Tencent-backed Kuaishou is the 5th largest social media app in China in terms of monthly active users. It’s a short video app similar to Douyin (TikTok is the international version), which is the 2nd biggest app in China after WeChat. The two apps are a bit different in that Kuaishou has a stronger hold on audiences in lower tier cities and rural China and has a wider range of content representing the daily life of the average person who lives outside larger cities. It’s also become a niche live commerce app for a unique group of retailers.
The Evolution of Kuaishou
Kuaishou was first developed in March, 2011 as a GIF-making app. Its founders were Cheng Yixiao, who was building programs to make small animated pictures for smartphones. The app’s first investor was Fisher Zhang.
In November, 2012, it pivoted to become a video clip app like Vine. It’s interesting to note that Vine was founded in June 2012 and had already been acquired by Twitter but it didn’t officially launch until January, 2013.
Kuaishou’s content remained a motley collection of low quality clips until former Google and Baidu engineer Su Hua came on board and built an algorithm to push personalized content to users based on their viewing preferences and behaviour. Then user numbers started to grow exponentially.
Kuaishou closed a US$350 million investment round led by Tencent in 2017 and purchased online video platform AcFun in 2020. Then in January, 2021, the company’s IPO raised more than $5 billion US.
Cheng Yixiao is now in charge of product, Fisher Zhang is a director and the chief executive is Su Hua.
Now, it’s primary competitor is Douyin. Douyin has around 120 million more daily active users than Kuaishou. It’s more popular among young people in higher tier cities and is more focussed on trends and pop culture and has more music-related content. Kuaishou attracts an older crowd and, while its users used to be almost exclusively those in the countryside and lower tier cities, it has moved beyond this audience and gained ground in higher tier cities.
Share of Kuaishou users by city tier, December 2020
It’s interesting to note that in 2017, Su Hua was about to acquire a video app startup when another company came in with a better offer. The app was called Musical.ly and went on to become Douyin/TikTok and the company that snapped it up was ByteDance.
Kuaishou has had its ups and downs along the way. In 2018, there was a crackdown on the app because it contained a lot of questionable content. It was instructed to remove misleading medical ads and material that was “vulgar, violent, gory, pornographic and harmful”. It also came under fire for featuring content about teen mothers that was seen as promoting or encouraging it. It was removed from the app stores and updates were blocked until the changes were made. The company also hired more people to filter content as a result of the changes.
E-commerce and Business Model
Kuaishou is a social commerce app. Tips are the biggest part of Kuaishou’s income. Viewers pay tips directly to creators or buy virtual gifts for them and the platform takes a commission from these payments. According to a report in Fortune from February, 2021, this made up 62% of the platform’s revenue in the first half of 2020. 33% of its revenue is from advertising.
The platform moved into e-commerce in 2018 and although only about 5% of its revenue, or around $315 million US, is from e-commerce, it’s still one of the biggest e-commerce players in the country when looking at GMV (gross merchandise volume). It’s also the second largest livestreaming commerce app behind Taobao, but it keeps its service fees very low so this is why it doesn’t make more revenue from this part of its business.
Following the path of many global tech companies and online platforms before it, the Hong Kong listed company has never been profitable, isn’t expected to be profitable before 2022 and recently suffered losses amid rising costs.
Kuaishou Becomes the App of Choice for Livestreaming Farmers
Farmers had been livestreaming on Kuaishou to promote and sell their produce since 2017 or earlier, but the app really picked up steam and became a lifeline for them when Covid hit. This is also when livestreaming sales really took off across the country and farmers across the country turned to the app to sell their produce directly to customers who were looking for fresh food.
By mid-2020, the app’s daily active livestreamers hit 170 million, up 70 million from the end of 2019 and with 70% of them under the age of 30.
Where is Kuaishou now? Where is it going?
Kuaishou has made no secret of its plans to expand outside of China and developed several international versions of its app that are all very similar to its biggest competitor, TikTok.
One is called Kwai. It really caught on in South American countries like Brazil, where it ranks number 1 in the App Store. However, it was banned in India. Another, SnackVideo, has gained a foothold in Indonesia where it ranks 22nd in the App Store.
However, it didn’t do very well with an app called Zynn in the United States and Canada. ByteDance’s TikTok is dominant in the short video space there so it was hard to gain traction. The app was also controversial because it paid viewers to refer friends and to watch content and there were also frequent complaints about material and even entire channels being copied from other platforms without permission. It was pulled from the App Store in early June, 2020 and in August, 2021, it shut down the app entirely.
So it is pushing ahead with investment in Kwai and SnackVideo to maintain its gains in these markets and it has opened an office in São Paulo in 2019. This has seen it’s sales and marketing expenses rise to 69% of revenue in the first 3 months of 2021.
Kuaishou has taken its competition with Douyin and TikTok to the international stage with wins in some regions and losses in others. It’s maintaining its position in China with its key stronghold still being in lower tier cities. Interestingly, this is a market that many brands are looking to expand into given the less intense marketing scene and consumers who have more free time and more disposable income due to lower levels of competition and less stressful working conditions.
To find out more about the Chinese market, trends and consumer groups, download our free report on China e-commerce and digital marketing Q3 2021.
The e-commerce marketplace is increasingly competitive and it’s important to understand China’s biggest social media platforms, their strengths and weaknesses and the role each plays. If you need marketing research and strategy in China, social media marketing, KOL marketing or digital advertising, feel free to contact us. We’re here to help.