'Prudence and restraint' have long been hallmarks of WeChat and the entire Tencent Group. However, WeChat Video Account appears to be an exception to this rule.

Launched for internal testing in January 2020, WeChat Video Account made a splashy debut in the e-commerce scene during Double 11 in 2021. Official figures revealed that merchants' live streams on Weidian generated over 35 million yuan in total transaction volume, with 600,000 users directed to WeChat Video Account live streams via the Weidian mini-program.

In early 2024, Pony Ma announced, 'This year, we will fully embrace live streaming e-commerce on Video Account. E-commerce and advertising will complement each other effectively.'

WeChat's e-commerce endeavors have accelerated in the second half of this year. In August, WeChat Video Account Stores evolved into WeChat Stores, further integrating products with the WeChat ecosystem. By the end of October, the 'WeChat Store Assistant' app for WeChat Store merchants was officially launched, enabling merchants to manage their stores, access data, and provide customer service via mobile devices. For the first time, WeChat Stores were mentioned in the third-quarter financial report.

So, what makes WeChat e-commerce unique compared to platforms like Douyin and Kuaishou? And what limitations does it face?

01. Traffic Pool: Blending Private and Public Domains, Charting a Middle Path Beyond Douyin and Kuaishou

The first distinguishing feature is WeChat Video Account e-commerce's reliance on Tencent's extensive ecological traffic pool.

As a leading social platform in China, WeChat boasts over 100 million daily active users, deeply embedded in users' daily lives, encompassing communication, information, and lifestyle services. This fosters unparalleled user loyalty and habits. WeChat not only caters to a diverse user base spanning ages 12 to 80 but also offers a one-stop lifestyle service through features like mini-programs and news reading, constructing a robust user ecosystem.

Leveraging this powerful ecosystem and traffic pool is a core strength of WeChat Video Account. This is evident in the average transaction value (ATV) of WeChat Video Account e-commerce. According to WeChat's open classes, the ATV per order on WeChat Video Account reached 205 yuan in 2023, surpassing Douyin's 130 yuan and Kuaishou's 88 yuan. This high ATV is intrinsically linked to its private domain transaction attribute.

Private domain traffic accounted for 50% of live streaming e-commerce traffic in 2021 and 30% in 2022, according to WeChat's open classes. In contrast to Douyin and Kuaishou, a significant portion of WeChat Video Account transactions stems from private domain transactions, with much of the traffic originating from sources like WeChat groups.

This transaction chain inherently carries a level of trust, facilitating the sale of higher-priced products. As mentioned in WeChat's open classes, pet plants topped the list with an ATV of 213 yuan, followed by clothing and home furnishings at 172 yuan, food and fresh produce at 160 yuan, and household cleaning and daily necessities at 152 yuan.

Simultaneously, WeChat Video Account has opened up its public domain traffic. This shift not only propelled WeChat Video Account from version 1.0 to 2.0 but also officially positioned it in the livestream sales arena. Some insiders even joked, 'The rise of WeChat Video Account has impacted Kuaishou, specializing in the private domain, and Douyin, noted for its expensive traffic.'

In the 1.0 era of WeChat Video Account, the focus was on private domain traffic. The traffic logic involved importing private domain traffic, leveraging public domain traffic, and fostering synergy between the two. Most traffic was controlled by private domain merchants, and users hadn't yet developed browsing habits, leading to slower growth and less targeted traffic for both short videos and live streams on WeChat Video Account.

In the 2.0 era, WeChat Video Account's user personas have gradually become clearer, public domain traffic has been opened up, and advertising tools have been introduced. Transactions within the platform have accelerated, and a cohort of merchants without private domain accumulation has emerged on WeChat Video Account.

According to several merchants, private domain accumulation is no longer a prerequisite on WeChat Video Account. The prevalent strategy combines organic and paid traffic. High-quality short videos and live stream content attract organic traffic, supplemented by paid advertising to draw users. This is followed by effective product offerings, culminating in private domain and service-driven repeat purchases.

