Where Has All the Chinese Internet Traffic Gone? – Business Solutions to Content Overload in China

The Chinese content market offers a fascinating comparison to the rest of the global Internet. According to research by KPCB and Hillhouse Capital, Chinese Internet users numbered 688 million by the end of 2015. Sina Weibo, China’s Twitter clone, saw its market worth catch up to Twitter at around 11 billion dollars in 2016. Tencent, the owner of popular social messaging app WeChat, achieved a market capitalization of $242.04 billion in August 2016.

An underlying factor to consider in understanding China’s online content market is its unique appeal to readers. The Internet offers Chinese users more space for free expression and access to news than offline. That unique appeal translates into more eyeballs and advertising revenue, and Chinese businesses have been fighting fiercely over the prize. Here is a snapshot of two notable trends in China’s mobile content apps market, currently dominated by WeChat but remaining open to ambitious and nimble startups:

Information overload

Like elsewhere, content has exploded on the Chinese Internet and harmed user experience. For example, the Financial Times ran an article in April 2016 titled “Overloaded China users battle ‘WeChat fatigue’” stating that many of the app’s 806 million users find WeChat content, distributed through channels which include 13 million official accounts, “overwhelming and useless.” According to academics at Fudan University and Guangdong Foreign Language University, China’s top mobile news apps, such as Tencent and Sohu, suffer from the same malaise of overflowing information that is badly organized and comes with little personalization. One important demographic factor underpinning this problem of too much content chasing too few viewers is that the growth in both users and time spent on the Internet has been flattening, according to the tech site Huxiu.

User response in turn has been punishing. According to a year-end report on the “WeChat Ecosystem” by Yeezan, a digital media service platform, official accounts are losing followers and page views; featured stories at popular accounts (some with millions of followers) see an 8.9% click-through rate. Dishonest tactics attempting to cover up such decline illustrate the extent of the problem. Reports of faked clicks and bought “zombie” followers to the tune of 1,000 for $3 on WeChat went viral in September 2016.

Solutions to information overload reshaping the content space

In some fascinating ways, WeChat is illustrating the possible outer limits of content distribution via social networking. Chinese commentators have pointed to sources of strain within WeChat that are likely contributing to its declining reach:

1. As social grows, quality slumps:

Both the quality and personalization of the information users receive tend to decline as social network broadens and content from less familiar contacts dilute the information stream, until the stream explodes by several orders of magnitude;

2. Winner-take-all:

The of traffic flows to a small number of top influencers, and the cost of acquiring followers is increasingly steep for latecomers.

3. A laggard in algorithm adoption, WeChat still largely relies on a timeline structure with minimum filtering.

Users have been flocking to curation that pares down content in ways tailored to their preferences. Jingri Toutiao (“Today’s Headlines”), the 4-year-old newcomer mobile news app that has gained an impressive advantage over competitors from traditional portals (such as Netease, Sohu and Tencent), solves the problem using algorithms with impressive success. It now boasts 580 million users, 63 million active daily users, and some of the longest average daily use time in the industry. Tencent News comes in a remote second, with 120 million users.

Consequently, there are now signs that the news industry is investing in algorithms and moving away from human curation. The Chief Editor at Sohu News, for example, is leaving the company, and CEO Zhang Chaoyang admitted to reporters that they are reorganizing the editorial team to take advantage of machine curation. Zhihu, Quora’s Chinese equivalent, stopped having its team of professional experts curate answers, throwing open the door to all users to crowdsource recommendations.

What next?

From the point of view of Chinese users, there is a lot of room for improvement. In response to declining reach, advertisers have been pulling back from WeChat. The WeChat team is now getting its toes wet in developing algorithms and intervening more actively in content distribution. One analyst pointed out that, even though the company is sitting on a goldmine of data comparable to that of Facebook, only 10%, or $514 million, of Tencent’s overall revenue comes from advertising, of which WeChat’s advertising income is only a portion. Similarly, despite its vaunted technical edge, Toutiao’s content customization is rudimentary compared to Facebook’s FYI. Yidian, Toutiao’s acknowledged rival that just received D-series funding, is vowing to improve user experience with a combination of search, human and machine curation. A head-on collision between WeChat and upstart rivals may be hovering on the horizon, and bear close watching. A lot of money hangs in the balance.




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