Taobao Keeps Saying It Wants to "Make Content." How Did All This Happen? | Double 11 Insights ①

The entry points that draw consumers' purchases or their attention are changing, and Alibaba probably feels it more keenly than anyone.

"Making content" is probably the latest big strategic shift for Alibaba, a company that has to "embrace change" every so often. It is also, after more than a decade in business, the first time Alibaba has rethought how it should "do e-commerce."

When people still relied on PCs, search and homepage displays were the main way to pull users in. What Alibaba built was essentially an online copy of an offline shopping venue. Now things are different.

Once the phone became the most important thing people carry, the Taobao gesture consumers know best is the swipe, not the click. Alibaba, with the largest army of compulsive shoppers in the country, would feel that shift earlier than anyone.

Add more sophisticated consumers and fiercer competition, and the fight for raw traffic has become very hard to win. What matters now is holding on to users and keeping them longer. That is Taobao's new position: find "the joy of discovery," and turn Taobao into a real tool for killing time.

Content is without question one of the most effective ways to do that. Put another way, the entry points that draw consumers' purchases or their attention are changing.

Alibaba began leading this change — or catering to it — at the start of the year. It means the rules of the game have changed, and they are also the new rules for this year's "Double 11." Plenty of merchants felt that strongly at Alibaba's mobilization conference earlier on.

How did one of the most powerful companies in China turn itself into a content-driven shopping-guide site? How will the new rules affect merchants large and small? And how will consumers answer, in the data? This series will use four articles to answer those questions.

If the new e-commerce story Alibaba is telling has a turning point worth recording, it is probably this year's "Double 11." Let's start with the outline of the plot.

A limited-edition Christmas YSL Star lipstick, priced around 300 yuan and only just on sale worldwide, somehow became as hot a topic last week as a Smartisan phone launch. A lot of people still haven't worked out how.

On WeChat Moments, a whole batch of inspirational essays and takedowns about it appeared almost overnight. In the week beginning October 17, the topic produced more than 60 official-account articles with over 100,000 views;

and on Taobao, which already carried more than 2,600 listings of uncertain authenticity for the "YSL Star lipstick," an article written by the Proya Official Flagship Store became a hit on Weitao.

Weitao works like an official-accounts feed inside mobile Taobao. The article drew 23,000 views but more than 2,700 replies: after scolding "lipstick bitches" with emoji and inspirational rhetoric, the way plenty of self-media accounts do, the store ran a "build a tower in the comments" lottery, with 30 lipsticks as prizes — 10 YSL Star, 10 Givenchy Le Rouge, 10 Tom Ford black tubes.

Proya is a domestic cosmetics brand, but its Weitao posts kept up with everything from Angelababy's pregnancy and Kimi Qiao's suicide to the iPhone 7 launch and Wang Jianlin's "small goal."

If you use Taobao heavily, you may have noticed the change already: you open Weitao only to see whether the stores you follow have anything new, then find you have read a whole article about the plot twists of Wang Baoqiang's divorce, or the scene at Ruby Lin's wedding.

Even people who rarely use Taobao would notice that it has gotten a little flashy.

The earliest mobile Taobao, like the web version, offered fine-grained categories: menswear, womenswear, bags, sports and outdoors. Those entry points have mostly vanished, replaced by rows of small tiles — "Good Stuff" for the quality-of-life crowd, "Love Shopping" for female users, "Must-Buy List" for scenario-based recommendations, "Taobao Live," and the bottomless "Guess You Like."

They have even started running breaking news in the most valuable spot on the first screen, like a media outlet: "Double 11 Headlines" and "Double 11 Live" squeezed out the old "Taobao Headlines."

On the business of selling things, China's largest e-commerce platform clearly has some new ideas. The new generation of consumers likes to interact, likes to browse stores, and much of the time is not shopping with any particular goal — so why not use all kinds of "content" to keep them there? It looks like the best way to make users stay longer.

Alibaba CEO Daniel Zhang has two more technical descriptions for the shift: "taking our original shelves up a level," and creating a smoother "consumer flow path."

In this setup, the sellers, or stores, that Alibaba used to talk about have become individual "accounts."

Why Does Taobao Want to Make Content?

Every so often someone inside Alibaba puts forward a big slogan about a change in strategic direction; this counts as an important part of how the company "embraces change." Taobao's current strategy — "content-ization, mobile-ization, socialization" — was raised that way back in 2015.

The change began with two odd sets of numbers: search traffic from mobile Taobao at one point overtook search traffic on Taobao's PC site; but measured by the revenue that finally reached Taobao after advertising and revenue-sharing, users spent less on mobile than they had on PCs a few years earlier.

