/Why so many live-streaming platforms are going bust in China

Why so many live-streaming platforms are going bust in China

At the end of June, ME, a Guangzhou-based live-streaming platform that once boasted over 10 million active users, suddenly went offline.

ME was not the only app that went out of business. In May 2017, a Chinese mobile live-streaming giant, Inke, sold about half of its stock equity to Shunyagroup, which just started its IPO in early 2017.

According to publicly available data, there were more than 550 million video streaming users in China by the end of 2016, and the market size of the video entertainment industry reached as much as USD 10 billion.  That’s why the live-streaming business is attractive for companies who want a piece of the live-streaming market.

So, then, why are some live-streaming apps failing? And, what are the possible opportunities that could provide live-streaming companies the ultimate leg-up in this ‘free-for-all’ that is ‘tech in China’?

YY.com-backed live-streaming platform, ME, fails miserably

Even though ME was once under the holding company of YY.com, a major live-streaming platform, ME’s focus was different than the main services provided by YY.com. YY.com focuses mainly on PC users, while ME focused primarily on users of mobile gadgets. This enabled users to broadcast on-the-go, which proved to be a powerful service for busy millennials. ME’s second strength was the user’s ability to stream mobile games broadcasted by other players, another good way to attract users from competing mobile terminals.

Photo from Baidu Images
Photo from Baidu Images

Though it is true that users prefer broadcasting PC games on YY.com, and while PC games remain an attractive pastime for most of these users, active interaction with mobile games is showing an upwards trend. Mobile games satisfy the consumer’s need for short-burst, fragmented usage, while simultaneously allowing for on-the-go play. Mobile gaming, as such, is an extremely attractive option and poses a serious threat to the PC gaming industry.

ME followed this trend, and backed by the PC live-streaming behemoth YY.com, one would have expected ME to have had a better result. So, why was ME out of the live-streaming game so quickly?

It’s all in the timing

ME was riding on the tail end of the live-streaming trend. Before ME even launched its mobile live streaming services, there were others in the market already, namely Inke and Huajiao. These pre-existing platforms were able to grab a large number of users and gain immense market influence. Thus, by the time ME launched, it was already losing the race in user acquisition at a lower cost.

Market differentiation is hard to achieve

Among the sea of live-streaming platform apps, ME competed for new users and market exposure while providing nearly identical services, mainly similar types of entertainment content such as talent shows, live streaming of games and more.

The similarities didn’t end there. Profit margins remained thin and profit yields for all of these platforms mainly relied on seemingly analogous methods of user interaction such as the selling of virtual gifts or giving rewards to live-show presenters. User boredom became rampant due to the interchangeability of these apps. In short, these platforms were unable to distinguish and individualize themselves to their users. Relatedly, the structural simplicity of the platforms also allowed for an abundance of copycats to spring up and saturate the market.

Photo from 58pic.com
Photo from 58pic.com

Profit generation is difficult

Turning a profit is a big challenge for live-streaming platforms. First and foremost, they need to spend money on new-user acquisition. This can be achieved, for example, through advertising on other related platforms, by rewarding user invites, and so on. However, the cost of acquiring these new users is rapidly increasing. And, to make matters worse, the platforms’ have have trouble holding on to their current active users, makes it difficult to offset such high customer acquisition costs.

Challenges in the future

Frankly, live streaming is still hot in China. Even though many live-streaming platforms are shutting down, there still remains immense interest for these types of services. Users are joining other existing giants who are providing competitive services. Because it has been difficult to build a technical barrier to prevent competition, content seems to be the single most important differentiating factor in gaining an advantage and retaining users.

The goal of content enrichment lends itself to some creative relationships. The introduction of e-commerce to live-streaming platforms has become a way of acquiring users who share relevant products via live streaming. This, in turn, provides fresh content for the platforms’ users. In addition, some live-streaming companies partner their platform with IP owners and other public-benefit events.

As the live-streaming battle intensifies in China, a successful platform will need innovation to acquire and retain users. But as for whether the key innovation will be great content or a differentiated technological advantage, we’ll have to wait and see.

(Top photo from 58pic.com)

Kaikai Shi majored in Biotechnology at Zhejiang University. He now runs the Tech Financing column for AllChinaTech. His interests are in new technology and reading. Kai believes that new technology will change the world we live in, and is trying to engage himself in this process.