When ByteDance's revenue exceeds that of all domestic airlines
Recently, foreign media reported that ByteDance's revenue in 2023 is expected to reach US$110 billion, overtaking Tencent and approaching Meta. If the news is true, ByteDance's revenue in 2023 will be equivalent to approximately RMB 770 billion, which will be 2.3 times the revenue of all 66 domestic airlines in 2022 of RMB 336.5 billion, and the revenue of all 62 domestic airlines in 2019 of RMB 648.7 billion 1.2 times the yuan. What does it mean when ByteDance's annual revenue exceeds that of more than 60 domestic airlines? What should domestic airlines do?
1. Overview of ByteDance
ByteDance refers to Beijing Douyin Information Services Co., Ltd. (named Beijing ByteDance Technology Co., Ltd. before May 2022), which was established in 2012. It has a registered capital of 200 million yuan and its vision is to build a "global creation and communication platform."
According to Bytedance's official website, Bytedance's products include Toutiao, Douyin, Xigua Video, Dianchedi, Pipixia, Feishu, Tomato Novel, Juju Engine, Xiaohe Health, etc.
According to foreign media reports, ByteDance's revenue in 2021 will be US$61.7 billion, a year-on-year increase of 80%, and a loss of US$7.15 billion; in 2022, its revenue will be US$85.2 billion, a year-on-year increase of 38%, with an operating profit of US$20 billion. ByteDance's main revenue comes from advertising, live broadcast reward sharing and e-commerce commissions. According to reports, ByteDance's live broadcast reward share is about 30%-50%, and Douyin's e-commerce commission rate is about 2%-5%.
ByteDance's huge revenue comes from huge traffic. According to reports, as of June 2023, the number of Chinese netizens has reached 1.08 billion, and Douyin's DAU (daily active users) has exceeded 800 million. According to reports, the GMV (total merchandise transaction volume) of Douyin e-commerce in 2021 will be 880 billion yuan, and the overall user penetration rate will be 26% (e-commerce users account for the proportion of Douyin users); the GMV in 2022 will be 1.38 trillion yuan, a year-on-year increase The growth rate is 57%, and the overall user penetration rate is 45%; while the GMV from January to October 2023 is close to 2 trillion yuan, with a year-on-year growth rate of 60%. Douyin e-commerce GMV comes from the "content field" (live broadcast rooms, short videos) and "shelf field" (Douyin mall, stores, etc.). For example, from January to October 2023, the content field's GMV exceeded 1.3 trillion yuan.
ByteDance's huge traffic stems from its core technical advantages. Based on personalized recommendation engine technology, personalized recommendations are made based on multiple dimensions such as each user's interests and location. The recommended content includes not only news in a narrow sense, but also music, movies, games, shopping and other information. Through social behavior analysis, user interests are calculated in 5 seconds; through user behavior analysis, the user model is updated within 10 seconds after each user action. Extract dozens to hundreds of high-dimensional features for each piece of information, and perform dimensionality reduction, similarity calculation, clustering and other calculations to remove duplicate information; perform machine classification, summary extraction, LDA topic analysis, information quality identification and other processing on the information. . Real-time recommendation, the recommendation results are calculated within 0.1 seconds, article extraction, mining, deduplication, and classification are completed within 3 seconds, new user interest distribution is calculated within 5 seconds, and the user model is updated within 10 seconds.
2. Similarities and differences between ByteDance and airlines
ByteDance and airlines belong to different industries, but they also have things in common.
(1) They are all professional connectors
ByteDance and airlines are both professional connectors.
The Internet platform established and operated by ByteDance connects producers and consumers. Producers include product or service manufacturers (including advertisers), product or service sellers, entertainment content producers, etc. Consumers are mainly individuals who purchase products or services through the platform, enjoy entertainment programs, pay the purchase price or directly reward them. ByteDance itself does not produce or provide a specific product or service. Its product is a platform for use by a large number of producers and consumers. Its service targets are not specific and difficult to predict.
The flights operated by airlines use aircraft as carriers to connect passengers and cargo in different cities. The number of city pairs connected by flights is huge, and the demand difference is huge. Some city pairs also have alternative competitors such as high-speed rail and expressway. The airlines' service targets are also not specific and difficult to predict.
(2) Nonlinear producers VS linear producers
Bytedance is a non-linear producer, and airlines are linear producers.
ByteDance's Internet platform has significant scale effects. The better the platform, the more producers and consumers it will attract. The more producers and consumers there are, the more producers and consumers it will continue to attract. Due to the Internet Due to the characteristics of technology and products, ByteDance does not need to increase investment in proportion to this. Therefore, the marginal benefit increases non-linearly. Of course, when a better platform emerges or there are problems with the platform, producers and consumers will also drop off a cliff.
The scale effect of airlines is not significant. Flights as products are time-sensitive and one-time and cannot be stored as inventory for a long time. Production is constrained by the number of aircraft, airport schedules, crews and other resources. To significantly increase production, the number of flights or aircraft must be increased accordingly, and peak season demand It is impossible to continue to increase investment when demand is strong, and it is impossible to effectively reduce resource investment when demand declines in off-season. Moreover, demand differences between city pairs are large, and the demand for new routes, new flight times and ticket prices are often low. At the same time, it is increasingly difficult for airlines to meet the needs of different passengers with the same product. Therefore, airline production is linear, marginal benefits are diminishing, and there is an inherent ceiling and basically no floor. When its business model remains unchanged for a long time and economic control policies have certain restrictions, its profitability will be worrying and it will be difficult to support long-term healthy development.
