Earn af­ter read­ing

China news app en­tices users with click­bait and cash.

The Star Malaysia - Star2 - - Technology - By PEI LI and ADAM JOURDAN

CAI Li, a jan­i­tor in Shang­hai, de­vel­oped a se­ri­ous ad­dic­tion to news app Qutoutiao, en­ticed by gos­sipy ar­ti­cles about celebri­ties and the cash she gets from read­ing the sto­ries.

Log­ging on dur­ing breaks at work and some­times at night when she can’t sleep, the 63-year-old has earned a few hun­dred yuan over sev­eral months, which she says is use­ful to sup­ple­ment her in­come.

With its un­usual pay-your-user strat­egy, Ten­cent-backed Qutoutiao Inc – pro­nounced “chew-tow-ti-ow” – has drawn in 20 mil­lion daily read­ers. a leader­board shows the top-earn­ing user has raked in more than US$50,000 (RM207,900).

dig­i­tal gold coins are earned by play­ing games that in­volve read­ing sto­ries or by con­vinc­ing oth­ers to sign up. The cur­rent ex­change rate is 1,600 coins for one yuan (61sen), with strong play­ers re­ceiv­ing the ti­tle of “master”.

The pay­ments are an ex­treme ex­am­ple of fi­nan­cial in­cen­tives from dis­counts to coupons em­ployed by a new gen­er­a­tion of chi­nese In­ter­net firms as they seek to es­tab­lish them­selves in a mar­ket dom­i­nated by much big­ger play­ers.

“ac­quir­ing new users if you’re com­pet­ing with alibaba, Baidu, Ten­cent and tra­di­tional mo­bile play­ers, you need to come up with some­thing new,” said Zhang chen­hao, Shang­hai-based man­ag­ing part­ner at tech­nol­ogy-fo­cused Prometheus Fund.

On one hand, it has worked. The news ag­gre­ga­tor, which listed in the United States in Septem­ber, tripled its num­ber of daily users over the last year. Third-quar­ter rev­enue - nearby all of it from ad­ver­tis­ing - jumped more than six times from the same pe­riod a year ear­lier to just un­der 1bil yuan (RM607.1mil).

But the strat­egy doesn't come cheap, even if in­di­vid­ual amounts paid to users are ‘triv­ial' - a word it used to de­scribe the pay­ments in its IPO prospec­tus.

Qutoutiao spent over 1bil yuan (RM607.07mil) on mar­ket­ing in the last quar­ter – more than its rev­enue,

nearly the amount of its net loss and over seven times what it spent in the same pe­riod a year ago.

“It is get­ting more and more ex­pen­sive to get traf­fic,” said chief fi­nan­cial of­fi­cer Wang Jingbo, but the cash give­aways were a key hook and a long-term strat­egy.

“It’s the eye­ball economy. Pre­vi­ously, peo­ple had to spend money to see con­tent, but with the chang­ing In­ter­net they no longer have to pay... Not only are they not pay­ing, users now need to earn some­thing as well.”

Since surg­ing on its trad­ing de­but, its shares have lost three-quar­ters of their mar­ket value, hurt by a wider eco­nomic chill that has hit chi­nese stocks and dis­ap­point­ing earn­ings. It is now worth around US$1.3bil (RM5.4bil).

In­dus­try ex­perts ques­tion how long firms like Qutoutiao can sus­tain cash­burn­ing habits and how they will be­come prof­itable.

“It’s very messy. If you lower the amount of money, users will lose in­ter­est.

But if you raise it, the cost is too high,” said Wei Wuhui, an aca­demic and man­ag­ing part­ner at tech­fo­cused ven­ture cap­i­tal fund Sky­chee Ven­tures.

More broadly, con­cerns are grow­ing about how some chi­nese tech firms, in­clud­ing house­hold names, are gen­er­ously us­ing dis­counts and other means to sub­sidise cus­tomers while also tak­ing on other costs in the pur­suit of mar­ket share.

Meituan dian­ping – a “su­per-app” whose ser­vices in­clude food de­liv­ery, restau­rant reser­va­tions and ridehailing – saw its stock plunge last month af­ter quar­terly op­er­at­ing losses tripled amid a bruis­ing price war with its main ri­val.

Prometheus Fund’s Zhang noted ven­ture cap­i­tal fund­ing was tight­en­ing due to the slow­ing economy, pres­sur­ing a key fund­ing chan­nel for tech firms.

“This (stage) is purely cash-burn­ing to cre­ate a foun­da­tion. But in the end you have to de­liver value and be prof­itable. If you don’t make prof­its, no-one will sub­sidise you and fi­nance you for­ever.”

Copy­cat be­liev­ers

Qutoutiao – whose name means “fun head­lines” – tar­gets smaller cities and ru­ral ar­eas with con­tent that ranges from cook­ing tips to videos on how to dance.

chief fi­nance of­fi­cer Wang said he hopes to have 200 mil­lion monthly users at some point, get­ting to­wards the es­ti­mated 250 mil­lion cur­rently com­manded by ri­val news ag­gre­ga­tor Jinri Toutiao. Qutoutiao had 49 mil­lion monthly ac­tive users as of July.

Byte-dance-owned Jinri Toutiao re­cently launched a lite ver­sion of its app tar­get­ing ru­ral mar­kets and users with smaller phones, that in­cludes cash games, a sign it’s tak­ing Qutoutiao’s threat se­ri­ously.

It even of­fers 25 yuan (RM15) for per­suad­ing an­other user to join, trump­ing Qutoutiao’s eight yuan (RM5).

Sev­eral Qutoutiao users said their main in­ter­est in the app was the money, but com­plained it was be­com­ing harder to earn.

Zhai Liyun, 45, a temp worker who lives on the out­skirts of Bei­jing, said she read “click­bait” sto­ries be­fore bed but so far had only earned 20 yuan (RM12) be­cause most of her friends were al­ready on the plat­form.

cai, the jan­i­tor, said she was cut­ting back af­ter her eye­sight suf­fered and she lost weight from go­ing on the app too much – prompt­ing an in­ter­ven­tion from her hus­band and daugh­ter.

“I’ll play in the evening if I can’t sleep but I won’t lose sleep over Qutoutiao. I try not to think about it too much now,” she said.

— Reuters

Dig­i­tal gold coins are earned by play­ing games that in­volve read­ing sto­ries.

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