Note: The utility apps mentioned in the title and covered in the report include desktop, app lockers, speed boosters, cleaning tools, battery savers, anti-virus programs, Wi-Fi and other utility apps in the narrow sense, as well as non-social but content-supported photography apps, browsers, and calendar apps in the general sense.
Foreword: The Content Era has Arrived
In 2015, companies fiercely battled over content for their video and audio apps. To build their audiences, some companies purchased copyrights while others poured money into development, creating original online shows and exclusive content for their users. Other companies such as Toutiao.com personalized newsfeeds by developing algorithms to best identify the content their user bases would be interested in. All of them had one goal in mind, to create profitable content and dominate the market.
As mobile internet became more widespread, many users showed a willingness to pay for quality content that would save them time and effort in searching for things which interested them. This created a new market that many companies were quick to take advantage of. The wise companies understood that great content attracts more traffic which provides huge benefits—increased advertising spending, especially brands spending more on influencer marketing. This demonstrates the popularity of content among brand marketers. The companies with the best content stood to create significant market value by having the biggest audiences, while the companies with weak content were destined to go out of business. The content war was not just about profitability for content-oriented companies, it was about survival itself.
Then, in 2016, several important events happened in China’s mobile internet market: Papi Jiang, a popular online comedian known for her short video blogs received a large amount of financing, competition amongst live streaming platforms reached an all-time high, popular audio book app Himalaya partnered with multiple content providers to offer paid content material, and all of China’s major e-commerce platforms entered the live streaming market to boost conversion rates. All of the above once again proved that we have entered a new—an era in which content is king.
Worldwide, Facebook, Snapchat, BAT (Baidu, Alibaba, Tencent), Cheetah Mobile and other internet giants have begun their own content strategies; some have even started offering paid content;
The benefits of introducing content onto utility apps includes extending the length of time users spend on apps, increased app recognition, attracting brand advertising, raising conversion rates, etc.;
Utility app content appears in a variety of different forms; many types of scenarios can be created and there are multiple advertisement placements;
A new feature of content integration focuses on personalized recommendations to users, as it can increase the conversion rates of advertising and e-commerce, but the corresponding requirements for big data, personalized recommendation technology and content copyrights are very high, therefore very few utility apps can do well on their own; most utility apps choose to integrate content SDKs;
A trend of content integration is that more and more brand advertisers have started to launch ads on utility apps, so the profitability potential of content integration is very high.
I. Background: Global technology giants have all joined the content war
As the future of content integration monetization becomes clearer, more and more mobile internet companies, such as e-commerce, social media, video platforms, search engines, utilities, stock trading, dictionaries. etc., have joined the content war.
Within this context, Cheetah Lab first analyzed the content strategies of Facebook, Snapchat, Alibaba, Tencent, Baidu and Cheetah Mobile as follows:
Although Facebook has repeatedly claimed that it is a technology company, in many ways, its content and influence have surpassed traditional media. Facebook is concentrating on two main types of content: Instant Articles and Facebook Live. To entice the media to license their content, Facebook Instant Articles provides a faster user experience, more detailed data and a more generous revenue sharing model.
At the same time, Facebook Live allows media to live stream on Facebook or embed a Facebook Live stream into their own websites via an API. Live streaming content has brought very positive benefits to Facebook. According to Facebook's own data, the user's comments on the live streaming video are ten times that of normal video.
Snapchat: Content is the cornerstone of success
Snapchat gained initial fame for its self-destructing messages, but it soon reached a bottleneck and fighting for survival. At its most critical moment, it decisively transitioned towards high-quality short video, which helped bring it back to life. Snapchat's content strategy also includes its "Discover" channel, which invites media and brands to offer selected quality content. Live Stories is a curated video feature which edits together user-submitted Snaps from the same event location to create a Live Story, such as "One day at the Rio Olympics."
The launch of the Discover channel has gained popularity among brands. For example, Burberry has set up its own channel on snapchat. Marc Jacobs, Alexander Wang, Chanel and other premium brands have also tried launching fashion shows and backstage stories on Snapchat Live Stories.
Alibaba: Connecting e-commerce, news and social
Taobao & Tmall: Pursuing the dividends of e-commerce through content integration
Alibaba has been actively integrating content into its e-commerce platforms. For instance, it
has added a Buzzfeed-style content feed, as well as live influencer marketing streams to both Taobao and Tmall. Although Taobao’s penetration rate in China is far ahead of other e-commerce platforms around the globe, it has nearly reached a saturation point in the market and needs a breakthrough. Good content can drive traffic to e-commerce sites and raise conversion rates. For example, the rapid rise of cross-border e-commerce platform Xiaohongshu ("Little Red Book") is attributable in part to its emphasis on user-generated content (UGC), in which users share pictures of the items they purchased through the platform.
