Why Does Everyone, No Matter What They Sell, Now Insist on "Making Content"? | QDaily 2017 Trend Watch, Part 3

The essence of content is value. It demands real labor time from whoever makes it, and that is both a sign of sincerity and a mark of credibility.

Fast-fashion-ification, rising purchase frequency, middle-class insecurity, demand reshaped by demographics... In 2017, four words — "consumption upgrade" — are no longer enough to grasp where business is going.

QDaily's 2017 Trend Watch series looks at these questions from four different angles, one per article. This is the third: everyone is talking about "making content" — but what do they actually mean?

"Everyone is the director of their own life." "Everyone is a news reporter." These phrases may sound familiar. But as the internet has developed, we've found that the world has turned into one where everyone wants to make a bit of content.

The fuller version goes like this: the internet is badly fragmented and the audience's attention is scattered, so a lot of people have found they can no longer get by simply selling things directly. Instead they look for ways to gather a crowd first, and work out what to sell that crowd later.

That is how "making content" became the hottest phrase in "internet operations" in 2016.

Ask what "making content" actually means and probably no one can give you a clear definition. That hasn't stopped anyone from reaching for the term at every opportunity — Taobao's various sections, "Taobao Headlines" among them; Xiaohongshu's endless "must-buy lists"; marketing official accounts of wildly uneven quality; and of course no shortage of videos (dressed up as "lifestyle aesthetics"). To reach an audience faster, the best method is to use internet celebrities (wanghong) and KOLs — though no one has ever actually calculated how much value they deliver.

Their shared aim is to catch the eye of consumers drifting around the internet. So it was inevitable that working out "how to engineer a viral hit," or riding whatever is trending, would become standard practice. When the Wang Baoqiang divorce case was dominating the news, Taobao sellers of everything from children's bicycles to women's shoes rushed out posts on the topic — and Taobao itself bundled them together and gave them a prominent entry point in the waterfall feed of shops a user follows.

Why is everyone piling into a solution that, in fact, saves no effort at all? Beyond churning out cookie-cutter fake headlines, what else does it do?

"Making content" is, in fact, an extremely old idea. The tire maker Michelin started building its brand through the Michelin Guide 100 years ago. LV has published its City Guide since 1998. Red Bull was so good at marketing that in 2007 it set up a separate media company devoted to content. And then there is the clothing brand Benetton, which most people know nothing about: it produced one of the coolest magazines in the world, COLORS (rumored in 2015 to have folded; it has gone nearly a year without a new issue).

The trend caught on for two reasons. First, social networks set a very low barrier to making content. Second, and more important, the power of those networks means such content can reach a number of people that has no precedent.

Take WeChat official accounts as a short illustration.

Technically, posting to a WeChat official account isn't very different from the old-fashioned blog. But blogs had no snowballing distribution mechanism — to keep following someone you might have needed an RSS tool. Official accounts changed things for most people who "wanted to make content but had no platform to do it on." And marketing tools like Guangdiantong, Tencent's ad-placement platform, let an account build its first batch of users at fairly low cost. At the same time, the gray areas here are so vast that faking the numbers is just as cheap — the traffic-inflation scandal that broke at the end of 2016 is the best proof of that.

But this is only what happens inside one ecosystem. If you treat every WeChat official account collectively as "content," then for WeChat that content is merely one way of sustaining traffic. WeChat has no real intention of cultivating content, and no sense of responsibility toward it; it simply wants to draw in as many content providers as it can, as comprehensively as it can.

Yet the method looked so effective to platforms such as Alipay, Taobao, Toutiao, Douban and the portal sites that they all raced to copy it, hoping to reproduce the same traffic boom, or at least to keep a grip on some of users' attention.

That is why you saw so many kinds of "subscription accounts" in 2016.

We've noticed that while more and more people claim to be "making content," genuinely valuable content has not increased at anything like the same rate. Consumers are still lost in an ocean of information, nowhere near finding a sensible source. Meanwhile "making content" has shifted from a marketing orientation to a far more direct sales orientation: the people supplying the content are themselves the sales channel. Where there is no content, content must be manufactured.

Two forces pushed "making content" to its peak this year. One is Alibaba. The other is the big fast-moving consumer goods (FMCG) companies.

As the traffic hub of the Chinese internet and one of the most influential voices in business, Alibaba turns whatever it does into the center of discussion — all the more so once it raised "making content" to the level of a "major strategic shift." The FMCG industry, meanwhile, holds the largest pool of marketing money, which makes it the bellwether for any stirring in the marketing world.

What the two of them have done explains the second reason "making content" took off: after exhausting their attempts to replicate offline experience and to bring in personal relationships, e-commerce and FMCG companies alike are trying to "find new scenarios."

Business just isn't as easy as it used to be.

