TouTiao Has Reached A Glass Ceiling In Cornering Baidu With Its Old Tricks

摘要: While Baidu became worry-free after it became the dominant internet gateway in the PC era (though it was constantly looking for troubles), TouTiao isn’t worry-free, though has already already become the dominant content distribution platform in the Chinese mobile internet market.

(Chinese Version)

Recently, Robin Li, founder and CEO of Baidu, got straight down to the business and talked frankly about the importance of “content distribution” in a 6,000-character internal speech, which held many people wondering if Baidu is embarking on a “battle” against TouTiao, unquestionably the leading content distribution platform in China.

The reason why Robin eyed on TouTiao might be that the latter is grabbing Baidu’s market at lightening speed. When we look at their revenue in ads sector, we may find some clue: While Baidu’s revenue in ads in Q3 dropped by 6.7 per cent year-on-year, TouTiao’s revenue in the first three quarters of 2016 has exceeded 6 billion RMB, and is expected to reach nearly 10 billion RMB throughout the year.

Although TouTiao’s revenue in ads is still less than 1/6 that of Baidu, that figure is increasing at a speed that can’t be taken lightly by Baidu and Robin Li.

As a matter of fact, some analysts have already pointed out the similarity of Yiming Zhang, founder and CEO of TouTiao, and Robin Li based on an interview he had with “Caijing Magazine” last year and pointed out that Zhang was likely to become the next “Robin Li”.

Yet, TouTiao managed to become a rival Baidu can’t neglect and even compete directly with Baidu not only with the help of the transition from the PC era to the mobile internet, but also by repeating tricks Baidu used to play.

As Wei Wuhui mentioned in his article “The Worry-Free TouTiao”, TouTiao has already become the dominant player in the algorithm-based mobile content distribution market. Even if a rival’s algorithm was 10 percent higher than that of TouTiao, it would be in vain. Likewise, although Sogou and Qihoo 360 can provide more accurate search result, they already can't challenge Baidu in the search engine market.

However, TouTiao’s leading position in the mobile content distribution sector, similar to Baidu’s dominance in the search engine market in the PC era, didn’t come out of thin air. They both rely heavily on traffic and adopt the same logic to gain traffic, though through completely different ways.

Baidu became a household name to Chinese internet users not only because it knew better Chinese, but also because of Baidu Toolbar, 3721.com and hao123.com, which are all referred to as “malware” by Qihoo 360’s founder and CEO Zhou Hongyi. It was by taking over the front page of various browsers through these malware that Baidu accumulated a huge amount of traffic. Baidu’s rivals such as Qihoo360 and Tencent, however, realized the importance of browsers much later before developing their own browsers.

At that time, Baidu had already taken over all major traffic platforms. This logic also applies to traffic in the mobile end, where App Stores is like PC browsers and APPs are like web pages.

Last October, Phoenix News strongly condemn TouTiao for maliciously hijacking its traffic. According to Zhihu user Handi, Phoenix News accused TouTiao not of DNS hijacking, but of SEM (Search Engine Marketing) hijacking. Like Baidu used to do in the PC era, TouTiao “bought” search result of keywords such as “news” and “information” in various App Stores so that TouTiao would appear on top.

After Baidu realized TouTiao’s trick, however, it mistakenly spent a large sum of money to purchase a failing App Store. What a waste of money!

Moreover, there’s something even more important than App Stores in the mobile end: pre-installed APPs. TouTiao was also aware of its importance and even achieved perfection. This is also why touTiao attaches high importance to “pre-installed times”. In fact, TouTiao’s pre-installed times is only slightly lower than that of Tencent.

In addition, TouTiao has already become one of the biggest ad platform in the mobile end. For hundreds of thousands of small and mid-sized developers, TouTiao is like a giant traffic gateway. In exchange, TouTiao can appear in front of almost every Chinese mobile internet user and accumulate the traffic from nearly half a million APPs together. Next, TouTiao manages to keep the traffic through algorithm-based positive feedbacks. Therefore, with huge traffic it has already gained, it could help other APPs gain traffic, so on and so forth.

