Click 'Read Original' for details. The Simple and Direct Traffic Dividend Is 'Once and Never Again' In the consumer sector, we are always looking for opportunities to invest in excellent new brands. Reviewing the past helps us understand the new. Three Squirrels is an excellent brand that FreeS Fund invested in and has now reached a mature stage. Looking back over its 7 years, when Three Squirrels was founded in 2012, it coincided with Alibaba's vigorous development of Tmall, aiming to position the entire platform towards mid-to-high-end 'consumption upgrade'. To this end, Tmall became a platform to support brands (B2C), with strategic importance surpassing Taobao's C2C business. At that time, Alibaba identified a group of enterprises among the many Taobao merchants that had the potential to become true brands, providing them with traffic support and operational preference. One manifestation was: when users searched for products in the mobile Taobao app, many of the results that appeared belonged to Tmall stores. As one of the first brands to join Tmall that year, Three Squirrels enjoyed this very important dividend. Of course, the traffic dividend was by no means the only reason for its success. After 2015, due to the mutual isolation of WeChat and Taobao systems, many traffic opportunities also emerged within the WeChat ecosystem, giving rise to a wave of large companies. By today, the era when brand startups could become major companies by leveraging the dividends of Tmall and Taobao has clearly passed. It is very difficult for companies to build their business purely through traffic thinking. In the past few years, I have rarely heard of startups being able to stably achieve a return on investment (ROI) of more than 3 times from advertising on Taobao. Many companies cannot even achieve a 2x ROI, meaning that 1 yuan of Taobao advertising spend can only bring in less than 2 yuan in sales. For consumer companies, the current high-quality customer acquisition methods must shift to 'content thinking', with particular emphasis on short video content. Content Output Can Form Strong Consumer Awareness of the Brand If we understand the problem of customer acquisition at different levels, the most basic is traffic—buying traffic to get consumers into the store and then place orders. In the era of TV advertising, consumers were anonymous traffic. Later, typical traffic acquisition methods included Taobao's Zhitongche tool and WeChat Moments and group selling. Compared to TV advertising, traffic in this period had user ID attributes. However, what proportion of users who enter a store via Zhitongche or join a WeChat group to make a purchase will remember the store's brand name after ordering? There is a natural difference between channels and brands: brands need to build a moat through strong awareness. At the current stage, seeing a product and liking a brand are increasingly separate. If you only create exposure, consumers will easily forget you, because they are exposed to massive amounts of information every day, and your exposure can easily become a fleeting glimpse. Brand marketing is no longer just about using a slogan or telling a story to attract consumers; it requires combining consumer demands and creatively producing content that reflects the brand's unique characteristics. The creation and output of content has become the new core competency for consumer goods companies because, in an era of information overload, it can create consumer awareness, memory, and preference for the brand. Choose Different Content Platforms Based on Product Characteristics (1): Beauty Products and Douyin ▲ Li Jiaqi plants grass for makeup products on Douyin, with amazing sales ability. Let's first talk about the content format that many consumer goods companies are paying close attention to recently: short videos. Cosmetics, especially makeup within cosmetics, are the consumer goods category that has benefited the most in the short video era. As far as I know, in 2018, Tmall's makeup market sales at least doubled year-on-year. On Alibaba's mature platform, a category that is not particularly niche can grow by more than 100% in a year. Could it be that demand suddenly exploded? I think this can explain part of it, but it is difficult to explain all of it. If makeup demand doubles within a year, there must be external forces as triggers; it cannot come solely from users' endogenous demand. In addition to the increasingly mature consumption habits of young consumers for makeup, the more important point is that consumers' purchasing behavior and usage frequency of cosmetics are easily triggered by short video content, and this content has successfully converted a large number of consumers. The rise of many domestic makeup brands in 2018 is inseparable from the increased penetration of video platforms such as Douyin, Xiaohongshu, and Bilibili, and these platforms have become the best way for cosmetics companies to make users 'plant grass' and remember them. Why? Because the makeup category needs to make consumers feel a strong aesthetic effect. Compared with text and images, short videos can more intuitively and vividly reflect the contrast before and after applying makeup, making them the most effective form for cosmetics to be remembered. Many viral videos on Douyin with the theme 'contrast before and after makeup' are actually using this method to show you how good the immediate effect of makeup is and how it can bring about huge changes to appearance. There are also many videos where half the face is made up and the other half is bare-faced, making the contrast even more obvious. Following this logic, we will find that behind the more than 100% growth of Tmall's makeup market, short video platforms like Douyin are becoming an effective new customer acquisition method for makeup companies. This new method is clearly higher in customer acquisition effectiveness, or in conversion