[JD Says] Webcasting in the Full Glare of Publicity: What’s Its Trump Card?


[JD Says] JD Capital dissects investments in different sectors, bearing witness to the development of enterprises. It shares what it has felt and learned from the process of its growth. 

[Sharer] The VC Fund of JD Capital: an all-male team of dashing investors in the mobile Internet industry, who are making strenuous efforts to blaze a trail in Fintech, integrated recreational sectors, and mobile e-business, look for ambitious entrepreneurs, change the status quo, and reshape the world. 

LIU Tao, one of Chinese A-list actresses, webcast live the launching ceremony of her latest soap opera Ode to Joy, attracting a staggering 710,000 viewers in total during the two hours, with the highest number of concurrent viewers being 170,000.

At the opening ceremony of the reality show Running Man 4, the seven participating celebrities interacted with netizens through Tencent webcasting, receiving more than 1,000,000 views and 330,000 concurrent views. 

In China’s Internet industry that features such buzzwords as “fans” economy, Internet celebrity, big data, vertical social network, e-commerce, and O2O, in 2016, “webcasting” has undoubtedly become the darling of the capital world. 

According to the statistics, the number of Chinese companies engaged in webcasting has risen from 25 in 2012 to 116 in May 2016. Among the 116 enterprises, 90% are in the stage of Series A round financing or before, about 30% are in the angel round, and two have been floated on the stock market; 50 are investors, which are divided into the following four categories: investing institution, celebrity as an investor, listed company and large corporation. In the webcast industry, start-ups are competing for a slice of the cake, and giants are also starting their strategic planning. 

[Keyword] A video webcast is an emerging live broadcast that allows real-time communication, using Internet technology to connect the participants in different places that are physically apart. The content of a webcast can be a studio show, an on-line game, and other forms of entertainment.  

Born out of webcasts are rewards from viewers, support of fans, subliminal advertising, and webcast e-businesses. 

To some degree, webcasting is not something new and not essentially so different from a conventional show of a street artist. But the development of technology has led to new channels of presentation and diversified recreational demands in users. 

On the basis of the case studies of China’s major video websites and webcast platforms, the VC team of JD Capital puts the webcast industry under the microscope, and predicts its future from the perspective of capital.

Webcasts: a rise to popularity

In fact, in addition to recreations, in the age of mobile Internet, the use of webcasts can also be extended to product presentations, meetings, plan assessment, interviews, online training. It has the advantages of being expressive, interactive, free from geographical barriers, and targeted to a specific audience. And we can make the most of webcasts through replays and requests after the live broadcast. 

2013 is the threshold year for online financing, 2014 for smart hardware, 2015 for “Internet+”, and 2016, for sure, for webcasts.

JD Capital thinks that the origin of webcasts can be traced back to 2004 when tudou.com, 56.com, PPS and PPTV were launched, which were followed by youku.com and the CorePlayer website. Around 2008, the map of the industry was reshaped by the SARFT’s introduction of the video website licensing system, and investment barriers were imposed on 400 video websites. Later, major video websites such as Letv, Youku and Tudou (merged into one), PPS (acquired by Baidu) underwent a process of floatation and restructuration.  

It wasn’t until last year that the development of 4G network and mobile technology, the popularity of mobile payment, the fall in Internet data costs, and the increasing variety of interactive forms made webcasts truly take root. 

Making of webcasts

Nowadays, China’s Internet system is constantly upgrading, and the optical fiber broadband service is reaching more and more households. The arrival of the 4G era, lower Internet data costs, wider Wi-Fi coverage, faster Internet speed have contributed to smoother webcasting. Lower requirements for devices and technologies (including camera lenses and screen recorders) have also made webcasting increasingly easy and practicable. 

Furthermore, we can find a perfect intersection in the Venn Diagram among webcasting, the “bullet screen” (a feature on online video sites, which allows real-time comments from viewers to fly across the screen like bullets) culture, and the emerging customer base made up of those born in 1990s and 2000s.

In this age of mobile Internet, with the incursion by Baidu, Alibaba, and Xiaomi into the webcast market, profit-driven webcast platforms have begun their fight for supremacy -- a rivalry probably no less fierce than those in the video and group buying markets in earlier years. 

Bottom line of webcasts: content and consumption 

Under the context of mobile Internet, one way to put a webcast platform into perspective is to regard it as a C2C e-business platform. A webcast platform is essentially about content provision and customer base development. And the bottom line is the content. 

The logic behind this is clear-cut: A good webcaster makes for premium content, and premium content means attracting more users, which, in turn, can be translated into fame and fortune for the webcaster, cash from viewers, and fund-raising for the webcast platform. 

During this process, the platform plays the role of identifying the content, offering product and technology services, discovering and coordinating the webcasters, staging publicity campaigns, expanding customer bases, serving the users, and developing a cyclic business model. 

