China's short video war: WeChat invests in Channels to take on Douyin and Kuaishou in battle for eyeballs and advertising spend

The fight for the attention span of short video viewers is heating up in China, and it is turning into a slugfest between WeChat, the ubiquitous super app operated by Tencent Holdings, Douyin, the domestic version of TikTok owned by ByteDance, and Hong Kong-listed Kuaishou Technology.

When WeChat gave animation artists Zhang Xiaoying and Qin Yun an opportunity to try out the platform’s short video feature Channels in the summer of 2020, the duo were quick to jump in even though videos of Yutaixian, a fish character they created, had already snagged the interest of users on rival platforms such as Douyin.

And their decision paid off. The video account of Yutaixian, a fish with a pale blue body and human limbs, attracted 250,000 followers on WeChat, with some of the most popular videos getting over 100,000 likes. While Yutaixian’s following on Douyin is 10 times bigger, Zhang said the WeChat Channels move “completed” the character.

“On WeChat it’s more than a video character. We’ve created a personal WeChat account for Yutaixian, where Yutaixian adds his own friends, interacts in group chats and posts on Moments like a real person. For other platforms we simply update the content,” said Zhang.

Yutaixian, which literally means a fish that has too much time on its hands in Chinese, talks in his videos about a reluctance to go to work and a desire to herd cattle instead. The character is Zhang and Qin’s attempt to capture the mood of many modern day workers in the country, who want to slow down the pace of their hectic work schedules to catch their breath.

The WeChat success and resonance with everyday people has given the character’s creators the confidence to further explore commercial opportunities, such as live-streaming and selling Yutaixian-themed products on Channels.

Watching short-videos, recommended by algorithms, has become a hugely-popular online activity for China’s netizens. Photo: Shutterstock

Zhang and Qin’s team is among a growing number of content creators in China seeking to leverage WeChat’s vast user base – which stands in excess of a billion monthly active users – via videos and live-streaming. As such, the Channels function is increasingly being seen as the app’s future, if it can fight off the likes of Douyin.

It is a battle that could shape the future of China’s internet industry landscape.

Watching short-videos, recommended by algorithms, has become a hugely-popular online activity for China’s netizens, leading to increased investment in the space by almost every big Chinese tech firm.

Meanwhile Douyin, conceived as a short video app and which now has over 600 million daily active users according to the company’s data, is taking the fight in the opposite direction by extending into gaming, social media and e-commerce, squaring up to the likes of Tencent and Alibaba Group Holding, owner of the South China Morning Post, in their own backyards.

As a response, Alibaba has boosted its live-streaming and video content on marketplaces Taobao and Tmall to woo consumers, whereas Tencent has added the Channels video function on WeChat to turn what was a traditional text-and-voice based communication tool into a fully-fledged video platform. With Channels, WeChat now provides the same endless flow of short video streams to consumers as Douyin and Kuaishou do.

Channels opens up new opportunities for Tencent, as the platform can tap more advertising and live-streaming e-commerce revenue streams from the growing short video user base. QuestMobile data shows that short video was the most popular medium for advertisers in the first half of 2021, taking up nearly half of total advertising revenue for the media industry.

However, Tencent has been cautious in commercialising Channels immediately and has focused on gaining more users to drive advertising revenue over the long term. “Monetisation is not a focus for now,” Tencent president Martin Lau said in an earnings call in August. “We know that at some point in time, there will be monetisation because the mechanism is well established in the industry.”

Channels, which is still subject to beta testing following its 2020 launch, celebrates its second anniversary this month and it is clear that Tencent plans even more aggressive efforts to woo content creators using WeChat’s enormous user base as a carrot.

As promised at the app’s annual developer event earlier this month, WeChat launched paid live streams on Channels on Monday, with the National Basketball Association (NBA) account the first to try out the new function.

Previously all videos on Channels were free to watch, from seconds-long videos to hours-long live concerts. But in the case of NBA games live-streamed on Channels, WeChat users will have to pay to watch the whole game. Users can only enjoy three minutes of the game for free before they are asked to pay 90 WeChat beans, equivalent to 9 yuan, to continue watching.

That compares with Tencent’s long video-streaming arm, Tencent Video, which currently charges users a subscription of 25 yuan per month or more to access NBA games and content.