ROI, than 'pure traffic buying' or image-text output. No matter how many Douyin marketing tips articles you read, the first category that benefits the most is definitely beauty products, because this category has the deepest integration with Douyin's media format. Choose Different Content Platforms Based on Product Characteristics (2): Skincare Products and WeChat Official Accounts ▲ ZhiGuan launched a new product 'Cat Paw Soap', introducing its three main active ingredients and effects with images and text on its official account. After looking at the makeup category, let's look at the other half of cosmetics: skincare products. It is a relatively functional product category—for example, products containing A醇 (retinol) are considered anti-aging; products containing vitamin C, kojic acid, and niacinamide can be used for whitening; products containing salicylic acid have acne-fighting effects, and so on. Skincare products do not benefit as much from video media as makeup, because video is not very helpful for describing product ingredients and functions. Therefore, the core content output platform for skincare companies remains WeChat official accounts. WeChat official accounts have not fully solved the problem of video media dissemination, but they are still the best publishing channel for high-quality image-text content. Because the effective ingredients that play the main function in skincare products, their mechanisms of action, and the underlying clinical research and skin tests can be accurately explained through image-text introductions—text as a media medium is more inclined to impart knowledge and can clearly explain the benefits and effects word by word. So we find that some skincare brands that focus on 'ingredient-focused' consumers have become big spenders on WeChat official accounts, while fast-growing makeup startups are betting heavily on Douyin. The help of thinking through the above issues for my own investment is that when content platforms become the most favorable customer acquisition source for the rise of new brands in China, when looking for investment projects, I need to consider what product categories are most favorable for the rise of the current content format. This article is not an industry research analysis of cosmetics; in fact, it applies to all brand startups that need to create content. Its inspiration for startups is that the current creation and placement of content, compared with the 'traffic buying' era of Taobao Zhitongche (buying traffic from the platform) and WeChat group building (buying traffic from people), requires stronger 'creative liberal arts thinking' to move people's hearts through content. In the traffic buying era, teams could obtain traffic simply through 'science thinking optimization' and control ROI within a good range. The reason this method does not work today is that current high-quality content is created, not optimized. If the content output by brand startups relies only on third parties (KOLs, official accounts, etc.) and they do not have their own creation and control capabilities, it is absolutely impossible to break through. In addition, throughout the customer acquisition process, content output has strong non-standard attributes. Completing cooperation with KOLs involves many details. For example, the team must at least understand: which KOLs are suitable for products with different tones; cross-platform KOLs cannot use the same material to place on Kuaishou and Douyin; and, when placing on 20 official accounts, how to adjust the presentation of materials according to the audience differences of each account, and so on. Therefore, excellent brand companies today must be companies with strong coordination capabilities in multi-channel content output—the output channels that need to be managed are increasingly fragmented and diversified, even at the level of individual KOLs. This is an advanced skill for brand companies. Seize the Dividend Period of Self-Media Platform Placement As mentioned above, the rise of a specific brand, in addition to the increase in endogenous demand within the category, also requires some external push to allow the demand dividend to explode. Self-media platforms are a very typical driving force. It is worth adding that the dividend of self-media follower growth and the dividend of consumer goods placement are two concepts that need to be distinguished. Generally speaking, there is first the self-media follower growth, and then the consumer goods placement dividend. For example, 2014-2016 was the dividend period for self-media customer acquisition on WeChat official accounts, 2017 was the dividend period for advertisers placing ads on WeChat accounts, the placement dividend declined in 2018, and in 2019 no one mentions the official account placement dividend anymore. Another example: the Douyin platform was launched in 2017, the KOL follower growth dividend was concentrated in 2018, and it has now declined; by 2019, Douyin has an obvious content placement dividend for brand companies, whether they are startups we invest in or large listed companies. Douyin's official 'Star Map' KOL order-taking platform was only officially launched in the second half of 2018. In addition, Alibaba is also gradually strengthening its awareness of 'supporting brands with original content characteristics'. The two brands invested by FreeS, 三顿半咖啡 (Saturnbird Coffee) and 钟薛高冰淇淋 (Chicecream), have both benefited from this. The development path we prefer for brand startups to achieve from zero to one is: first, through content creation, or more ideally, through product differentiation to form 'product as content', build a good reputation among consumers, then form influence on social media, and then fully return to the Tmall platform for development. In this way, they are more likely to be favored by the platform and form a positive interaction with it. Source: FreeS Capital (ID: freesvc)