02. Distribution Mechanism: Dual Distribution of Social + Algorithm, Decentralized Traffic Allocation

The second unique aspect is its decentralized distribution mechanism. For a long time, traffic distribution on e-commerce platforms has been highly centralized. Whether it's search rankings on marketplace platforms or algorithm-based recommendations on content platforms, the platforms dictate the traffic flow, and merchants compete fiercely for exposure.

Under this model, traffic costs soar, compressing merchants' profit margins and degrading the consumer experience due to pervasive advertising. Centralized traffic distribution seems to have hit a wall and urgently needs disruption.

WeChat Video Account's core advantage lies in being more than just a content display platform; it's a bridge connecting private and public domain traffic. When users like or share content, they essentially delegate traffic distribution power, allowing traffic to flow naturally through interpersonal networks rather than solely relying on platform algorithms. This decentralized model vastly improves traffic utilization efficiency and offers merchants the potential to build long-term relationships with consumers.

Previously, players with private domain capabilities could inexpensively launch commercialization. However, due to distribution mechanism optimizations and commercialization considerations, the platform now encourages private and public domain synergy. This has become the traffic model and operational foundation of WeChat Video Account e-commerce. Consequently, WeChat has taken two notable actions: reducing the private domain's weight in the commercialization path of WeChat Video Account and encouraging merchants to direct private domain traffic to the public domain.

03. Addressing Shortcomings: Balancing Act. The Degree of Commercialization Poses Challenges for WeChat

While WeChat Video Account boasts unique advantages in traffic pools and distribution mechanisms, these also pose challenges as an e-commerce platform.

As we know, Kuaishou focuses on major live streamers and trust-based e-commerce; Douyin emphasizes interest-based e-commerce, relying heavily on paid advertising and recommendations. Compared to follower counts, live streamers require a diverse product mix; WeChat Video Account prioritizes relationships and may evolve into relationship-based e-commerce.

Among these models, Douyin boasts the highest commercialization efficiency, with traffic allocation determined by ROI and a tilt towards e-commerce. Kuaishou's efficiency ranks second, with traffic controlled by top live streamers and platform traffic favoring content. Due to its focus on relationship-based e-commerce, WeChat Video Account's overall traffic tilts towards content, with advertising mechanisms yet to be fully developed, resulting in relatively lower commercialization efficiency.

This is WeChat Video Account e-commerce's biggest hurdle. As the saying goes, 'Water can carry a boat, but it can also capsize it.' WeChat Video Account e-commerce's differentiation hinges on every function and link in the private domain conversion process. However, too many functional links hinder WeChat Video Account e-commerce's growth. For some merchants, compared to other e-commerce platforms that only handle public domain traffic, the logic of private domain accumulation supporting WeChat Video Account e-commerce is a 'heavy burden.'

Simultaneously, every WeChat feature impacts contemporary social interactions. WeChat's inherent challenge in balancing social interactions explains the sluggish progress of the WeChat Video Account e-commerce system. When our communication tools for acquaintances are inundated with ads, and we're constantly bombarded by product promotions in a 'familiar' manner, it's a scenario WeChat may seek to avoid.

Moreover, e-commerce development clashes with WeChat's philosophy. Under Zhang Xiaolong's leadership, WeChat's commercialization has been restrained. This restraint extends to WeChat Video Account. For instance, WeChat Video Account's advertising load rate is less than 3%, as revealed by James Mitchell, Tencent's Chief Strategy Officer, during the Q3 2023 earnings call. In comparison, third-party research data predicts Kuaishou's advertising load rate will exceed 7% and Douyin's will surpass 10% in 2023.

04. Conclusion: WeChat Video Account E-commerce Must Lay Solid Foundations Now

In summary, WeChat Video Account's live streaming e-commerce presents both notable strengths and weaknesses: The advantage is abundant traffic. The familiar communication channels built on WeChat's social network can quickly reach a vast user base, achieving deeper and more efficient penetration than JD.com; the disadvantage is a late start and incomplete supporting infrastructure, necessitating improvements in product and merchant scale, live streamer resources, transaction rules, and after-sales support.

Whether WeChat Video Account can catch up with its competitors this year largely hinges on addressing these shortcomings.

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