Figure 1: Operating profit margin of relevant nodes in the domestic tourism industry chain in 2019
When ByteDance's annual revenue exceeds that of more than 60 domestic airlines, an elephant has appeared in the room. The best choice is to actively choose to face and interact with it. ByteDance and airlines are both connectors, each with their own core strengths, and various cooperation possibilities exist. What should airlines do?
3. What should airlines do?
(1) Take the initiative to attract traffic as soon as possible
As a giant platform that attracts consumers, when ByteDance's traffic exceeds that of many companies, and its annual revenue exceeds that of all more than 60 domestic airlines, airlines should not only learn from new practices, but also take the initiative as soon as possible Grab traffic.
However, there are currently not many airlines that have entered the Douyin platform for marketing.
Air Macau is the first airline to enter Douyin Life Service. Air Macau has fully experienced the traffic diversion effect from "planting grass and pulling weeds" to a more direct sales conversion. After two months of settlement, on June 12, 2023 Won the top 2 spot in the group buying list for that day, just behind Oriental Selection.
According to Douyin's official data, the number of Douyin users watching travel content in the first quarter of 2023 has exceeded 400 million. Taking advantage of traffic is taking advantage of technological dividends, and actively embracing massive consumers is a core advantage of cooperation. Why not?
(2) Carefully rebuild and operate your own sales platform
Super platform is a new thing in the digital age. UNCTAD mentioned 7 super platforms in the "Digital Economy Report 2019", namely Microsoft, Apple, Amazon, Google, Facebook, Tencent and Alibaba. There are also many industry-level super platforms. The tourism industry super platforms include Booking, Expedia and Ctrip. wait. ByteDance is a new super platform, but it is definitely not the only platform.
The competition among super platforms is crushing. A super platform is a hub node that aggregates resources and connects producers and consumers. It is the product of the continuous refinement of social division of labor driven by the wave of new technologies. Opposite to the super platform is an independent platform based on its own APP. From a customer perspective, it is obviously unreasonable to install separate apps for airlines, hotels, and attractions that have low utilization rates. From a supplier's perspective, in the vast ocean of the digital age, if a super platform is compared to a group of aircraft carriers riding the wind and waves, then are independent platforms based on airlines' own apps and official websites more like small sampans that can't help but be windy?
(3) Cooperate to create a truly free flight
After the COVID-19 epidemic began, many domestic airlines launched various fly-as-you-go products, mainly package tickets. However, this type of fly-as-you-go product is mainly based on the airline's existing flights, and the range of choices is limited. Airlines cannot yet allow passengers to truly fly as they wish.
Semi-Private Airlines is a new aviation model that has emerged mainly in the United States in recent years. It has the characteristics of traditional commercial aviation and private aviation. As a new model of aviation, many semi-private airlines have brought many new concepts, as well as many new service changes and new practices, such as "hop-on jet service" and non-invasive Security check, book by-the-seat, the first passenger decides the flight time, all-you-can-fly, on-demand private aviation, on-demand flights (on demand flights), crowdsourced flights (crowdsourced flights or crowdfunded flights), shared flights, etc. For example, SetJet allows members to book tickets 60 minutes before the latest flight takes off and check in 20 minutes before the latest flight takes off; and, except for scheduled flights, the specific time of other flights is determined by the first scheduled passenger.
At present, China has a large number of small and medium-sized airports. However, the utilization rate of small and medium-sized airports is not high, and the number of regional aircraft is also very small. However, the low utilization rate of small airports and the lack of regional aircraft does not mean that there is no market demand. The key issue may be how to efficiently connect the supply and demand sides and achieve precise design and supply of products driven by demand. In the era of the rise of semi-private airlines and the era of super platforms that can gather a large number of consumers, especially in small and medium-sized airports with low utilization rates, airlines cooperate with super platforms such as ByteDance to give full play to their respective core advantages and completely based on passengers The feasibility and economy of demand design and execution of flight products are increasing.
(4) Build an operating platform based on core advantages
The core advantages of any industry or company are limited, and any incremental business beyond the core advantages may lower operating efficiency and profitability. An ideal company should be an operating platform based on core strengths, amplifying the advantages to the extreme and minimizing the disadvantages.
Globally, Europe's Ryanair is the airline closest to platformization.
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The non-crew man-to-machine ratio indicators of major airlines around the world vary greatly, which is related to factors such as each company's business scope and support model; Ryanair's non-crew man-to-machine ratio is only 3, with 341 aircraft and 84 Due to the size of the operating base, the man-machine ratio indicator has reached an ultra-low level; overall, the non-crew man-machine ratio of major airlines is inversely proportional to the operating profit margin, that is, the lower the man-machine ratio, the higher the operating profit margin. When the man-machine ratio gradually increases, the operating profit margin shows a downward trend. Ryanair's ultra-low man-to-machine ratio and personnel structure reveal Ryanair's following management strategies: focus on key human resources; outsource non-core businesses; flatten management and eliminate non-value-added functions.
The outsourcing of non-core business is an inevitable trend of social development. Airlines can choose to outsource a series of support services such as aircraft maintenance, meal machine supplies, ground services, IT and logistics support. Due to economies of scale and professional division of labor, outsourcing suppliers can complete their work professionally and efficiently, while airlines can obtain obvious cost and efficiency advantages and be able to effectively focus resources on core businesses.
The essence of an enterprise is an operating platform that aggregates resources to complete specific functions. Compared with traditional airlines, Ryanair does not pursue possession of resources, a large and comprehensive business, market share, industry chain integration, or diversification. Its management has long focused on its main business and market segments. Ryanair uses core products with competitive advantages as the carrier and mobile Internet as the resource aggregation platform to link related businesses and fully meet customer needs, which represents the trend of airline operation platformization.