As such, Channels opens up another revenue gate for content creators by offering a subscription-based fee model alongside advertising and live-streaming e-commerce, which traditionally provides the bulk of revenue.

The WeChat team has also said that it intends to launch tipping or fee-charging features for short and long videos and live streams on the platform, as part of the app’s efforts to expand monetisation channels for content creators.

‘I think WeChat is disadvantaged by an inferior algorithm versus Douyin and Kuaishou, which is so easy to use and addictive,’ said Mark Tanner, managing director at Shanghai-based consultancy China Skinny. Photo: AP

At the app conference, the team announced a series of incentives to encourage “original creators” to come on board. It vowed to distribute user traffic to 10 million original creators, including those with no current followers, and give cash awards to 1 million high quality creators over the coming year. Similar incentives have already been promised to established influencers on rival platforms to join Channels, the WeChat team said.

These aggressive platform expansion plans contrast with WeChat creator Allen Zhang’s grassroots approach in the early days. Speaking at last year’s conference, Zhang said that Channels had declined to pay celebrities to join the platform because he believed that “the creativity of ordinary people is enormous, and bought content will not necessarily strike a chord with our users.”

However, although Channels has continued to grow its grassroots creator base in the past year, the first content to take social media by storm was a live-streamed concert by Irish boy band Westlife, which was extremely popular in China in the early 2000s. When streamed on Channels in December, the concert attracted an audience of 27 million and eventually generated 170 million views, exceeding the expectations of the team, according to the company.

A few days later on New Year’s Eve, an online concert by Mayday, a Taiwanese pop rock band, attracted 16 million views on Channels.

And it seems like smaller influencers are finding it hard to kick-start their Channels account, as they are not on the receiving end of a boost from the platform’s algorithm, as is the case with Douyin.

“The distribution mechanism of Channels is very different from Kuaishou and Douyin. It’s very hard to start to build a Channels account from scratch. The algorithm is not very friendly for beginners,” said an agent surnamed Wang, who manages a multichannel network (MCN) agency based in Beijing. Wang did not want to provide his full name for this report.

Wang explained that while Douyin’s traffic is more like a public pool where everyone can swim and compete with each other, making it much easier to create a really popular account overnight, WeChat’s video channel relies on connections between friends and relatives.

When you are scrolling through Channels, you are likely to see the videos that your friends have liked, but this video-spreading chain “can be very easily cut”, according to Wang. For example, when your parents see the video you liked, they may not like it because they have different interests. As such, the chances of the video being recommended to your parents’ friends are low, he explained.

Wang’s early attempts to grow a presence on WeChat Channels for his influencers have not yielded impressive results, and although he is still uploading videos to Channels, he does not want to invest much more effort into it.

“I don’t want to put too many resources into Channels,” said Wang. “This problem was encountered by many other influencers and has made them reluctant to move [from Douyin to Channels],” he said.

Channels had accumulated 200 million daily active users as of June 2020, but WeChat has not provided updated user numbers since. However, third-party analysis shows that the daily active user base may have reached 450 million by the middle of October last year, and approached 600 million by the end of 2021, compared with Douyin’s publicly declared total of over 600 million daily active users in China.

“I think WeChat is disadvantaged by an inferior algorithm versus Douyin and Kuaishou, which is so easy to use and addictive,” said Mark Tanner, managing director at Shanghai-based consultancy China Skinny. “WeChat is much more old fashioned and relies much more on user pull and [Channels] is one of many services on the app, rather than the primary [one].”

However, some video makers are still putting their faith in Channels as part of the overall WeChat ecosystem, which remains a major part of life for Chinese netizens, from socialising to shopping.

Cai Zonglin, general manager of Guangzhou Tunda Software which helps businesses run accounts and shops on WeChat, has set up a video account featuring one of his employees talking about the life of a programmer, and has also trialled selling oysters through Channels. Cai happened to know a good local source for oysters and said it fits with the trend of helping rural areas sell more fresh produce via live-streaming.

“We’ve had a lot of inquiries from clients about how they can leverage Channels, so we carried out our own trials first to understand it better,” said Cai.

While Cai faced difficulties in kick-starting his programmer video account, oyster sales exceeded his expectations by bringing in over 20,000 yuan in less than two weeks.

“I still think it’s worthwhile to continue our investment in Channels, as it’s part of a healthy ecosystem that has components like mini programmes and Moments to help us reach more people,” said Cai.