Pay by the word — China innovation of the day

by on February 23, 2016 at 2:08 pm in Books, Economics, Web/Tech | Permalink

Consider China’s largest online/ebook publishing company, Yuewen Group, which has over three million digital books in its catalogue. More notable than the scale here however is how the company monetizes: Chinese readers can pay per every 1000 words (sort of like by chapter), and have been able to do so for more than half a decade.

Not only does this micro-transaction model encourage more readers to sample more e-books while providing instant revenue to writers (who can begin selling a book right after the first chapter is completed), the collected data can help TV producers make series-optioning decisions at a more granular level. But the unintended consequence of all this is that authors with extremely popular books never want the story to end, changing the narrative significantly. Over time, it could even change the act of storytelling altogether; it’s not unlike what’s already happening in the U.S. with shows like Game of Thrones or with binge watching/streaming leading to an entirely new genre of entertainment.

More broadly speaking, Yuewen is also an example of how Chinese and Western users monetize differently across multiple tech categories. For instance, less than 20% of Tencent’s (the creator of WeChat) revenues come from advertising compared to over 95% for Facebook’s revenue. In fact, most large consumer mobile companies in China (and elsewhere around the world) do not rely on advertising as their primary source of revenue; they focus on transactions instead. Chinese internet companies have therefore experimented with numerous non-advertising business models including in-app or in-game fees, other microtransaction models, free-to-play, and more. For a U.S. company that was previously monetizing only via ads, studying its Chinese counterpart could reveal alternative ways of generating revenue so it’s less dependent on advertising as many U.S. internet companies are.

The Connie Chan article, which focuses on tech innovation in China, is interesting throughout.  And don’t forget this:

In fact, 4 of the top 5 free apps in the U.S. Google Play store tools category are apps that originated in China. This isn’t just happening in the “invisible” tools category; right now, 3 of the top 10 free apps in the photography category on the U.S. Google Play store are also made in China.

Recommended.  And who is this Connie Chan, and why don’t we know more about her?

1 Peter February 23, 2016 at 2:11 pm

I wonder if the authors are also paid by the word, like at this company: http://compellingsciencefiction.com/submit.html

2 Ralph e February 23, 2016 at 2:18 pm

“Connie is a Partner at Andreessen Horowitz and previously led business development and marketing efforts for HP Palm in China. Prior to HP Palm, she worked as a founding Senior Associate at Elevation Partners. Connie graduated from Stanford University with a MS in Management Science & Engineering, and a BA in Economics.”

3 Tom Whitwell February 23, 2016 at 2:42 pm

Connie’s piece from last year on WeChat and Mobile in China was fantastic:
http://a16z.com/2015/08/06/wechat-china-mobile-first/

“Tencent launched a Chinese New Year campaign where third party advertisers gave away 500M RMB (~$81M USD) of free cash in red envelopes to WeChat Payment users in a single day.”

4 Paul February 23, 2016 at 4:24 pm

In many cases, American companies or companies in the American market have tried to develop microtransactions as a revenue source, with limited degrees of success. One reason is that many consumers seem to despise them with an incandescent fury. It’d be interesting to find out why Chinese consumers have a different attitude.

But as for payments for every 1000 words: I’d be worried about the incentives that creates for mediocre wordiness. Dickens got away with it, but most of us aren’t Dickens, and sometimes not even he is.

5 Tyler February 24, 2016 at 4:14 am

There would be a mix of incentives that would probably work out roughly the same. For instance, although mediocre wordiness might boost revenue for the first few pages, it may also reduce the average pages read per person as more readers quit before the end.

6 required February 23, 2016 at 4:27 pm

The content matters. For books it is different than games.

7 Kevin P February 24, 2016 at 12:25 am

“But the unintended consequence of all this is that authors with extremely popular books never want the story to end, changing the narrative significantly.”

The obvious analogy is comic books

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