UC headline: Browser transformation
UC Browser, owned by the Alibaba Group, has always supported Alibaba’s e-commerce strategy through content. The browser hosts massive amounts of traffic, giving content a natural platform that also requires content to support. Before content integration, the browser was just a tool with a high possibility of being replaced, but content was able to bridge the gap between the browser and its users through emotional linkage, and increase user stickiness. More importantly, content integration has been able to connect UC Browser and Alibaba’s e-commerce platforms, closing the loop on Alibaba’s ecosystem. UC Browser has also added subscription accounts to better control content and maintain the harmonious development of the entire ecosystem while maximizing its benefits.
Alipay: Socialization is to improve the user stickiness
Even though Alibaba’s online payment platform Alipay receives a torrent of criticism after every update, it is still pushing ahead with content integration. According to data gathered by Cheetah Lab in the third quarter of 2016, pressure on Alipay to transition towards content comes from its primary competitor, WeChat Payments. WeChat itself is opened an average of 167 times per week, each time leading to the possibly of using WeChat Payments. AliPay, on the other hand, is only opened 16 times per week, less than one tenth that of WeChat. As such, AliPay feels it needs to join the content integration war to increase its usage rate.
Tencent: rich content sources to ensure both social distribution and interest distribution
Tencent and content integration are a perfect match. In the beginning, WeChat was just a social app, but after adding a Moments feed and Subscription accounts, it gradually became the dominant platform it is today. A contrasting example is world-famous communication app WhatsApp which was acquired by Facebook. This was primarily because WhatsApp is just a communication tool with a single function and a single profit model. It couldn’t compete with Facebook, which thrives on content.
The introduction of WeChat Public Accounts triggered a wave of domestic UGC. A "Hot article from Moments" feature focused on social distribution was added beneath the search box in WeChat. This is similar to what Facebook did for content distribution.
In addition, Tencent, which owns WeChat, also created a single cross-platform "Penguin Account," giving users a single account to facilitate content distribution across all of Tencent’s platforms, including QQ browser, Tiantian Kuaibao, Qzone and Tencent News.
Baidu: content is the last piece of a puzzle
As of Baidu, which always seems less vigilant, has recently announced to spend RMB 10 billion to support its own "Baijiahao" cross-platform account, and share revenue with the content producers.
Baidu began as a search engine operator. It has huge advantages in the PC space. At first, the content provided by Baidu consisted of keyword searches, and promotion bidding made up the bulk of Baidu's income. But when the mobile era arrived, Baidu didn’t move quickly enough, and even after suffering negative impacts to its advertisement business, it remained in a passive state.
However, given the size of Baidu, even though its content integration strategy has fallen slightly behind, Baidu is still a major factor based on its user data and search algorithm, not to mention its advertisement alliance. Content integration still has great strategic significance to Baidu, especially in regard to its products, such as Baidu Mobile , Baidu Browser, Baidu Netdisk, etc. If Baidu is able to bolster its content offerings, its ecosystem will become more robust, and the advertising revenue it will gain through traffic sales will be immeasurable.
Among all Chinese internet companies, Cheetah Mobile (NYSE: CMCM) has performed the best overseas. Despite fierce competition in the utility app market, Cheetah Mobile occupies a leading position in the overseas market. In the third quarter of 2016, Cheetah Mobile announced that it has successfully completed the first stage of its strategic content transformation. Its content integration includes news platforms, social live streaming platforms, mobile games and other fields.
In terms of news app products with an oversea distribution, Cheetah Mobile acquired News Republic, a global mobile news service operator, for USD 57 million. Cheetah Mobile also launched a social application Live.me in the United States, which topped the Apple App Store and Google Play rankings after just three months. Globally distributed casual game Rolling sky has ranked in the Top 10 in the US App Store for free downloads.
At the same time, Cheetah Mobile’s utility products such as Clean Master, CM Security, Battery Doctor and other utility Apps have huge number of users and have thus started their integration content strategy. Fu Sheng, Cheetah Mobile's CEO, said that based on the company’s massive user base and supported by solid big data, as well as its globalization footprint and vision, Cheetah Mobile will build a globalized mobile content ecosystem.
II. Utility apps join the content wave: Content is the key to saving utility apps
There are two main reasons that utility apps went into the content integration process other than those e-commerce and social apps which have a strong correlation with content:
1.Built-in content can extend the length of time spent using utility apps
Normally, the formula for defining the value of an app is: the number of users x openings x length of time spent on the app. In this formula, the biggest advantage of utility apps is the number of users.
