Turning clicks to cash: Red's monetisation is reshaping China's influencer landscape

In the ever-evolving landscape of social media, one platform has risen from the depths of user-generated content to become a commercial juggernaut. Red, also known as Xiaohongshu or Little Red Book, is celebrating its 10th anniversary in 2023. But this is not just a birthday; it's a rebirth for the platform.

The platform seamlessly blends content creation and commerce. With over 260 million active users, Red is more than just an app; it's a digital marketplace where creators turn into entrepreneurs.

Recently, Red made a bold move by closing its official online shopping channel, Fulishe (Benefits Club), after nine years of operation. Why? Because Red is stepping up its monetisation game. It's merging e-commerce with live streaming services, transforming bloggers and livestreamers into product-selling powerhouses. But it doesn't stop there.

What sets Red apart is its unique ability to shape the trends of "deinfluencing." In a world saturated with influencers, Red's key opinion leaders (KOLs) and content creators have something different—trust—they've built genuine relationships with their audiences, making their endorsements more authentic than the traditional influencer.

So, here's the big question: Can Red strike the perfect balance between authenticity and monetisation and is its dominance here to stay? How will brands adapt to this era of influencer marketing? And what about those brand crises that surface on Red and how are they being addressed?

Campaign turned to leading experts in China to discuss the future of social commerce via Red in China, or is there more to this story than meets the eye? Read the analysis below:

Elisa Harca
Co-Founder and Asia CEO
Red Ant Asia

The main strength of Red lies in its role as a multi-user UGC community, contrasting with the one-on-one nature of platforms like WeChat. It is the creative outlet for Chinese girls and young women to enhance their daily experiences. It acts as the go-to platform for exploring novelties and confirming the suitability of products you've encountered, we call it “Chinese girls hack to their daily life”. Furthermore, its default placement on the "discover" page accelerates the visibility of trends. By aligning with these trends, you can swiftly gain real-time exposure.

 

 

Dodo Kwong
Head, HongKong market, Partipost

With over 200 million active users on Red, the most significant advantage for Red is undoubtedly the extensive reach of the audience. One outstanding part of Red is the integration of social e-commerce, enabling brands to frame a closed loop from seeding to harvesting with content platforms. On user behavior, people tend to browse information on Red, they find it valuable and resourceful, not only on product suggestions but also when discovering new places to go or to dine.

The algorithm and the user interface contribute to the massive success of Red. It learns fast and feeds relevant information to users, resulting in a better user experience and higher stickiness.

However, speaking of the behavioral changes in the Hong Kong market, the shift remains at the “browsing” stage, but not yet extended to the “content creation” stage. We can see this as a challenge, but on the other side, it is actually an opportunity to grow, and probably very soon.

Arnold Ma
CEO, Qumin

I will list out the advantages in a crisp manner.

• A large, sophisticated, young user base—95% of its 300 million monthly active users are post-90s and female, with 60% working class in tier-1 and tier-2 cities.
• Strong spending power who prioritise product quality over price.
• Perfect for premium brands.
• Unique user/creator relationship focused on authenticity and P2P recommendations.
• Higher engagement and strong relationship between users and creators. Great for influencer collaborations.
• High trust factor of creator content. Again, opportunity to create more effective and persuasive branded content.
• Challenges: Despite being an effective seeding platform, Red has a low purchase rate inside its ecosystem.

Users tend to use Red for pre-purchase research (seeding), and other platforms like traditional e-commerce marketplaces Tmall and Taobao for actual purchases. That means—a “closed-loop” consumer system, which appears to be mature on Douyin, Kuaishou, and WeChat—is not established on Red.

Campaign: What are the biggest changes for Red in the past few years in the era of influencer marketing?

Arnold Ma
CEO, Qumin

More diversified businesses/services, tapping into AIGC content and everyday life services. Establishing livestream as an independent business unit was one of the most noteworthy steps. The move followed by the super successful livestream by Dong Jie, a Chinese actress, which generated sales of more than 30 million RMB in one single live session with over 2.2 million users tuned in.

The momentum also gave the birth of “quiet livestream,” which refers to a livestreaming practice focusing on product presentation and sharing consumer experience that differs from a rousing atmosphere where hosts are shouting about discounts and viewers are prompted to place orders—typically a commonplace seen on other social commerce platforms. This allows Red to carve out a unique space in the already saturated social commerce space.

Dodo Kwong
Head, HongKong market, Partipost

Red started with a clear industry focus—beauty and cosmetics.

With time it has evolved and become a more diversified social platform, covering not only beauty but also lifestyle, food, travel, parenting and even entrepreneurship. This variety of content supply contributed significantly to its recent growth in active users.

The international expansion seems low-key, but we can see most overseas brands are aware of the trend of Red. Advertising mechanism and content collaboration have been developed more systematically, enabling brands to utilise the platform’s resources better. The continuous improvement of the platform algorithm is the most impressive and unique edge of the platform, which differentiates Red from other social media platforms.

Elisa Harca
Co-Founder and Asia CEO
Red Ant Asia

Red's impact on direct, in-platform (closed loop), social commerce has been overshadowed by Douyin, which has more seamlessly incorporated livestreaming into its platform. To enhance its position in the social commerce landscape, Red is shifting its strategy by focusing more on livestreaming, utilising out-of-the-limelight celebrities to become rather surprising and interesting influential Red livestreamers.

Campaign: What should brands do or avoid when they begin the journey on the platform to avoid the brand crises that surface on Red?

Dodo Kwong
Head, HongKong market, Partipost

As said, Red’s algorithm, or the “personalised-recommendation,” plays a vital role in promoting the platform. Unlike other social media channels, followers or fan numbers are not that crucial when evaluating potential influencers to collaborate with on Red—instead, relevancy, content quality, keyword optimisation and topic strategy matter. We have run several campaigns on Red for clients by leveraging KOC with less than a hundred followers but, resulting in thousands of total engagements.

With the content distribution strategy of the platform, users no longer need to follow specific influencers to look for content. The platform understands users well that they can feed the most relevant posts or short videos that interest them. Having understood the mechanism, “influencer” collaboration with Red should extend to a broader landscape from KOLs to KOCs, all relevant individuals and everyday people.

Arnold Ma
CEO, Qumin

Brand compatibility is the most essential factor; Red has a very nuanced and specific user base, as mentioned above (young and female). As a result of its user demographics, the platform sees a strong endorsement of “delicacy,” which means products that show a high level of visual appeal with solid functionality and quality are more likely to draw users’ attention.

Meanwhile, as a content-driven platform, it also requires quality content (notes) that clearly shows a brand’s identity and explains products’ unique selling points. Efforts should also be made to “guide” or provide valuable adding information to leverage Red’s seeding mechanisms.

Elisa Harca
Co-Founder and Asia CEO
Red Ant Asia

Brands need to actively participate in localised trends on Red to ensure their content gains visibility rather than getting lost. Allocating an advertising budget to promote both their brand content and Key Opinion Leader (KOL) content is also crucial for maximising visibility. Depending solely on organic reach within Red tends to be a gradual process, something that many brands are reluctant to embrace.

This post is filed under... Brand Health Check: We assess and (if necessary) solicit suggested remedies