The skit went to sea and continued to run wildly.
In April this year, Appfigures, a third-party data company, announced the report card of short dramas going overseas in the first quarter of this year. The cumulative revenue of the entire Q1 overseas short drama category was 245 million US dollars, an increase of 80 times compared with the same period last year, and the market scale expanded rapidly. The category list released at the same time shows that ReelShort, DramaBox and ShortMax lead their peers by a wide margin in terms of downloads and revenue.
2024Q1 Overseas Short Drama Download/Revenue Ranking (ShortTV has now been renamed ShortMax) | Image source: Appfigures
In the past Q2, the above three products are still in the first echelon, and the revenue scale has also risen to a new level, but the ranking has changed a little: DramaBox has overtaken ReelShort with its success in the Japan market, and continues to push up the global daily flow peak of the short drama application (practitioners feedback that the third-party data value is usually small and is only used as a reference of magnitude); ShortMax, which had been dormant for a while, finally ushered in a new round of growth after July and began to catch up......
ReelShort, DramaBox and ShortMax's year-to-date revenue | Data source: Diandian Data
On July 15, ShortMax returned to the top 10 of the total iOS download list in the United States, and the highest Android came to the top 2 of the total Google Play download list in the United States, and continued to dominate the list. Revenue rose at the same time, and Diandian data showed that ShortMax went all the way to the top 36 of the United States's best-selling list, and on the same day, Netflix ranked in the top 68. ShortMax told us that the platform's daily turnover peaked at 1.2 million US dollars (about 8.73 million yuan) in July, and if we look at it from the outside, it is easy to attribute the growth to the success of a certain work, and ignore the systematic operation and improvement.
ShortMax Revenue Growth Curve | Image source: Dotted Data
In the past year, the Beluga Whale editorial department and ShortMax have met and communicated several times, but due to various reasons, the plan has been repeatedly postponed, and it was not until this spring that they contacted ShortMax's COO Nine Tails. We have always been curious about how ShortMax, as a company that was deeply involved in the domestic market in the early days, would have different feelings and understandings about making content overseas, and according to Nine-Tails, ShortMax's strategy in the overseas market has actually gone through many iterations, and a long-delayed exchange has given us the opportunity to better review the changes and growth of ShortMax.
This article was written in April of this year, and the following is the full text of the exchange.
After reaching a million DAUs, ShortMax pressed the pause button
Moby Dick at Sea: Can You Introduce Yourself?
Nine-Tails: I'm the COO (Chief Operating Officer) of ShortMax, and I'm currently responsible for the overall operation of ShortMax, mainly including the decision-making of the follow-up direction and strategy.
Let me briefly introduce my previous experience, Jin Long and I (author's note: Liu Jinlong, CEO of Short TV) are both from content backgrounds, and we were first in the circle of online writers, and we wrote books. Later, I went to iQIYI's Literature Division as the overall content editor-in-chief, and also did APP operations, and then went to Station B and Tencent one after another. At Tencent, I led the team to build the content ecology of Tencent's micro-short dramas from 0-1, and then came to Kyushu to incubate overseas teams.
At the beginning, this business was just me, Jin Long, and our product leader, Brother Tao. It was about June last year that we started to build an overseas team from 0, and then ShortMax was launched, and I was completely focused on the operation of this product.
Moby Dick: Since the beginning of this year, ShortMax's overall revenue has actually risen very fast, and many people are very curious about what you have done. Can you tell us about your thinking?
Nine-Tails: Actually, we think this year's increase is both expected and somewhat unexpected. The reason is this, of course, we are firmly optimistic about the track of short dramas going overseas. I myself mentioned the track of short dramas within iQiyi from the end of 19, when short dramas were still relatively early. We also had some research and judgment on the business model and strategic layout of the short drama industry very early, and the outbreak of the domestic market was actually similar to what we expected; Overseas is currently in a similar situation, and in the long run, there will be short drama platforms comparable to Aiyouteng and Netflix.
With this in mind, we decided on two things to do. The first is the infrastructure in the early stage, including the infrastructure of product and technology research and development, and the infrastructure of the entire operation strategy and system. The second is the construction of content production capacity, because we feel that the core competitiveness depends on the retention efficiency of the overall launch and operation in the early stage, and the continuous high-quality production capacity of the entire product in the later stage.
We launched ShortMax in September last year, and we actually started operating in early October, and from October, November, December, and actually maintained a 100% growth rate every month. However, because of the late start, it may rank third in the industry in the early stage, occasionally run to second, and sometimes fall to a fluctuating state such as fourth and fifth. By January of this year, ShortMax was running in almost a million DAUs. At that time, we felt that any platform that could achieve millions of DAUs in such a short period of time, whether it was production and research, operation and production capacity, needed to enter a plateau period, so we decided not to run forward quickly, but to cultivate our internal skills first.