How long will “attention economy” last?

Currently, webcast platforms rely on shows, games, and other forms of recreation to attract a great amount of users by drawing their attention. However, there is a definite lack of variety in the content of webcasts, leading to a less-than-diversified profit model in the industry. 

Cost-wise, given that China’s broadband service is priced according to the highest Internet speed, suppose the speed is a minimal 800kb/s, a webcast platform with 1 million concurrent viewers can run up a monthly 30-40 million yuan tab in broadband service fees. On the other hand, vying for those much sought-after celebrities as webcastrs will also cost the platform a bundle. 

Income-wise, the selling of virtual items and advertising are still the major revenue streams for webcasting. Studio webcasts, the most common form, feature the webcasters’ interaction and performance, thus having a secure operational and profit-making model. By comparison, at present, game webcasting and mobile webcasting have a lower degree of liquidity. 

Webcast platform: An Internet data “guzzler”?

1. Studio webcasts: theoretically, the profit model of studio webcasts can feature visual goods selling, membership fee collection, online advertising, ticketing service, etc. They usually enjoy a longer life and broader customer base. Although a single studio webcast is unlikely to bring an enormous fortune overnight, they are still a cash cow for the industry. 

2. Game webcasts: Since 2015 when WANG Sicong, son of Chinese billionaire WANG Jianlin, made inroads into the eSports industry by investing in Panda TV and launching the Banana Project, the eSports industry has received a blaze of publicity. The development of the game industry, especially eSports, has spawned 100 million-strong loyal customers for game webcasts. At present, value-added services (visual items selling) are the main but limited source of profits. However, with the deeper pockets of the users, game webcasts are in line for a surge. Now all game webcast platforms are exploring new profit models, such a cross-platform operation of mobile games and new interactive advertising. The industry has a promising future. 

3. Mobile webcasts: In 2015 and 2016, souped-up smart phones and improved Wi-Fi Internet have contributed to a sudden boom in mobile webcasts, which concerns a variety of recreational activities. Webcasts vary from one to another in terms of scene, participant, cost, content and form. They can also be extended to product presentations, sports events, and on-line education. Such multiple possibilities paint a rosy picture for the mobile webcasting market. 

Webcasting + sweeping coverage

With the increasing interactivity and a great presence of mobile terminals in Internet usage, webcasts will become more interactive. Driven by different occasions and scenes, the initial “attention economy” is likely to undergo a change, leading to a tendency toward “video-ization” in different sectors and industries. 

Given that, things have begun to fall to place in the arena of webcasting: 

1. The transition from a “vertical” (meaning involving different levels or stages of a specific domain) webcasting platform to a comprehensive recreational platform: This expansion results from the efforts by webcast platforms, already in a favorable position, to diversify what they webcast, such as outdoor activities, sports events, and variety shows, in order to enhance general consumer loyalty.

2. Celebrities+ webcasting, with maximized brand equities and enhanced promotional effects: Actress LIU Tao webcast live the launching ceremony of her latest soap opera Ode to Joy, attracting a staggering 710,000 viewers in total during the two hours, with the highest number of concurrent viewers being 170,000. 

3. A major switch from PCs to mobile terminals: Cell phones free webcasting from time and place restrictions, and allow the audience to watch the webcasters they like in anywhere at any time. This, in a sense, constitutes a video-based social contact. 

4. A more specific classification of “vertical” webcasting platforms: Some platforms that are rich in resources in a certain domain will go further in the direction of professionalism and specialization, providing users with the latest information and profound insights into the field. 

According to JD Capital’s projection, “webcasting+ sweeping coverage” will have put the total size of the webcast market to 120 billion yuan by 2020. 

How to make wise investment decisions in the webcast industry?

1. Premium content matters

In the current fierce competition in the webcast market, those platforms with premium content have limitless potentials. In a certain domain, after the process of the survival of the fittest and mergers, the platforms that emerge victorious will become a “vertical” one, providing users with the most professional profound insights into the area. 

The priority for investors is to discover the webcast platforms with premium content, and support the establishment of top-notch professional “vertical” webcast platforms. Such platforms can develop independently in the future and it is advisable to merge and acquire them. 

2. More attention to mergers and acquisitions 

In order to enhance general consumer loyalty, webcast platforms in an advantageous position will gradually turn into comprehensive recreational platforms. 

The number of comprehensive recreational platforms is unlikely to be great, and mergers and acquisitions will, in all probability, occur. Early investment in potential comprehensive recreational platforms can reap high returns.

Generally speaking, JD Capital holds that webcasting is only a means of media, or instrument, in essence. It takes sensible arrangements and creative design to produce premium content that can reach as many consumers as possible.