According to 2016 Q3 Ranking provided by Cheetah Lab (Cheetah Mobile’s own products are excluded), 35% of the top 20 apps in the Chinese market are the "utility apps" in general sense, including Wi-Fi Master Key, QQ Browser, Tencent Mobile Assistant, Baidu Mobile, Alipay, UC Browser and Baidu Mobile Assistant, indicating that the user base of utility apps is large.
The number of times utility apps are opened varies, but since users have a consistent need for utility apps, the number is relatively large. Screen locker, app lockers and other features of utility apps are opened with a high frequency. In contrast, length of time spent on utility apps is their biggest pain point since once users solve their problem with a utility app, they no longer need to remain within the app. Therefore, adding content to the utility apps can effectively prolong the length of time that users spend on the apps.
According to data from Comscore, in the US market, the length of time spent in news apps is experiencing a growth spurt
According to data provided by Quest Mobile, after introducing content into their apps, the total length of time spent on UC browser, Taobao and Toutiao.com are just behind that of WeChat and QQ, surpassing input method and video apps.
2.Content integration is another way for utility apps to cash in
In addition to increasing usage time, content has also disrupted the profit model of utility apps. First, when content is displayed as an information feed, there is an increase in native ad placements. When the adjacent content has a similar style, the ads hidden in between receive a higher conversion rate. Second, when users read the content, corresponding data tags are generated, which is helpful in creating user portraits for precise targeting. Finally, the content has emotional resonance with the users, which can change the user’s impression toward lifeless utility apps, building a stronger emotional connection for brand ads launched within those apps.
Therefore, among the Top 20 Apps ranked in the Chinese market, all utility products are accelerating the process of content integration. Integrating content into utility apps has become an irreversible trend.
III. Classical placements in utility apps allow for content integration
1. Mobile phone management apps: Content attracts users in varied placements
Typical products: Clean Master, CM Security, Battery Doctor
A. Screen lock: Content displays in the lock-screen and charging screen. These are the most viewable placements on mobile phones. They suit personalized recommendation and brand ads. The only difference is that some placements will only display when charging phones.
The two pictures above show the frequently displayed placements when charging phones and screens are locked. The image on the left is a traditional advertisement, while the image on the right shows a news feed. Clean Master altered its charging screensaver, turning its one and only ad placement into an information feed which can be slid up and down, so that users can view massive amounts content before unlocking, consequently increasing the number of ad placements. Moreover, ads hidden among compelling content also receive less resentment from users.
B. App lock: Similar to screen locks, app locks also have a high viewability. It is very suitable for brand ads. The difference is that the app lock pages can serve different ad content based on the type of app. It can offer more options and is more precisely targeted.
For example, Samsung had great success advertising on Cheetah Mobile’s Facebook app locker. Due to its strong brand exposure plus the brand effect of the chosen app, the potential for brand advertising in app lockers is very high.
Compared to performance ads, revenue from app lock increased ten-fold after launching the brand ads. This feature also has gained attention from automotive, telecommunications, movie and television, financial and other industries.
C. Wi-Fi, Accelerator, Security apps: Integrate a news feed, and the information feed will pop up automatically after the app’s basic function is completed. No additional action is required from users, and users will continue to read if they are interested in the content.
For example, the length of time spent on Clean Master was extended to 7 times after adding content to its results page.
D. Desktop apps. There are also various ways to add content in the desktop apps. One is to provide high-quality wallpapers and personalized services to meet the needs of users to increase stickiness. Another is to add content, driving traffic in other directions. Launcher gadgets and search toolbars can provide content and drive traffic for ads.
2. Browsers: Major browsers have access to abundant content resources, including novels, comics, news, e-commerce, etc.
Typical products: UC Browser, QQ Browser, Baidu Browser, etc.
3. Photo and video processing: Content sharing giving birth to the content community
Typical products: PhotoGrid, Butter Camera, etc.
Many photo or video beautifying apps are generally regarded as utility apps, but users often use the apps to share their photos, allowing other users to see their content. As a result, these apps gradually established UGC communities of their own. Past cases include Miaopai, Meipai and other short video apps, and recent examples included PhotoGrid and Butter Camera.
The new version of PhotoGrid added a set of comment functions to improve community interaction.
4. Other categories
Typical products: Weather, calendars, etc.
B. Calendar Apps: combining the scene with horoscope etc.
For example, popular calendar app Wannianli added horoscopes, health, historical anniversaries, "Daily Words" and other interesting content to its information feed.
IV. Difficulties of content integration with utility apps
The above examples show that news feed are the ideal form of content to be integrated into utility apps, and personalized recommendation will play an important role. Personalized news is the future. Based on what we see from the browsers, the BAT companies all have their own personalized news recommendation products.
