Xiaohongshu will turn its livestream shopping business into an independent unit, local media outlet LatePost reported on Mar. 10, as part of efforts to accelerate its monetization campaign. The head of the lifestyle app’s new department will also be in charge of the firm’s community ecology.
Why it matters: Xiaohongshu’s recent adjustment indicates a push for further monetization at a time when the country’s mainstream shopping platforms have seen live commerce thrive. The move follows the recent livestreaming e-commerce success of Chinese actress Dong Jie on the platform, which demonstrated to Xiaohongshu the possibility of diversifying its revenue growth path amid uncertainty over whether the company will file for an IPO.
Details: Xiaohongshu first tested its livestreaming e-commerce feature in mid-2019, officially launching it in 2020 at a time when China was experiencing a boom in livestream selling. However, the company was initially cautious about the emerging sector, with particular concerns about its impact on Xiaohongshu’s community ecology.
- Seen as China’s equivalent to Instagram, Xiaohongshu is now approaching 100 million daily active users, according to LatePost. The lifestyle-sharing platform attempts to position itself as a calm and high-quality community where users are able to share recommendations for food and sightseeing.
- Xiaohongshu’s livestreaming business hasn’t gained much attention over the past two years while Taobao, Douyin, and Kuaishou made major gains in the field courtesy of breakthrough star hosts such as Li Jiaqi. But Xiaohongshu has won traction recently after Chinese actress Dong Jie delivered a less aggressive live shopping experience, helping the platform find a unique voice in the sector.
- Xiaohongshu reportedly generates 80% of its revenue from advertising, primarily through ads designed to build brand awareness. LatePost reports that the firm is now weighing up whether to attempt to lure more brands to sell goods on the platform, as it looks to drive direct consumer purchases that can be completed without leaving the app.
Context: Live commerce is now a key driver of revenue growth for video platforms. Xiaohongshu, founded in 2013, was slower to monetize than its competitors Douyin and Kuaishou, only beginning the process cautiously in late 2019.
- In 2022, ByteDance generated RMB 330 billion in revenue from its advertising business in China, with more than RMB 120 billion coming from live commerce on TikTok sibling app Douyin, according to LatePost. Revenue from viewers rewarding hosts surpassed RMB 130 billion in the same year.
- Kuaishou recorded RMB 8.9 billion in revenue from its livestreaming business in the third quarter of 2022, accounting for 38.5% of the firm’s total quarterly revenue.
- In late 2021, Xiaohongshu was reportedly considering listing in Hong Kong after the startup suspended its initial plan for a US IPO. But the Chinese company told the Financial Times last November that it “has no IPO plans currently.”