Why be interested in YOWANT?

Live streaming has been the most loved type of service in China’s consumer market for a while. KOLs or influencers are the content generators during a typical hot live streaming show. Two of the most celebrated KOLs, Viya (薇娅) and Li Jiaqi (李佳琦), who attracted 30 million viewers last Double 11, have raked in CNY 2.7 billion (USD 389 million) and CNY 1 billion (USD 144 million) in sales respectively.

However, the whole industry chain is more complicated than a live streaming studio. Factories, brand merchants, advertisers, KOLs, MCNs, e-commerce and UGC/PGC platforms have altogether created an ecosystem behind the shows. The MCNs who possess (have signed contracts with) over 90% of the KOLs are the real force that generating hype and sales to support the rising medium.

Kuaishou, one of the top short video platforms in China, has been releasing the most influential MCNs on its app since February 2019. One MCN company named YOWANT stands out, having retained the number one ranking since May 2019.

At present, YOWANT has built co-operations with Douyin (the Chinese version of TikTok), Kuaishou, Taobao Live and other well-known streaming platforms. It has more than 50 influencers and has signed more than 10 celebrities, including Wang Zulan and Zhang Bozhi. The company boasts 150 million fans, over 10 billion accumulated video views and more than 2.5 billion monthly exposures. Besides, the company began to monetize its short video content in September 2019 and had achieved CNY 3 million in average daily sales by December.

How does YOWANT grow?

Founded in November 2010, YOWANT positioned itself as a digital marketing solution provider and has been improvising its business to keep surfing the top of the market wave. From 2013 to 2014, its main business was Internet-based advertising distribution. It served Baidu, Tencent, NetEase and other Internet players, matching different marketing needs to the right resources. In the following two years, it entered into the mobile game market, serving as third-party operator and advertiser, leveraging its advantage in distributing channels. Two years after that, YOWANT established a matrix WeChat official account, covering e-commerce on consumer products, beauty and skincare education and others from 2017 to 2018. The business model of ‘pay for content’ started to come out in revenue.

After 2019, the company started to concentrate on social e-commerce and to train Internet influencers though short video platforms and other e-commerce platforms. These rapidly evolving business strategies of YOWANT coincided with the development of the MCNs in China recent year, which is one of the reasons for its current leading position among 6,500 counterparts.

How’re YOWANT numbers?

In March 2018, A-Share listed company Saturday (002291:SZ) acquired 88.57% of the shares of YOWANT for CNY 1.8 billion (USD 284 million). Saturday paid CNY 474 million in cash and the rest of the CNY 1.314 billion in shares.

An announcement from Saturday also showed that the two parties signed an agreement promising that the recurring net profit of YOWANT attributable to shareholders of the parent company in 2018, 2019 and 2020 should be no less than CNY 160 million, CNY 210 million, and CNY 260 million, respectively. In 2018, the recurring net profit of YOWANT exceeded the promised amount of CNY 8.369 million, with a completion rate of 105.23%.

Any worries?

The rapid development of short video platforms in China has fostered a large number of users who are accustomed to watching live broadcasts and short videos; at the same time, it has incubated thousands of influencers who can turn their Internet traffic into profits. Moreover, due to the competition between giant Internet platforms on live streaming and short video fields, other players in the industry chain can still benefit from the current business model.

But risks coexist with opportunities. From the development experiences in other countries, the bargaining power of MCNs – as an agent to connect upstream (the influencers, celebrities) and downstream (brand merchants, e-commerce platforms, UGC/PGC platforms) – is low on both sides. That makes MCNs a weak link in the whole industry chain, especially compared with the Internet content juggernaut as a whole. Therefore, when the competition between the platforms ends, the reshuffle of the MCN industry will accelerate. 

More importantly, the capability of generating good content is the core competitiveness of an MCN. The ability to guarantee constant, good quality marketing content will differentiate a winner from the competition. The current MCNs, though they ‘own’ some influencers are also facing the conundrum of a lack of talent, as the top KOLs are a scarce resource for all players. The cost of attracting influencers or training them will also be crucial for an MCN’s future.

Last but not least, as the live commerce model is exploding, problems have surfaced, especially in terms of the quality and after-sales service of the goods brought through the live show period. EqualOcean believes that in the future, MCNs with more resources and connections with suppliers and brand merchants will be more advantageous. The MCNs that dig into one or several product verticals, such as apparel, jewelry or cosmetics, will possess more bargaining power and will be more likely to get a profit.

Despite all the risks, there will be at least one or two leading companies emerge from the crowd. From the development history of YOWANT, we can surely see the strategic vision of the founding team. In November 2019, the company set up a CNY 5 million fund called ‘Cradle’ (which is homophonic with the company’s Chinese name) to ensure that consumers can buy goods via its live broadcasts. If the products are problematic, the fund will be applied in compensation. In addition, YOWANT also set up a special live broadcast customer service team to ensure a trouble-free after-sales service for consumers. The fund is the first such venture among players in their sector.