Pay-to-view, in reverse

“Remember that time is money. He that can earn ten shillings a day by his labour, and goes abroad, or sits idle one half of that day, though he spends but sixpence during his diversion or idleness, it ought not to be reckoned the only expense; he hath really spent or thrown away five shillings besides.” So said Benjamin Franklin in 1748 to suggest there is an opportunity cost in leisure time. The aphorism, however, has taken on a new meaning under Tencent’s newly launched video streaming service, which promises to reward viewers based on a simple mechanism: the longer they watch, the bigger the prize money.

The service is called Pianduoduo, literally meaning “lots and lots of films” – and is an obvious wordplay on Pinduoduo, the e-commerce platform that owes much of its success to bargain hunters in less affluent regions.

Pianduoduo offers tens of thousands of classic TV shows (packaged in full seasons) and movies. All are ad-free. Users who watch these programmes can earn 60 digital coins per minute. Based on the conversion of 18,000 coins for 1 yuan, and the daily cap on maximum earnings at 3,600 coins, an individual can make up to 0.2 yuan a day by watching videos on the platform for at least an hour.

The giveaways are far from generous. Viewers have to spend 500 days or watch 334 movies of a 90-minute duration on Pianduoduo before pocketing Rmb100.

Yet still the strategy has proven to be hugely successful in building loyalty among lower income families and the elderly in China’s more rural areas.

News aggregator Qutoutiao pioneered the ‘coin’ approach and grew its number of monthly active users to nearly 49 million in a little more than two years before going public in the US in 2018.

Since then, fungible tokens have become a staple in the so-called “super speedy” edition of mainstream video apps operated by the likes of Bytedance and Kuaishou. Coming with a simplified interface, thus commanding little computer memory, these new apps are mostly designed for the not-so-tech-savvy, an increasingly intriguing market for many Chinese internet majors.

With 123 million paid subscribers at the end of 2020, Pianduoduo’s sister firm Tencent Video is already China’s largest Netflix-like on-demand video platform.

Market saturation in more affluent areas in China since late 2019 means that providers of longer videos and paid content have hit a speed bump in user growth, despite making many popular shows such as Produce 101 (see WiC416) and Nothing But Thirty (see WiC506). Focusing on tier-three cities and below, which account for 54.5% of China’s internet users, is therefore a logical step to tap into new subscribers.

Tencent Video did not want to employ the same approach largely because it would reverse the ongoing trend of making users pay for content – a consumer habit that has taken over a decade to form but is yet to entirely take root. The parent group’s hope is that Pianduoduo marks an entry point that over time will convert its users into paying subscribers. In addition if Pianduoduo is able to sign up a huge pool of active users quickly, Tencent could also add more e-commerce functions to the app. Such a move might make Pianduoduo into a rival of Pinduoduo and help to realise Tencent’s long-standing ambition of expanding into the e-commerce business.

“Short video platforms are a pure traffic business. The bigger the viewership to support its social element, the larger the scale of its advertising and e-commerce business,” said CBN newspaper, explaining why free content works for the likes of Kuaishou and Douyin, but less so for long-form video platforms, which rely on subscription fees and more conventional forms of advertising to survive.

This April saw lossmaking Tencent Video, established in 2011, raise its subscription fees for the first time. The prices it quoted for certain packages jumped by as much as 50%. Commentators see it as a litmus test of Chinese consumers’ readiness to pay more for video entertainment. For a clue: Nasdaq-listed rival iQiyi did something similar last November and lost more than three million users during the fourth quarter. These losses were recouped the next quarter though, with the Baidu-backed company reporting on Tuesday that it had gained 3.6 million subscribers in the first three months of this year, raising its tally to 105.3 million. That helped narrow its net loss to Rmb1.3 billion as membership services revenue ticked up by 12% from a quarter earlier.

Tencent’s price hike was accompanied by a restructuring of its content business, which saw Tencent Video and Weishi (a short video app that aims to rival Douyin) finally grouped together under a new division called ‘Online Video Business Unit’. The head of Tencent Video, Sun Zhonghuai, will serve as the unit’s CEO.