At that time, the first action was to adjust production capacity, in the past, our production capacity was more complicated, both domestic production capacity, and overseas production capacity, now we adjust to North American production capacity; Second, there are actually some technical breakthroughs in our delivery link; Third, we have also made refined operational actions similar to user stratification within the device. After the adjustment, we started again in February, when we thought it would return to 100% growth, but what was surprising was that there was a hit short drama in the middle, which grew faster than we expected, and once came to the first place in the industry in March. Later, we went to review, whether it was the results of the list or the consumption during that period of time, it should have reached the peak of the industry.
The penetration rate of overseas short dramas is less than 5%, and there is still room for growth of translated short dramas by at least 2-3 times
Moby Dick at Sea: Do you feel more competitive this year during the adjustment process?
Nine-Tails: After we grow, we will find that ReelShort and DramaBox are not squeezed because of our growth, but the entire industry market is growing at the same time. We have always felt that it is a positive thing for more players and more capital to enter at this stage, because the penetration of the media side (author's note: referring to social media platforms such as Facebook and TikTok) is less than 5% of the overseas short drama crowd.
We feel that more players are coming in, in fact, more money is invested in the media side, quickly improving the maturity of the market, and completing user education. For the media side, it is also necessary to accelerate learning through data and algorithm models, which can expand the user base of short dramas faster, better identify which users are willing to pay for which content, and quickly scale up the amount of advertising on the premise of maintaining an excellent ROI return model.
In the past, this matter was actually relatively rudimentary and weak on the overseas media side, and the algorithm did not have a model that specifically served the short drama business. Because there was no content in the early days, there was no content label, and the media didn't know what a short drama was. Overseas media are not like Douyin and Kuaishou, and Douyin Kuai has basically done a good job in the past two or three years to classify short dramas and subdivide the labels of short dramas.
The media side needs to understand the content and users in order to match better, but the maturity of the overseas part is far less than that of the domestic one, so we will hope that more players and good dramas will come in to accelerate the occurrence of this process, and the spread of the media side will be faster, which will also accelerate the growth of the market.
Moby Dick goes to sea: How can you tell that the penetration of big media such as Facebook into the skit crowd is less than 5%? If you push it according to such a standard, what is the order of magnitude of the user group of the short drama?
Jiuwei: Judging from the current data in China, the penetration rate of short dramas among short video users is close to 50%. The user base of overseas short videos is about 2 billion, and if overseas short dramas reach 50% of the short video user penetration rate, there will also be a volume of 1 billion users, and the total number of MAUs should be less than 50 million, so the overall penetration rate is less than 5%.
Beluga Goes to Sea: Before this wave of growth in North America, we observed that the ShortMax performed better in Southeast Asian markets such as Indonesia and Thailand, including neighboring markets such as Japan and South Korea, how did you prioritize these markets?
Nine-Tails: Our initial vision was to follow Netflix, because in the long run, the consumption time and user volume of short videos are likely to be higher than those of long videos. So if we follow this logic, our global strategy will also align with Netflix. ShortMax has achieved relatively good results in Southeast Asia, Japan and South Korea, in fact, it has a lot to do with the content genes of our domestic short dramas, and we have a lot of inventory of domestic popular short dramas.
It takes time to build the production capacity of overseas self-made dramas in the early stage, and we can't wait in place until the overseas production capacity is perfected, right, there must be a growth rate. So in terms of the early stage, the past content gene has helped us a lot. In the long run, domestic short dramas will still become a supplement to our content base, which ensures that I can eat this piece and maintain the top three positions in the industry, but I still need to use self-made short dramas to break through.
Therefore, our strategic focus is still on the entire English-speaking market, with Southeast Asia, Japan and South Korea as supplements, and will also expand to Spanish-speaking and Middle Eastern regions in the future.
Moby Dick: We are currently doing research on DramaBox, and we have found that translated short dramas can also run particularly well in the European and American markets, will this situation affect your judgment?
Nine-Tails: It is true that there will be several large audience areas for translated short dramas, such as Southeast Asia, Japan and South Korea, which are actually expected, but the fact that translated short dramas can run to this level in United States and even the entire English-speaking region is indeed beyond everyone's expectations. We also have our own data and models running, and at the moment it seems that this piece (translation skits) is actually still incremental, and it has not yet reached the ceiling. We feel that even if DramaBox is only deeply engaged in translating short dramas, it still has at least 2-3 times more room for growth.
Moby Dick Goes Sea: Will It Lead to a ShortMax Content Strategy?
Nine-Tails: Our content strategy isn't going to change much.
Our genes are similar to those of Dianzhong (the parent company of DramaBox), but there are differences in strategic decisions. To be honest, at this stage, you will definitely find that the ROI of translated dramas is better than that of self-made dramas, because you have almost no content cost and are completely doing addition. The translated drama has already made money in China, and then it is redistributed overseas, as long as the ROI is okay, it will not be lost. This has led some manufacturers to invest in translating short dramas.
But our goal is not to say that we can be the top 1 of short dramas today, we hope to benchmark the strongest overseas content platform, or serve the part of TikTok users who like the plot, so in terms of content diversification, as long as there is a demand, whether it is self-made or translated, we will be fully invested.
