Disclaimer: I am taking a bird's-eye view to analyze this issue, retrospectively.
I'm still trying to fit myself into the new team, and it's a bit overwhelming. I'm not one for dealing with clients... I'd rather silently write code and create value.
Chopin's works in G minor at ages 7 and 11 are full of charm and intrigue. His scherzo at 27, the Polonaise 'Heroic' at 32, the Waltz 'Little Dog' at 37, and his final composition in F minor at 39 show the evolution of his musical style throughout his life. It is summarized as follows: he retained his childlike innocence as a prodigious youngster, his adult compositions show wild agitation indicative of his uninhibited nature, and after gaining fame, he delved into deeper exploration, focusing less on technique (although he was never as obsessed as Liszt). Likewise, pianist Evgeny Kissin followed a similar trajectory. His youthful renditions of 'The Bells', 'Revolutionary Etude', and Rachmaninoff's Prelude in G minor could be performed in just over three minutes. However, his most recent G minor piece from 2017, takes nearly four minutes to perform, showcasing a much more delicate touch, a pursuit of something different.
This Soviet-born prodigy, Kissin, in a way, mirrors the journey of China's internet companies. They all started with a bang, then advanced rapidly, stabilized at high levels, and as their technological prowess aged, they shifted towards more nuanced operations. We are lucky to live in an era of relative transparency, where we can peek into how these companies consolidate their dominance after making a fortune.
I firmly believe that any entity capable of growth, due to the scarcity of resources, must go through several stages if the field is right - inception, growth, slowing growth, maturity, and decline. Because progress is inevitable (in my definition, progress is characterized by the highest level of technology and the most stable Nash equilibrium in a given period), it's just that the pace of progress varies in different eras. New companies will inevitably replace older ones that resist change. This is like the messy Java code in Minecraft; if you refuse to start over, you'll be taken down. Recent examples include the rise of Pinduoduo (especially in this time of economic stagnation and financial struggle, PDD's stock price is soaring) and Tesla, both posing challenges to established corporations. Companies out of step with the times and lacking the means to adapt, like diamond and chocolate companies (gift her chocolates if you love her), are filing for bankruptcy.
In recent days, I've been pondering the shift in China's internet landscape. I didn't see a single advertisement from an internet company during this year's Spring Festival Gala. The data from last year's Double 11 Shopping Festival (the Chinese version of Black Friday) was riddled with inconsistencies. If internet companies can't protect themselves, how can they expect to leech off brands? From 2021, job cuts began in the internet sector, peaking in 2022, with countless offers being revoked by major companies.
Yet, against this backdrop of universal austerity, livestream e-commerce is thriving. Even the Chinese chess community I follow, which was supposed to host the tenth game between Wang and Zheng on January 13, had to cancel because Zheng Weitong wanted to host a livestream sale for making money. This is the first time in Chinese chess history that a top player, who has ranked second for nine years, broke his word, and he dared not compete and even made arrogant remarks. Master Wang often says in his livestream that Zheng makes quite a lot of money from selling goods online and couldn't earn as much from his livestreams and competitions. But I've watched Zheng's livestreams, he doesn't speak much, a female host is always promoting products beside him, in essence, they are just exploiting his fame. That is to say, even in the economically challenging year of 2023, there is still money to be made in livestream sales (the sector really defied the odds in 2021 and 2022).
So, what I want to discuss is my understanding of livestream e-commerce. In a nutshell, I believe it is the ultimate tool for internet companies to monopolize targeted traffic when they have exhausted all other means. Here's why:
Let's take popular livestreamer Wei Ya (accused of massive tax evasion in December 2021) as an example. Her success rests on two pillars:
- Offering the
lowest priceon the internet. This is her and many other livestreamers' trump card. Without it, they would become irrelevant over time. - Promoting essential or frequently used high-quality products. This is a secondary factor.
In essence, the value of a livestreamer, like that of any business, lies in either saving money or saving time for customers.
So, why has the industry of livestream e-commerce become so popular?
Fundamentally, it's because people are running out of money, and resources are insufficiently distributed. The timeline and logic, I believe, are as follows:
- During periods of economic prosperity, brands participate in large-scale events like "Double Eleven", and they are also actively involved in bid ranking, and activities like being featured on the homepage. Brands would rather lose money for the sake of attention because people are not short of money and demand can be created by irrational consumption. As long as the product is decent and not too expensive, they can get a share of the market. Bid ranking is very strategic, using competitive human nature to grab more profit: previously it was competition within the same industry, now even different industries have to bid, increasing the competition tenfold.
- However, after the outbreak of Covid and the Russia-Ukraine war, and as the U.S. tightens after QE (Quantitative Easing), demand weakens globally. Consumption is low and various Internet companies are tightening their belts, doing everything they can to squeeze the last profit, which is not their fault, it's just game theory. Subsequently, brands discovered that even if they gave a lot of money to Alibaba for advertising, most of the traffic they received could not be monetized. After all, customers no longer had money. Even if they clicked into the store, they wouldn't make a purchase, so they stopped spending a lot on bidding.