Once Alibaba entered, "making content" was finally pushed to its climax

As we analyzed in "Taobao Keeps Insisting It Wants to Make Content — How Did This All Happen?," this is the first time in more than a decade of operating that Alibaba has rethought, from a different angle, exactly how it ought to "do e-commerce."

According to Alibaba Group CEO Daniel Zhang, Taobao makes content because "we want users to be able to spend time here, filled with the joy of discovery. But how do you produce that joy of discovery? At its core, this platform has to keep creating new products, new objects of consumption, new information to consume, new content."

In essence, this is a search for ways to lengthen the time consumers stay on the platform and increase how often they shop. So Taobao's old entry points organized by category — men's wear, women's wear, bags, sports and outdoors — have been replaced by sections such as "Good Stuff," "Love Shopping" and "Must-Buy Lists." Over this year Alibaba also redesigned the mobile Tmall app (to give the content sections more prominence), held the offline Taobao Maker Festival, launched "Taobao's Second Floor", and opened "livestreaming" sections in both the mobile Taobao and mobile Tmall apps.

Alibaba says it has also opened a 2-billion-yuan fund pool, which mobile Taobao plans to spend over the next three years recruiting and rewarding content creators. These producers will make "content" — posts combining text and images, or livestreams — for merchants and products on Taobao.

What makes content urgent for Alibaba is this: since 2013, the growth rate of Alibaba's quarterly GMV (gross merchandise volume) has fallen from nearly 70% to under 30%. Blame for that quickly spread through the industry as received wisdom about the traffic dividend hitting a ceiling; you heard "the traffic dividend is over, the hard traffic battles are getting harder" everywhere. But the so-called traffic dividend had its own problem with ineffective, even fake, traffic. The deeper issue was never the size of the traffic but how well it converted. In fact, over the same period that Alibaba's GMV growth was slowing, both its total traffic and its registered users kept growing.

Alibaba believes "contentification" can solve the "conversion rate" problem. One version of the logic runs like this: Alibaba pushes "content" to consumers based on their product-browsing data; the data generated when consumers open and read that "content" flows back into Alibaba's database; through this repeated collection, Alibaba deepens its grasp of what consumers like, which allows more personalized and more precise pushes, and in the end raises the conversion rate.

Ultimately this is about seizing more of the consumer's time. From that angle, Alibaba's rivals are not only JD.com or Amazon but also social media such as WeChat and Weibo. JD.com opened a livestreaming section in September and, in the same month, announced a strategic partnership with Toutiao to embed JD.com products inside Toutiao's articles — including a fashion show called "JD Made" staged in London. The logic is the same: hoping that more content output will capture more of users' attention and time.

Once Alibaba began making content, its spillover effect as the hub of Chinese internet traffic showed itself quickly. Almost overnight, everyone came to believe that making content was the right direction, and resources of every kind were mobilized faster than anyone imagined.

The "contentification" Alibaba is doing now is, to a degree, the operating model once used by shopping-guide sites such as Meilishuo, Mogujie and Xiaohongshu. But "content commerce" drew so much attention this year, rather than in 2014 or 2015, because of the arrival of a far bigger player. What Alibaba did convinced people that making content might really be the future.

Another question deserves just as much attention: as more and more big internet companies get into "contentification," how are the smaller e-commerce players supposed to find a direction? Mitao.com, once seen as a leading cross-border e-commerce site, shut down for good this year. For most e-commerce sites the biggest challenge will be holding on to the users and content creators they already have, and keeping their best creators from being lured away by Alibaba's "2-billion-yuan reward fund."

Similar stories have already turned up in our earlier coverage. And the integrated "content-plus-commerce" model Alibaba offers since its pivot to content has begun turning some content creators into Taobao sellers themselves.

FMCG companies are making content themselves, also hunting for new consumption scenarios

Just as Alibaba spent years replicating offline models and is now trying to find new consumption scenarios through content, brands — the big FMCG companies most of all — are trying to find new points of connection with consumers the same way. And looking at Alibaba's ever-deeper strategic partnerships with FMCG giants like Procter & Gamble, Unilever and L'Oréal, it is hard to say these two forces haven't been fueling the "making content" trend together.

You have probably heard plenty of these enviable-sounding stories already. A livestream Li Yuchun did for L'Oréal at Cannes sent the matching product sold out at L'Oréal's official online flagship store within 4 hours. Internet celebrity Zhang Dayi went live on Taobao Live with her "My Beloved Wardrobe" stream and reportedly booked 20 million yuan in sales within two hours...

But no one discusses what all this costs, and whether it can last gets ignored just as easily. In the words of L'Oréal UK managing director Adrien Koskas, what brands want today is "to build special relationships with opinion leaders, and use them to convey the brand's message and create good content," because those figures have built emotional ties with consumers that are hard to replace. Over the past year the French cosmetics company has signed up "internet celebrities" one after another around the world.