After more than a decade of operation, Alibaba has already fenced in the great majority of Chinese consumers who shop online. If those people had merely moved from the computer to the phone, then in spending power, tastes, and dependence on Taobao, things should in theory have stayed as they were.

But the "gestures" they use on Taobao changed: from clicking all over the place to swiping up and down without stopping. At the 2016 Annual Merchants Conference that Alibaba organized, brands and distributors heard some of Daniel Zhang's thinking on the problem:

"The mobile era has a weakness — the screen is so small. But that weakness brings a strength: a small screen can be more focused, and can target the individual consumer and his preferences better. ... Today a consumer's habitual gesture on the phone is the swipe, not clicking through a tree of categories one at a time. ... For them, swiping endlessly through Taobao to see new things — this joy of discovery — is behavior that should be captured and kept. That is why over the past two years we have built so many shopping-guide products on mobile Taobao. This is the change we see today."

A deeper problem: China's internet traffic dividend may be close to running dry. If Alibaba cannot hold on to users, results that are still growing fast today will stall within a few quarters.

On one side, it has to fight WeChat, Toutiao and every kind of livestreaming app for users' time. Trustdata, a third-party research firm, counted in 2015 that the average Chinese user spends nearly 50 minutes a day in WeChat; over the same period mobile Taobao took up only 20.5 minutes of a consumer's day.

On the other side, it has to fight other e-commerce sites for users' attention. That is harder still for merchants doing business on Taobao: first they have to win a round of competition for consumers inside Taobao itself.

But "traffic on Taobao and on Tmall has hit a ceiling. At a merchants' meeting a while back they mentioned reactivating old customers and raising traffic. I don't think that helps, because the total hasn't changed — your old customer is someone else's new customer, so you are really taking what belongs to someone else," Cui Shirong, founder of the Taobao store Xujiu, told QDaily.

On Taobao, Xujiu — the name means reminiscing about old times — is not only a store selling mostly artsy womenswear, but an "account" with more than 3 million followers. Its daily updates carry the usual new-arrival notices and buyer photos, and also outfit advice and topic-based interaction more typical of a content community. These hold users better.

Who Is Making Content for Taobao?

Over the past year or two, the team behind Shihuo, Hupu's e-commerce business, was often approached by the Taobao staff in the sports channel they worked with, who floated ideas that sounded "nothing like Taobao":

"They once pitched us a model like this: at one end is still the Taobao seller, at the other end is still the consumer, but the middle has changed — the content side handles all of the selling and the pre-sale service. Taobao just builds the stage and stays out of nearly everything in between. That would have been hard to imagine before," Dong Xiaoqi, who runs Shihuo, told QDaily.

Dong knows Taobao's old way of working, and its relatively closed profit model, very well: before Hupu he worked at Alibaba, in charge of the business at the core of the company's earnings — advertising.

But since the end of last year he has found Taobao suddenly open. "It will hand third parties positions that are extremely core, ones you wouldn't have dared imagine before." Those "extremely core" positions are the content shopping-guide entry points you can see in the first three screens of mobile Taobao.

After turning toward "content-ization, mobile-ization, socialization," Taobao added dedicated content-operations posts to every industry-category team — though the job is not to write copy or chase trending topics, but to manage and maintain the content that a large body of "creators" writes about products every day.

Hupu is one such creator, one of the first vertical trade outlets Taobao took an interest in. If you like sports and have researched sneakers on Taobao, your mobile Taobao homepage probably now shows plenty of posts and recommendations written by the Hupu Shihuo team.

Some of it comes straight from the enthusiastic forum users who authenticate sneakers: to balance expertise with variety, Hupu sometimes commissions pieces from those users directly, standing in for Taobao.

Autohome, IT168, Guoku, Xiachufang: more and more vertical outlets and websites began supplying this brand-new channel. Even self-media accounts that had decided, back when WeChat official accounts were still booming, to stick to Weibo and WeChat alone were invited into the "creator" program by a Taobao in a hurry to build a content system.

Wang Yin, the entrepreneur behind the WeChat official account Mermaid Lines vs. Ab Lines, was invited not long ago to a Double 11 kickoff conference for "Taobao creators," where he "met three or four hundred trade outlets and internet celebrities at once."