- The retreat of the brands put Alibaba in a difficult position. As the largest intermediary in the country (yes, the essence of the Internet is
intermediation, earning advertising fees - I conservatively estimate that the advertising fee is more than ten times the commission of the products sold, although this data is in the financial report, but I'm too lazy to look it up), Alibaba needs to keep making money to ensure continued financing and prevent stock prices from dropping significantly (though it's already dropped significantly, from 225 to a low of around 80). So they began to exhaust every resource, trying to concentrate the highest quality traffic on the entire web. They stopped charging brands for bidding, and said: I can advertise for you, just put your products under my influencer to sell, I won't charge you any money, just guarantee me that your product will have thelowest priceon the whole network. - Thus,
live-streaming saleswere born. The advantage of this form is: the live room is there, 1 million people pass by, as long as 10,000 people watch for a while, and 3,000 people buy something, then this 3,000 traffic is the highest quality, targeted traffic, which is highly valued by brands. - Any economic behavior, in the absence of external disturbances, will eventually converge to a standard model, just like the law of large numbers. Here, the standard model is the final Nash equilibrium: Different brands see the benefits and start bidding again to get into the influencer's live room, eroding their own profits. Over time, the profits are all taken by Alibaba and the influencer team: compared to the previous bidding, this time Alibaba went even further, not only making brands pay for the influencers' slots, but also requiring them to offer the lowest price on the web,
losing money at both ends. The brands are devastated. And while they know this model is not sustainable, most choose to sell goods through live-streaming for a certain period, and then use the attention and fans gained to pave the way for future excess returns (Here's a little story, the influencer Little Brother Yang began to sell goods last year, soaring to great success, with his registered company's revenue reaching 100 million. One of the umbrellas he sold for 18 yuan (2 euro) was refunded by a fan saying it couldn't withstand wind, but all other qualities, such as sun and rain protection, were of high quality, and the umbrella handle was even made of solid wood - although it could be particleboard... But at a price of 18 yuan, it can be said that in the past, you could only afford one-third of an umbrella, so Little Brother Yang also played the emotion card, talking about how hard the brands have it...). - But how many brands have the funds to implement such a long-term strategy? Since live-streaming, countless small and medium-sized brands have been overwhelmed.
Drawbacks:
- Inherent in its logic, I believe the biggest issue is
traffic concentration. The resulting consequence is that service industries, which could absorb the most employment opportunities, such as sales, mall service staff, and intermediaries, face massive closures and job losses. During economic downturns, such traffic concentration gives the public only a few choices (while the public hopes for more options, the platform's power limits their ability to explore more), which is bound to trigger social unrest. No? Think about the context of the last unemployment wave (unemployment wasn't so severe for middle-aged people in 2022, just for graduates), consider how the Tangshan Stabber Gang was formed, and think about who succeeded in using the law to protect themselves when people struggle to eat? - Secondly, all industries, except their own, are seeing profit declines. This is akin to a
zero-sum gamein game theory: with limited flow and consumption, people are concentrated in live broadcasts, and brand merchants find that customers who search for their goods independently have significantly reduced. After all, the concept of "lowest price on the internet" has deeply rooted in people's minds, causing all industry profits to decline.
At this point, Wei Ya was fined a substantial amount. I don't believe Wei Ya really made 3 billion. The majority of it is bound to be devoured by Alibaba, which will surely offset the amount it used to earn by selling slots. If the anchor does not obey, Alibaba's platform advantage will surely terminate the contract and recruit a new compliant team. When traffic monopoly is so severe, the central government imposes fines as a warning to others. We won't discuss who swallowed the fines in the end. At least, it calmed Alibaba down a bit.
Now, do you understand why Bilibili let a talentless, charmless, and contentless creator like Hou Cuicui become one of the top 100 influencer? The essence of this is a platform with control over traffic, warning its other influencers to be obedient to it and help it make more money, or else they will suffer.
Bilibili warned all influencers of who is the final boss, telling them that they must get through Bilibili before cooperating with brand merchants, or else account suspension will become commonplace. Bilibili demonstrated its ability to make anyone famous through Hou, unless something unexpected happens, she will soon lose traffic, face account suspension, and then be bombarded with negative news. Remember Financial Wizard who was slandered and then banned? I must say, Bilibili knows how to deal with people after it experiences the great change in its shareholder, even though it would do so without it. But compared to the Financial Wizard, Hou is more pitiful. At least the Financial Wizard he is an elite in Chinese top investment bank and he could make money independently. His fans were mostly high-educated and intelligent people. Even if he was banned, it was only a matter of time before he regained the popularity.
Bilibili has made a person without any abilities famous. Through a clever construct, the final discussion topic became: does she really have the ability to be in the top 100? Instead of: why Bilibili did this. They successfully shifted the focus. Brilliant.
But the current situation is actually more interesting because I have smelled Bilibili's plan to target Hou. The recent hot topic of Lao Jiang’s arguing with Hou seems abnormal, perhaps Bilibili has begun its warning? I must say, Bilibili's operations have already exceeded half of Pinduoduo's, currently moving closer to Alibaba, and almost there!
So, when you look back at those who think that they can become like them through hard work, do you find it amusing?