Why is Xiaohongshu (Little Red Book📕) the best platform for web3 mass adoption in China? | Following the yuan
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Why is Xiaohongshu (Little Red Book📕) the best platform for web3 mass adoption in China? | Following the yuan
Compared with Tencent, Baidu, ByteDance and Bilibili, that is, although the latter is a close runner-up. I'll tell you why.
This is one of the ad-hoc commentaries in addition to the weekly news roundup that I publish on Tuesdays. If you’re also new to web3 OR think it’s a scam, I’ve added some relevant readings at the end that depicts this nascent and murky space.
To summarize the words of one of my interviewees: you can name the use cases and apps in web2 because it already happened, but everything about web3 is new.
Like TikTok for U.S. users, people around my age in China are increasingly relying on the social e-commerce platform Xiaohongshu, a.k.a. Little Red Book, for everything.
What is it? First seen as a shopping guide for female consumers, now it has become around 200 million people’s lifestyle guru and search engine (see millennial male user, Reuters’ Tech reporter Josh Ye’s comments below), business-oriented communities and brands see it as a valuable channel to lure in potential customers.
In late 2021, the Shanghai-based company was reportedly shifting its IPO from the U.S. to Hong Kong as a result of Beijing tightening listing rules after China’s ride hailing giant Didi went public on NYSE without an official nod. Domestic business publication Caixin Global reported that it had been valued at around US$18 billion.
Moreover, it’s not just used by China-based users, but also overseas based Chinese speakers.
What’s new? Recently, I’ve noticed that XHS’s R-Space team are merging web3* communities with Chinese-speaking audiences. Founded in 2021, the team had 20 people by last May and offers a portal to in-app art and fashion NFT trading platform on the account. (*web3: a catchall term for crypto-based web, here I mostly mean overseas NFT projects built on public blockchains)
Since Dec. 2022, several top NFT communities including Bored Ape Yacht Club, Moonbirds, Azuki, Doodles launched on the app that some liken to Instagram.
What’s special about XHS? It’s where middle-class millennials and Gen-Zs create and follow trends; it’s an enabler of the cultural zeitgeist. The buzzy lifestyle trends you’ve been hearing about in China — glamping, land surfing, stove afternoon tea set 围炉煮茶 — all started or amplified on XHS, aside from TikTok’s sister app Douyin.
As an avid user of both XHS and Instagram, I can firmly say that the Chinese platform is no copycat.
Though even if it was in its early days, it has done a much better job with hyper-accurate tagging and recommendation algorithms that are known to be ‘molecular’ 颗粒化. I’ve effectively used the app as a search engine, an entertainment source and a pool for finding interviewees.
I believe Xiaohongshu is best positioned for web3 mass adoption in China for 3 main reasons:
Its user base are trend-setters and early adopters. It’s where nascent consumer brands find their target audiences and early-stage investors source their ideas, the same growth trajectory can be easily applied to web3.
It knows how to play the community game. In today’s consumer and web3 space, business models are built on a targeted community’s needs and aspirations, and XHS is well prepared on this.
It provides digestible web3 educational resources. As people use it as a search engine, they can follow accounts and influencers that can make web3 knowledge intelligible.
Key steps on #interoperability:
Last June, I first wrote for SCMP that it participated in a US$1.2 million pre-seed fundraising round of Shil.me, a U.S.-based start-up that has plans to build ‘Linktree for web3’. In some recent posts, users shared they can now list digital collectibles they bought from XHS’s R-Space on Shil.me.
This week, XHS users can also display their NFTs minted on Conflux Network, a public blockchain founded in China, on their profile page in R-Space.
What’s wrong with Tencent, Baidu, ByteDance or Bilibili? With China’s ban on transactions of virtual assets including crypto and NFTs, the future of web3 in the country is doomed or at least limited.
Given that Baidu and Tencent are too big to be cool, (Tencent killed its promising NFT platform Huanhe a few months before Beijing launched its national marketplace, Baidu has a metaverse Xirang that’s ‘worse than '90s game demo’) and ByteDance is focused on VR/AR with the acquisition of VR headset maker Pico. Smaller tech companies have more breathing room as long as they don’t cross the red line.
With fans of Animation, Comics, and Games (ACG) as a core audience base, Bilibili has potential with 330 million monthly active users, but I’m biased because I’m not one of them.
Last April, it launched NFT ‘Cheers up’ outside China. This month, Bilibili International announced its partnership with Azuki’s creator Chiru Labs. I call Bilibili a runner-up because with existing public information, and compared with XHS, its web3 efforts remain scattering dots to be connected.
Relevant reading:
Bloomberg’s cover story last October “The Crypto Story” by Matt Levine (I opened the tab twice but forgot to reach each time gahh)
The New York Times explainer “What is web3?” by Kevin Roose (much shorter)
The Co-founder of Ethereum Gavin Wood coined the term web3 in 2014, and wrote this think piece “Why We Need Web 3.0” in 2018
Differences between public, private and consortium blockchains (China basically only allows the latter two)