May 18, 2018

Social Media in China - Douyin Attracting Brand Spending in 1H18

700 HK, BABA, TCEHY, WB
By Wei Ying
Douyin is attracting robust spending increases as it enters the digital media scene in China with its popular short-video platform.

In 1Q18, Douyin became the new platform attracting advertisers’ social spending with its fast-growing daily average user (DAU) numbers and broad-based acceptance by users in tier-1 and -2 cities. Douyin was incubated by Beijing ByteDance Telecommunications Co. Ltd.’s Toutiao, a popular news aggregation platform.

The phrase “Two Ws and One Dou”, referring to Weibo Corp.'s Weibo, Tencent Holdings Ltd.'s WeChat and Douyin, has been the new slogan for social spending strategy among digital agencies since the beginning of 2018, with the addition of Douyin indicating the platform’s rapid emergence. “We recommend advertisers leverage Douyin because it has garnered the attention of many well-educated, young consumers in tier-1 and -2 cities,” a Beijing agency source said. Another said, “Just before the Chinese New Year, I got swarmed with requests about how to spend more on Douyin.” So far, Douyin has attracted spending from online gaming, telecommunications, fast-moving consumer goods (FMCG) advertisers, as well as international brands such as Nike Inc. and Adidas AG.

Currently, Douyin’s top advertising inventory is represented by newsfeed and open-screen advertisements. According to sources, open-screen and newsfeed advertisements have garnered robust pricing for available inventory.

Douyin Helping FMCG Brands Drive Conversions
An FMCG brand manager said they’re increasing advertising budgets on Douyin for a new product during the first half of 2018 but have already opened a Douyin account and are running several short-video advertisements. Interestingly, the source also noted that they are targeting variety show stars to promote their products on the star's Douyin accounts.

In March 2018, Douyin announced plans to link its platform with Alibaba Group Holding Ltd.'s Taobao ecommerce platform to help ecommerce advertisers drive more conversions. An FMCG source suggested that despite Douyin’s shortcomings in user tracking, the partnership with Taobao has allowed more insight on conversion rates for Douyin advertising. “We cannot check how spending on Douyin has converted to sales as effectively as we’d like. But as products become more popular on Douyin, it has translated to more sales on Taobao,” a source said.

Another source was also intrigued by attention given to advertisements by users in the comments section where users can discuss video content and interact with advertisements. “Some Douyin users said what we wanted to hear and commented on our products we were advertising,” a source said. “Honestly, we have no idea if they are real users or digital robots, but our boss loves it and therefore we’re increasing spending on Douyin.”

Competitors Taking Notice
In OTR Global’s 1Q18 reports on Weibo and Tencentmany sources reported that both Weibo and Tencent’s social media advertising budgets are facing competition from Douyin. “Weibo users are shifting time spent to other emerging short-video apps like Douyin. I heard many advertisers who shifted their spending from Weibo to Douyin in 1Q18,” one Shanghai source said.

In response to the emergence of Douyin as a competitor, Weibo blocked its link to Douyin to avoid users leaving. Tencent also responded with the launch of its own short-video platform, Weishi (We-Video), in April and plans to make large investments in content creators to expand its network of publishers.

Risks to Watch
Douyin is the dark horse in China’s media industry, and sources noted other hurdles facing the platform, including immature user tracking and government censorship of video content limiting the user experience.

Sources said there is a need for more transparency on user tracking and further development of Douyin’s advertising resources. “Douyin’s sales team has aggressively approached us and we are considering doing more. But it’s still difficult to track users, and their advertising resources are somewhat limited. Transparency into available inventory has also been a challenge,” a source said.

As do other digital media platforms, Douyin faces the risk of government regulation and censorship. Sources said because controlling video is more difficult than text, the government may be restricting accounts, which reduces the number of videos that run on the platform and results in videos being recycled. Some of Douyin’s leading accounts have recently been shut down and its user-generated content has become less robust. “Now all of a sudden there is less content, and within 20 minutes, the video you watched three or five days ago is showing up,” one source said.

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