Case study of Uncle Tongdao: 3 years, 5 million WeChat followers, and 300m RMB valuation

Tingyi Chen WeChat guides & tips, WeChat news

Uncle Tongdao WeChat

Uncle Tongdao, a WeChat Official Account about astrology just had an exit at a RMB 300 million valuation. The founder and ex-CEO, Cai, Yuedong cashed RMB 217 million ($31.42million) for his 72.5% share. Meisheng Culture is the investor.

How can a WeChat Official Account be worth that much?

Turns out, saying Uncle Tongdao is a WeChat Official Account is a huge under statement. It’s a brand that was founded on WeChat but has extended way beyond a social media account.

How did Uncle Tongdao get started?

Tongdao was founded by Cai Yuedong, a 28 year-old illustrator who was taking freelance projects to help Weibo users to draw customized profile pictures. In 2014, he was a small Weibo KOL with less than 100,000 followers.

Things changed on the day that he drew a sarcastic & funny cartoon about the 12 astrology zodiac signs. It was a huge hit with 40,000 re-shares overnight. Cai understood he had struck a nerve, and he started the Uncle Astrology series of cartoon. Within a year, his Weibo fans grew to 5 million.

The very specific tone of Uncle Tongdao

What made Uncle Tongdao successful, besides that a large number of Chinese girls have a keen interest in astrology and fortune telling?

The is one trend that can explain this success: Uncle Tongdao is great at 吐槽 (Tu Cao), which literally means “to spit in someone’s bowl”. The verb describes the act of playfully expressing your discontent, or simply to complain about something or someone. Tu Cao is a language art in China and Japan. It occupies a specific symbolic and cultural role in China. You could compare it to the sarcastic sense of humor which is part of the way British culture is perceived, both by insiders and outsiders.

By becoming the embodiment of Tucao, Uncle Tongdao managed to attract a wide range of very engaged fans. His team also was able to bring to life the 12 Zodiac characters. They are featured in each article representing each Horoscope.  This consistent tone of voice is maintained over time and through its multiple marketing channels: WeChat, Weibo, WeChat shops, merchandize, coffee shops, books, and offline events.

Contrary to what one might expect, startups are not the only companies able to capture this form of very up-to-date cultural trends. Another company that masters the art of Tucao is Durex. It often reacts to social trends with a funny and implicit humor which made many of its content pieces viral.

Multi-revenue streams is the key to monetization

WeChat is an integrated eco-system. And the best way to make money on WeChat is to leverage this integrated nature in order to combine multiple sources of revenue.

Revenue stream #1: Advertising

The first technique that comes to mind when monetizing a social media account is of course advertising. Tongdao Uncle followed this principle and started to include native advertising inside its social media accounts.

By year 2015, the advertising revenue on Uncle Tongdao reached 30 million RMB.

Revenue stream #2: Custom merchandize

There is something inherently inefficient about monetizing through ads:

  1. The product and message from the advertiser can never be completely in line with the editorial line of the account
  2. If an advertiser is paying you for ads, it means they’re getting more value from the ads than what they’re paying you, so somehow you’re leaving money on the table.

What’s the solution? Vertical integration. That is to say: using your WeChat account to sell your own products.

That’s what Uncle Tongdao did by setting up their own line of merchandize

By the end of 2016, Tongdao will have developed more than 3,000 SKUs of branded merchandize, including toys, office supplies, kitchenware, cosmetics, clothing and even food.

All the merchandize products are of course based on the cartoon characters of the 12 Zodiac signs.

狮子座 tongdao uncle

A gift package of Leo Horoscope

Revenue stream #3: Cafe & Store

Merchandize was just the beginning of monetization for Tongdao Uncle. Tongdao opened the Uncle’s Friends Cafe & Store in Shanghai.

tongdao-cafe

Despite all the growth of online retail, online shopping accounts for only 12.9% of retail purchases in China. An offline presence enables to reach out to the other 87.1%, but also to differentiate with the growing multitude of WeChat Official Accounts which are not going through the hassle of setting up an offline presence.

Revenue stream #4: Multiple WeChat shops

Tongdao not only has one WeChat shop, it has three of them. One of the shop features Uncle Tongdao’s branded merchandize. The other two shops sells other products such as cosmetics from Japan and Korea and health supplements from Australia. Mostly products for his female fans.

Tongdao WeChat Shop

It happens that the majority of followers who are interested in astrology are female, which makes the account the perfect place to promote other cosmetics products.

The combination of proprietary merchandize and third-party products enable to combine:

  • A continuous renewal of the inventory by sourcing products from other brands, making the account feel “fresh”
  • Maintain very high margins by pushing in priority the vertically integrated merchandize coming directly from the brand

This is exactly the same strategy leveraged by the superstar WeChat account Luoji Siwei (罗辑思维) which is selling third party products, but also set-up their own publishing company and sell the books on their WeChat shop.

Revenue stream #5: Emojis

Tongdao Uncle also have a series of WeChat emojis reinforcing the brand image. Tongdao WeChat

Tongdao wechat emoji

Although the set of emojis is free, using these stickers os a powerful tool of soft marketing for the brand. WeChat emoji is great for sharing and brand building (and could turn into a revenue stream with premium stickers, although brands haven’t yet successfuly managed to drive significant income from sticker sales in China)

Revenue stream #6: Offline events

Earlier in July 2016, Tongdao organized an astrology gala in Guangzhou. Just by selling products during this event, the company earned RMB 2 million in a month.

Conclusion: what brands can learn from Uncle Tongdao?

There are a few very actionable learnings which can be taken from the example of Uncle Tongdao:

  1. Multi-channel monetization: WeChat and Weibo are both complex ecosystem combining content and e-commerce, online and offline: if you’re not leveraging all of these channels, you’re losing out on large revenue streams
  2. Vertical integration: although a lot of brands are reluctant to vertically integrate (by designing their own merchandize), the upside of doing so is outstanding. Vertical integration enables to increase margins, and ensure a perfect alignment of content with products. And because few accounts will put the effort, it’s an amazing way to stand out from the crowd in an increasingly competitive environment
  3. Digital isn’t everything: companies are fascinated by the concept of “digitization”, but the lion share of our daily interactions (and purchases) is still happening offline. Keeping a physical presence through offline shops and events was part of the success of Uncle Tongdao
  4. Picking a trendy voice: Uncle Tongdao managed to choose a trendy style to write its content and design its merchandise (Tucao) which gave it a very recognizable visual identity and much higher virality
  5. Sticking to your voice: a lot of (especially large) companies tend to think that they can recuperate each and every online trend and turn it into a marketing asset. This is usually a failure as it appears as an opportunistic maneuver. Uncle Tongdao did none of that: they picked a trendy voice and sticked to it on the long run. This kind of commitment to a given social trend is key to driving long-term engagement and following

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