Personalized news recommendation faces the same challenges as utility apps
China is paying more and more attention to copyrights. Some personal media platforms like WeChat Public Accounts have strengthened their protection of original content, and other platforms are also fighting against infringement. Copyright issues are more sensitive in overseas markets. Not only is it more difficult to obtain copyright licenses, the punishments are more severe for copyright infringement. As for utility that want to add content, copyright issues are the first obstacles to overcome. It becomes even more difficult when trying to obtain copyrights in multiple countries.
2.Personalized recommendation technology
We can see the importance of personalized recommendation technology in the leading role that news apps with personalized recommendation features in China’s news apps market, and the usage of personalized recommendations in every content-related browser. Personalized recommendation technologies were perfected by Chinese companies, which is illustrated by the achievements of Chinese companies in overseas markets last year. Personalized recommendations require precise algorithms and huge amounts of data, so the technology and data requirements are extremely high.
3.User experience and engagement
Utility apps are simple to use. Users generally regard them as single-use tools, but the task of news and content apps is retaining users to the highest degree. So, they require a high-quality interface and good user experience. But many utility apps which are known as simple tool may not have this kind of development capability.
How to solve the 3 challenges above？
Case 1 Cheetah Mobile
Cheetah Mobile, the world's leading app developer on Android, was able to open up the overseas apps markets quickly and gain a great number of users. The company began to transition towards content integration when they realized that content will define the next era of internet development. One of their most important actions was the acquisition of the world's leading news app- News Republic. Founded in France, News Republic has a lot of users all over the world. News Republic’s design fits the habits of overseas users. Additionally, News Republic has over 2,500 licensed media partners, and its vast amount of content cover 47 countries in 43 languages, with 100,000 articles, 40,000 images and more than 2,500 videos uploaded daily.
After acquiring News Republic, Cheetah Mobile leveraged its own big data and personalized recommendation algorithm to take it to the next level. According to Cheetah Mobile’s third quarter financial report for 2016, Cheetah Mobile have over 600 million monthly active users, creating vast amounts of data every day. Cheetah Mobile analyzed these data to push precise recommendations and advertisements to users.
Case 2 Integrate content SDK
The investment in content and the matured technology of Cheetah Mobile helped bolster News Republic’s core personalized content. But more utility app publishers and even OEMs have chosen a simpler way: integrate content SDKs. SDK integration means that the service providers will embed other personalized content product to their own products directly, and share revenue based on the income of ads.
Compared to developing their own personalized recommendation content, SDK integration saves a lot of manpower and material resources, and the revenue sharing model is very flexible as well. Therefore, SDK integration is the most common way for utility apps to integrate content.
V. The future of profit for utility apps with content integration
The profit model of utility apps is simple and limited. One is charging for functions inside the app and the other is charging for ads. However, due to the limited time users spent in the app and the lack of emotional interaction, it is hard to get brand ads, and the result of performance ads is unsatisfying. Now, new content integration methods open up new types of ad placements, hence providing utility apps with new opportunities.
1.Telling the story and setting the keynote by content, making it possible for utility apps to get brand ads
According to data provided by BBC via eMarketer, millennial internet users prefer content and stories provided by brands. The percentage is even higher in India, where the internet is developing rapidly. It proves that the most important way to promote a brand is to tell stories through content.
E-commerce platforms JD.com and Dmall have both placed splash screen ads on Clean Master, showing that brands’ awareness of the value of advertising on content-driven utility apps is rising. Automobile and cellphone companies are starting to place brand advertisements on utility apps as well.
2.Ad revenue sharing model
We can learn from Facebook, which provides its media partners with a revenue sharing model for Instant Articles that they can’t resist. As of now, 100% of the revenue generated by the content is given to the content provider, and if Facebook fills the ad space, then Facebook and the content provider share the revenue.
If the traffic is big enough, utility apps can share revenue in different ways with content providers to achieve a win-win situation.
3.More accurate personalized recommendations lead to higher ad conversion rates.
This is even more apparent sin utility apps after personalized content SDKs are integrated. Personalized content is provided to users with various tags, and the portrait of the users become more and more accurate. After accessing utility apps, ads can be launched more specifically, and get a higher conversion rate.
Utility apps can also gain benefits from content integration. More ad placements can be created in the content feed, the length of time spent on the app can be prolonged, greater opportunities for performance ads will be created and higher conversion rates of e-commerce ads are possible, among other things.
In 2017, after the mobile internet market stabilizes, those companies with huge traffic and advanced technology will be the leaders in the industry. With content integrated into utility apps and the ecosystem connected with content, the future of mobile advertising will belong to them.