Moby Dick: When it comes to content diversification, we found that ShortMax is a manufacturer that is very advanced in the theme of self-made short dramas. For example, you have been filming battlefield male frequency short dramas for a long time, including Korean short dramas later...... Half a year has passed, will you notice any changes in user portraits?
Nine-Tails: Actually. This is also a question that we have often discussed with capital and peers before, will the short drama be particularly homogeneous? Is it only a sinking content such as the god of war's son-in-law or the female frequency tyrant? I think short drama is a brand-new form of content that is more suitable for user needs, and on this basis, a distribution model based on the delivery algorithm and a business model based on single episode payment/subscription/free have been developed.
The reason why it seems that short dramas are more homogeneous in a certain region now is because in the past, the consumption of story-based content in this country was mainly long videos, and the content of short dramas was blank, and supply and demand were extremely unequal. When our short drama enters this market, the growth rate is very fast and the ROI is also very high, but after the follow-up user penetration rate of this part of the user goes up, it must need to break the circle.
We are willing to do new content themes and vertical content because we believe that new content will bring new user circles, and on the whole, it is based on our strategic goal, which is to cover all languages and all users.
Moby Dick Goes to Sea: Does ShortMax Have Some Hit Methodology?
Nine-Tails: In fact, we have already sorted out the process relatively smoothly, and the internal friction of each link is relatively small, so the output content will naturally be above a horizontal line. For us, we need to ensure that the lower limit of production capacity is ensured through SOP, at least all my dramas are qualified and users are willing to consume, and I will not lose money when I put them on.
On this basis, the main creative team will have a certain amount of creative freedom, and their personal ability and thinking talent will have the possibility of breaking through the upper limit. Therefore, I think that the explosion contains both inevitability and possibility.
"Judging skits with the same thinking as watching KFC and McDonald's"
Moby Dick going to sea: When we were discussing short dramas going to sea before, we would find that production capacity was a big problem. Half a year later, is capacity still a limiting factor?
Nine-Tails: Yes, we think production capacity is still a problem right now. Because the current growth rate of user volume, user scale and platform is greater than the growth rate of production capacity. The situation overseas and domestic are different, first of all, there are many original domestic film and television practitioners; second, there are also many resources in film and television bases like Hengdian and Xiangshan; Secondly, there are still a large number of MCN and material delivery practitioners in China, and these production capacities will be quickly released in a market with high certainty and good profitability.
Domestic companies, together with overseas film and television resources and overseas teams, mainly due to differences in language, work philosophy and cognition, etc., lead to overseas production capacity being far inferior to that of China. This situation has actually happened in the domestic short drama market, when the short drama was very popular and the production capacity was not available, and the shooting team was in short supply, but the domestic supplement was fast, and a large number of players poured in about 2-3 months. The duration of overseas capacity shortage will be a little longer, but it will definitely enter the stage of capacity matching, and then it will be overcapacity and de-capacity, and go through these stages again.
Moby Dick goes to sea: Some practitioners' understanding of domestic short dramas may be biased towards traffic logic, and this business can run through because we can quickly launch a large number of short dramas, and then go to the stream for testing, waiting for the explosion to appear and then achieve profitability. If overseas production capacity can't keep up, will it still be this logic?
Nine-Tails: We define skits as fast food consumption in the content industry. We will judge it in a similar way to KFC and McDonald's. In other words, it is a business based on controllable costs and the pursuit of high-quality production capacity under a standard quality system, and we are not going to make a theatrical movie or a well-received artwork. The commodity attribute of the short drama is much higher than the artistic attribute, and we do not expect it to be very innovative, or bring a very different experience to the user, but to ensure that the content is above the user's demand line.
Therefore, when we evaluate whether overseas short dramas can run through, there is not much difference between them logically and those in China, but the carriers are different, which will lead to much more complicated than domestic short dramas. We now use a platform to carry it, and the follow-up user operation and commercialization need to be explored by ourselves, but in China, this matter is actually handed over to WeChat and Douyin, of course, they must also have a complex team to do this, but overseas is to do it themselves.
Therefore, the overseas situation is that the early thinking is consistent with that of China, but in the long run, its business model and completion difficulty will be much more complex than that in China.
Moby Dick: Recently, we have observed ReelShort doing brand advertising placement in short dramas, so what are ShortMax's thoughts on commercialization?
Jiuwei: The size of the domestic short drama market in 2023 is 40 billion yuan (author's note: this figure should mainly be calculated by the recharge scale), I think this is only a relatively small part of the short drama business ecology, accounting for about 30%-40%, and the rest also has commercialization methods such as brand advertising placement and IP incubation.
Overseas short dramas will also move towards diversified commercialization paths in the future. Because of the simple truth, in today's commercial market, everyone is grabbing the same kind of resource called the user's attention span, where this core resource is, there is the most possibility of monetization.