"I think what Taobao is doing is right. If you purely write a lot of content on WeChat, converting it into e-commerce is still quite hard. There are very successful cases in the business, like Luogic Show, but it also depends on whether the people your content reaches convert easily into buyers of what you are selling; for some categories the conversion rate is extremely low. With an app like Taobao, people open it and browse even when they have nothing to do. On your own platform, or your own app, or your WeChat account, selling something is still hard."

Wang opened a Taobao store for Mermaid Lines vs. Ab Lines, but he did not want to sell commodity goods like resistance bands and ab wheels there — no competitive edge, he felt — so he mainly pushed an energy bar his team had developed itself.

"Everyone's purpose in becoming a Taobao creator is probably a bit different. For us, we wanted to extend our influence further, to reach more consumers, merchants, or more Taobao resources. ... But a lot of individuals feel that writing an article and selling a few products can make money, and that is also a way to make a living."

Dawenzhi, who trained in fashion design, may be the kind of person Wang means.

At the start of this year she knew nothing about the "Taobao creator" system. With help from an internet-celebrity incubator in Hangzhou, she was certified as a "trendy women's stylist" creator, and now has to complete one or two orders a day — writing content, or livestreaming to sell goods.

That one incubator alone manages about 300 Taobao creators.

By Taobao's latest figures, the "Taobao creator" platform now holds more than 12,000 accounts — trade outlets like Hupu, self-media accounts like Mermaid Lines vs. Ab Lines, grassroots creators like Dawenzhi. What they produce draws more than 130 million views a day on average.

Its main business is still selling things, but by this route Taobao has joined the ranks of "content platforms." Its public line is that it also wants to help more original creators and content-driven merchants grow.

How Do Content Producers and Sellers Connect?

In the end, though, all this content is only one more selling model Taobao has built: whether merchants write it themselves or commission a creator, however long or rich it is, it is supposed to turn into actual visits and sales.

Dong Xiaoqi still remembers that when Hupu Shihuo first plugged into the creator system, Taobao seemed a little impatient, wanting "content that leans fast-moving, in the hope it would quickly produce direct transactions";

impatient too were the merchants who did not quite understand the new model but wanted to sell things. Dawenzhi once met a merchant in a rush to create a hit, who agreed to hand over 50% of the final sales as commission to the creator.

To help merchants and creators match up, Taobao built a system of its own called V Task: merchants post jobs, creators take them, content goes out, results are tracked, commissions are split. Like a professional ad exchange, the whole process runs inside it.

Taobao says that over the past year merchants on the platform have paid creators more than 1 billion yuan in commissions, and that in the third quarter the figure topped 100 million yuan every month. It has never disclosed how much Taobao itself makes from the process.

Livestreaming to sell goods on Taobao now earns Dawenzhi a steady 20,000 to 30,000 yuan a month in commissions. That is what remains after her internet-celebrity incubator and Taobao have each taken a cut:

as she understands it, the commission a merchant puts up is first docked 20% by the company, then 10% by Taobao, and the remaining 70% goes to the creator. Across the jobs Dawenzhi has taken, merchants' commission rates have run from 5% to 50%.

Creators sometimes recruit merchants in reverse as well: by Dawenzhi's account, they propose themes and invite merchants to post jobs against them. "But when we apply for that kind of reverse recruitment, we can't currently see the status of the application on the platform. I also think creators aren't sorted finely enough — sometimes we get jobs that make no sense for us."

Because V Task splits revenue by actual sales, content marketing has become a fairly safe business for merchants and for Taobao alike: however much time and effort a creator spends making content, and however good the result, if it brings no transaction, not a cent of commission is owed.

Even a media "creator" with as much weight as Hupu Shihuo has to mind its reputation. As in the ratings system Taobao has run for years, creators and merchants can rate each other once a job is done. Dong Xiaoqi says that because the brands they work with are mostly quite happy with the promotional results, and thanks to the team's careful maintenance and follow-up, Hupu Shihuo has held a perfect 5-out-of-5 rating on V Task — not an easy thing.

Dawenzhi thinks the system still has holes. "Taobao creators" who have opened their own stores, for instance, can hawk their own products and also slip them into the jobs they do for other merchants, and still collect a share of the commission.

She has heard that in the small world of Taobao Live, someone livestreaming goods from their own Taobao store can make 200,000 to 300,000 yuan a month. Since she finds it easier to monetize than other livestreaming platforms, she is planning to open a store on Taobao and sell things herself.

But once she shifts from a "creator" courted by the platform and by merchants into an "internet celebrity" Taobao seller, what she faces may be a far more complicated set of rules.

In the next piece we will look at how merchants large and small on Taobao are being affected by this new set of "content-ization" rules.