L'Oréal USA has gone as far as co-producing a beauty reality show with YouTube, declaring that it wants to cultivate "the next generation of internet celebrities." In the past year alone, Procter & Gamble ran no fewer than ten livestreams for its various brands. Unilever announced U-Studio in September, making it the second FMCG company — after PepsiCo formally opened its content studio Creators League this year — committed to marketing its products through TV dramas, films, games and music. The British personal-care brand Lush announced plans at the end of this year for a 24-hour TV channel, and the company's chief digital officer, Jack Constantine, told the press flatly, "Lush doesn't just sell products; it can also be a reliable source of information." And Mondelez stated outright, at an advertising industry forum in Shanghai, that "the product is the content."

As we analyzed in our "What Changed the Advertising Industry" series, young people moved first from the television to the computer, and are now scattered across all kinds of apps. The phone has become the thing clutched in the hand, and "entry points" to information are everywhere. Time has fragmented, information has fragmented, and the audience's attention has fragmented with them.

Besides carrying no risk of being blocked, content — a post, a video, a VR experience — usually carries more information than a display ad. It can take up more of a consumer's time, which also means cutting the time that consumer might have spent with a competitor.

Beyond that, making content has become the marketing method no brand wants to fall behind on, and has been given such an important place, largely because social media changed how people react to information: marketers want to see more reposts and shares. "Making content" is also an excellent way for a brand to project its values, which is thought to work on a younger generation that "consumes according to shared values."

But Rob Norman, 25 years in the advertising business and now global chief digital officer of WPP's GroupM, sizes it up this way: "I think what they're doing is placing a bet — betting against the whole industry."

This wave of "making content" — is it an end, or a means?

The oldest forms of "making content" might be a book, a TV program, a magazine, a newspaper, a news report. All of them are, at bottom, a medium. And to make money, these media had to attract more advertisers by attracting more readers. In that process "content" is only an intermediary; it sits a long way from the eventual sale.

In that setting, the marketing path usually ran in this order: media content (trustworthy) → advertisers are drawn in → an ad is made and published (back on the medium) → (the consumer) finds a place to buy → the sale is made.

But the content wave of 2016 differs from the old media at the root. The content makers named above, Alibaba and the big FMCG companies among them, are sales companies in their nature, and their final mission is to sell goods, sell goods, sell goods.

The other kind of company that joined the content wave, smaller outfits like Wu Xiaobo Channel and the video outlet Yitiao, did exactly the reverse: they put out content first, using the resources they were already good at, then converted content consumers into consumers of goods, so that "e-commerce" became the business model. The model looks so encouraging because it satisfies nearly every fashionable feature of online selling: precision marketing, a complete ecosystem, and sometimes a chance to ride the buzz around the "fan economy."

Alibaba and the small companies alike have created a new sequence: a person (trustworthy or not) → the person publishes opinions and information (so-called content) → the person is selling something (the sale is made). Content has become a means, not an end.

That goes a long way toward explaining why so many "formulas" have appeared. In part it is because the creators have had no reliable training (media people who've switched over are the exception, though that brings problems of its own). In part it is because innovation in content looks like poor value for money, since what is wanted most is speed and scale, not quality.

Everyone is making content — good thing or bad?

When content is produced only to generate more transactions, it tends to create a bubble in content itself.

Take movie-ticket O2O as another example. Companies including Maoyan, Gewara and Weipiao set out simply to sell movie tickets online; they handed out heavy subsidies and cut prices to pull in users. Movie tickets are among the easiest goods to digitize, with no logistics cost at all, so apart from promotion the only thing these companies had to pay for was the terminal machines inside the theaters.

They soon entered the process of contentification — they were simply too close to content to have any reason not to claim it. A product like Maoyan poured money and effort into content: a rating system, descriptions, feature retrospectives and a large volume of film reviews.

That line of business hit a bottleneck fast. Not only was the sales conversion driven by content uncontrollable, and small in total, but the competition outside was too fierce, with countless others offering similar content — while all the consumer wanted was to find a suitable showtime and seat, buy the ticket and go.

On the other side, riding trending topics to churn out mediocre, harmless content in bulk, or manufacturing trending topics with no bottom line at all and producing sensational content to grab eyeballs, can only make the information environment worse.

The essence of content is value. It demands real labor time from whoever makes it, and that is both a sign of sincerity and a mark of credibility.

What we want to say is this: if a company cannot offer a good product or a good service, then once the enthusiasm for making content dies down, the company will not have gained any core competitiveness, and its audience will scatter just as fast. That isn't even the bad part. The worse thing is that every problem the enthusiasm for content temporarily covered up will still be there, not one of them gone.

Cover image from Pixabay