Analysts believe a merger between the sister platforms is long overdue as the tech giant looks to integrate more video and live-streaming features into its ubiquitous super-app WeChat.

Reviewing the reviews

Eleven Chinese brands barred from Amazon’s US site

Amazon closed its Chinese site, Amazon.cn in 2019 after failing to crack a market dominated by domestic giants like Alibaba and JD.com. But that didn’t mean the e-commerce giant had given up on China completely.

In fact, Amazon has been working hard at recruiting Chinese businesses to sell their products on its e-commerce sites in the US and Europe, opening “cross-border e-commerce parks” where sellers can receive help with logistics, branding and instructions on how to navigate Amazon’s platform.

Prior to Covid-19 the American firm had held conferences in cities like Shanghai that were attended by more than 10,000 sellers, many of whom were looking for higher margins for their products as compared with what they get from domestic platforms like Taobao and Pinduoduo.

Its efforts have been paying off. The number of sellers from China on Amazon’s US site surged to 63% of the total in 2021 from 28% in 2019, according to statistics from Marketplace Pulse. That helps to explain why when you look up consumer electronics like massage guns and power banks, more often than not you are offered a host of Chinese brands such as HOVAMP, Mpow, Opove, Aukey and Anker. The chances are you will also find thousands of positive reviews for manyu of these companies’ products.

But herein lies the problem: since early May, Aukey’s power chargers have been listed as “currently unavailable” on Amazon. Similarly, Mpow, a brand owned by the Chinese company Patozon – which specialises in audio products – are no longer available for sale on the platform either. In fact, Marketplace Pulse, which tracks e-commerce sites, reckons that at least 11 sellers from China have been suspended by Amazon.

The US e-commerce firm refuses to directly address why these Chinese producers have disappeared from the platform, simply saying that it has detected “suspicious behaviour” from them.

“We have long-standing policies to protect the integrity of our store, including product authenticity, genuine reviews and products meeting the expectations of our customers. We take swift action against those that violate them, including suspending or removing selling privileges,” Amazon said in a statement.

Caixin Weekly believes that the Chinese manufacturers may have been manipulating customer reviews. It won’t be the first time that Chinese companies have been accused of faking rating and customer feedback on e-commerce platforms. But TechNode found that even ‘verified purchases’ on Amazon could be faked (companies often purchase their own products using gift cards and then write glowing reviews). In China, merchants have often resorted to using bots to inflate sales, a tactic called “brushing,” to get better placements on e-commerce platforms like Taobao.

Anker Innovations Technology, a gadget accessory producer best known for portable battery packs and cables, has not been banned by Amazon. The Shenzhen firm is a top seller on the US e-commerce site. It is currently valued at Rmb61 billion after going public on ChiNext last September (see WiC509).

Yet Amazon’s ban on Anker’s Shenzhen rival Aukey, which owns the power tool label Tacklife and home gadget brand Aicok (think neck massagers and juicer machines), couldn’t have come at a worse time.

For a start, Amazon just moved its annual two-day discounting sale Prime Day from July to June (it has yet to announce the exact dates of the event). If Aukey stays banned, it could lose out on billions of yuan in sales; the unsold inventory could also put enormous pressure on its supply chain.

Worse, Aukey is planning to launch a share offering on the New Third Board in Beijing. In the first three quarters of 2020, the company’s revenue reached Rmb6.6 billion and it made a net profit of Rmb500 million. Aukey’s prospectus reveals that the company is increasingly reliant on Amazon, generating as much as 75% of its sales from the platform as of 2019, from just 29% in 2016.

In addition to Aukey’s overdependence on Amazon, investors may also be worried about its lack of innovation. Its prospectus reveals that it spends relatively little on research and development. Between 2016 and 2018, its R&D accounted for just 1.5% of its total revenue. In comparison, during the same period, Anker’s spending on R&D was 5% of its sales.

“With the rapid development of the consumer electronics industry and intensifying competition in the market, Aukey needs to stay ahead of trends in the consumer market and respond to needs in a timely manner. Otherwise, it could run into the risk of declining market share,” concluded news site Meiri Caibao. 

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