounts ranging from Rmb66.6 to Rmb2,020.

Kuaishou also added a virtual gift called “Wuhan, go go go” to the interface to raise money for the epicentre of the coronavirus outbreak. People could donate the hongbao that they had received during the event to fighting the virus as well, with Kuaishou contributing 10% on top of every donation.

The marketing splash came at a time when competition between Kuaishou and bigger rival Douyin (also known as TikTok outside China) has become more intense than ever. Douyin, which is owned by Bytedance, reports the majority of its users from China’s bigger cities but it is now stepping more onto Kuaishou’s turf by looking for more business in lower-tier towns and less developed urban areas.

The overlap in footprint of the two rivals jumped from 18.7% of customers last year to 46.5% this year, suggesting the competition for subscriber enrolments is intensifying, according to CBN.

(In a bid to steal some of Kuaishou’s thunder, Douyin signed up as sponsor with some of the regional TV gala shows that take place over a similar period. Its parent Bytedance also paid Rmb630 million for the streaming rights to the hotly anticipated family movie Lost in Russia, which stars comedy actor Xu Zheng. The film was one of a group of cancelled releases ahead of the Chinese New Year because of fears the Wuhan virus would spread in cinemas and as a compromise its producers have instead made it available to stream for free on Douyin for a limited time.)

“The Spring Festival Gala boasted 1.23 billion viewers, while the short video industry has about 810 million monthly active users, with 614 million from the lower-tier cities. Kuaishou, meanwhile, has about 400 million monthly active users, which suggests that it has a lot of ground to cover and a lot of room for growth,” 36Kr added.

“These numbers prove there is still a large ‘blank space’ in the market that the internet alone could not cover but the Spring Festival Gala might. It’s like WeChat years ago. While it already had a very strong user base, there was so much room for growth. After the gala, WeChat not only recorded a big uptick in users, it also introduced the whole WeChat ecosystem, which was critical to its success today.”

The core question is whether Kuaishou can capitalise on the surge of interest on gala night. Baidu ran into problems when it sponsored the show, for instance. Many of those taking part in the giveaway complained that the hongbao had expired before they could retrieve them. Others grumbled that registering all of the information Baidu wanted was too tedious. Nor was user retention good.

“Even though Baidu’s daily active users (DAU) went up to 300 million, that number did not last long. By the second quarter of 2019, it had fallen back to 188 million. It also reported a net loss of Rmb327 million in the quarter, the first quarterly loss for Baidu since it went public in 2005. Its CFO Yu Zhengjun blamed the increased marketing spending during the CCTV Spring Festival Gala as the main reason,” Sina Finance noted.

Only time will tell whether this year’s event will bring a lasting boost to Kuaishou’s customer base. “Judging from the experience of internet companies that have cooperated with the Spring Festival Gala in the past, if Kuaishou’s goal is to jinshang tianhua [literally: to add flowers to a brocade], perhaps the heart of the issue is to ensure a good user experience. Now they have found the ‘flower,’ is the ‘brocade’ ready? That’s the question Kuaishou will find out,” was Sina’s verdict.


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