From this aspect, TouTiao is more like a secondary traffic distribution platform, while content is merely a tool it utilizes to retain, manage and distribute traffic.

In a previous article “ Is Algorithm Turning Media into Mere Tools?”, we’ve already pointed out that TouTiao’s content comes mainly from a “content factory”. In this sense, TouTiao looks even more similar to Baidu during the period of its barbarous growth in the PC era in terms of both traffic accumulation and distribution.

The only difference, however, might be that: while Baidu became worry-free after it became the dominant internet gateway in the PC era (though it was constantly looking for troubles), TouTiao isn’t worry-free, as Wei Wuhui predicted in his article.

After all, it can’t stop gaining more traffic through SEM. After Apple App Store opens its APP ranking to advertisers, a huge gray area is to emerge. Therefore, cost to purchase rankings is to rise inevitably. It is in this sense that I believe that TouTiao has already almost reached its glass ceiling. This may help explain why it is busy going abroad. Worse still, Tencent’s WeChat is increasingly expanding its influence and grabbing TouTiao’s traffic through innovation such as “Mini Program”.

Although TouTiao can continue to adopt its traffic-centered strategy in the mobile internet ecosystem centered around APPs, it fails to further expand its business scale in sectors such as social network and social community. At the same time, sources of TouTiao’s content won’t take things as they are, since they all have the impetus to expand their user base, build their own social community and make profit.

Another lesson TouTiao learns from Baidu is content grabbing. However, while Baidu can gain traffic for websites whose contents are grabbed, TouTiao is more like hijacking their traffic. This is why it is constantly accused of traffic hijacking in the media circle. Although it has already started producing its own content, invisible “content grabbing” behavior remains.

After reaching the glass ceiling, TouTiao’s next step is to further improve profitability efficiency. Although its revenue in 2016 exceeds much higher than as expected, it’s still no easy thing to be as potent as Baidu.

Like Google, Baidu’s over 10 billion RMB revenue mainly comes from over 500,000 long-tail clients and local clients, and it has to rely on team of over 7,000 ads and marketing specialists to constantly expand new clients.

Although TouTiao already set up thousands of “tags” on its platform, it still can’t be compared with keywords-based search engines as to the granularity and refinement of content and information. Therefore, TouTiao can't accommodate needs of as many long-tail clients as Baidu. Moreover, TouTiao’s mechanism is after all based on passive content pushing and recommendation, so users’ need can’t be revealed as easy as active search behaviors on search engines. In addition, it can't be as accurate as Baidu in matching information.

During the WeChat Pro 2016 Conference, Xiaolong Zhang, known as the “father of WeChat”, mentioned that: “It’s even more difficult for enterprises and business owners to connect with users in the mobile internet than the PC era.” WeChat carried out “Mini Program” exactly to bypass intermediaries such as e-commerce and life service platforms and directly provide all types of entries in front of users.

For ad clients, when smartphone users no longer reveal their needs through active search behaviors on search engines and rely more on content filtration and screening by e-commerce and life service platforms as well as thought leaders and internet celebrities, the golden time for SEO and ranking-based traffic hijackers may after all come to an end.

To conclude, TouTiao rises because it bridges tens of thousands of APPs and advertisers. However, content might not be enough to achieve refinement, accurate matching and distribution of traffic. This is especially true as videos have surpassed texts and pictures in gaining traffic. Perhaps, the only market left for TouTiao is Baidu’s market that has already been grabbed by all kinds of e-commerce and life-service platforms, WeChat, Sina Weibo, live streaming platforms as well as other mobile ads leagues. Therefore, TouTiao can never become the single gateway to internet as Baidu used to be in the PC era and win as many ad clients as Baidu.

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[The article is published and edited with authorization from the author @Zhang Yuan, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

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