How Does Douban Make Money?

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img:douban.com

Willingly or not, Douban, the interest-based social network, disclosed some metrics that it would rather not to, if news didn’t break out that several core engineers left in September. It turned out those employees were off to start up their own business, but the seeming public relations crisis forced Douban management to project a number for revenues in 2012, to quiet the media. 80 million yuan ($13mn) doesn’t sound a big number but a OK one since people always doubted Douban could make any money at all.

As of September 2012, Douban had 62 million registered users. Combing the unregistered audience who only read content created by Douban users, it covered over 100 million unique visitors each month, with 160 million daily page-views. Not big numbers at all by Chinese standards. But Douban doesn’t seem like a company that would inflate numbers that far that some of its Chinese peers do. Founded in 2005, Douban’s valuables include user-generated quality content and niche user groups.

As the end of this year is approaching, let’s do some speculations on where and how Douban can pull together the 80 million revenue.

Commissions from e-commerce transactions

Starting as a community for book readers — similar to GoodReads, Douban made its first money from commissions by directing users to online book retailers, Dangdang, Amazon China and the like. The rate was less than 10% of the transactions in 2006, according to Yang Bo, the founder and CEO. Now it contributes a total of 200 million yuan ($32mn) worth of online book sales a year.

Later on the site added other categories of content, including movies, music, local events and the like, so did the commission-based business. New feature released in May enables buying movie tickets directly at the Douban page of a movie — Douban takes sales cuts.

Very recently, Douban tried to expand the realm to everything by launching Items; so that what a user can upload isn’t limited to entries of movies, music, books, or online of offline events anymore. Instead it can be an app, a kind of snack, or anything in your life. The same with pages for books or movies, it’s for users to have a space to show how much they like or hate a certain item. For Douban, there’s a possibility to take sales shares from everything sellable. The company, briefly, tested it with cosmetics, placing links of online stores, Amazon China and selected Taobao stores, on pages of makeup items.

The conversion rate of books has been high, as its CEO confirmed at various occasions (such as this message(in Chinese)). It’s estimated the movie ticket sales have been increasing fast.

Brand Campaigns

CPM-based targeted display ads was introduced in 2009 and became a major revenue source in 2010.

Along the way Douban came up with some social marketing solutions for brands, including Xiaozhan and ads in Douban FM, a music Radio product. Xiaozhan is themed sub-site which turned out to function like Facebook Page.  (Yes, the one also called Xiaozhan of Renren’s is a copy.)

Existing two hundred advertisers are well-known brands. Douban promises to offer advertising solutions based on user interests and content.  At least those marketing campaigns look well-designed.

Though most ads are CPM-based, Vancl, an online garment seller, once did a transaction-based campaign on Douban.

E-book Sales

Douban Read, a e-book store, was launched in the past May, initially aiming to publish and sell short articles for 1.99 yuan ($30 cents) per piece. Douban takes 30% of the sales

Soon it became a full-fledged e-book platform, selling digital books and magazines from conventional publishers, third-party online publishers and the like. Exclusive e-books, including the simplified Chinese edition of the latest work by J.K.Rowling and books that just won national prizes in literature. Prices rise to much higher a level, revenue shares, however, is unknown.

Very lately it started a translation program, offering translators 5000 yuan plus 20% of the sales for a case.

Books of Douban Read are available on the Web, Android and iOS, and can be sent to Kindle. The payment process is through Alipay.

Its founder always say that his company could break even whenever they stop investing in new products. Douban has raised three rounds of funding and has three hundred employees.