No one ever expected that the punches would start to fly so quickly! All the live-broadcasting platforms have joined the cash burn war after copying the HQ Trivia (HQ) model in China.

Live streaming is certainly not a new idea, and if anything it’s Chinese companies that have been doing a better job with the various live streaming apps of late. For example Inke, Huajiao, Xigua and Yizhibo; who have around 15 million, 5 million, 6 million and 8 million active users respectively. As they already have the users and the tech teams, adding a new feature on top of their existing product has proven to be relatively straightforward for them. None of them could afford to miss out on the action, so the battle again goes down to market share – with the inevitable outcome being lots of money spent.

Notice any similarities?

For those of you who don’t know, HQ is a New York based live streamed trivia app from the creators of Vine. It allows users to win a share of a cash pot – you can read more about it in one of our earlier articles. It is slick, with smart scripting, humour and high production values.

As it gained popularity in the US and spread to other countries, it didn’t take long for Chinese companies to want to emulate it. The battle in China began with a Weibo (Chinese twitter) post by Wang Sicong – a businessman and the only son of Chinese tycoon Wang Jianlin, which announced that he would give 100 thousand Yuan (US$15.5k) as a prize for his quiz app Chong Ding Da Hui on Jan 3.

After that, more and more similar apps appeared and with a rapid increas of the prize money on offer to attract more users. All the mainstream live-broadcasting platforms have now joined the foray.

On Jan 9, all the platforms started to increase the number of daily sessions and the prize pot. The accumulated prize value for one day quickly increased to 4 Million Yuan (around US$620,000), and the highest prize for one game has reached 1 million Yuan (US$155,000). The cash burning war just went atomic! Along with the increase of the prize pot,the number of online users also increased to millions from hundreds of thousands.

It has proven to be an extremely efficient way to get user traffic and more platforms will definitely join this trend before we see competitors drop out.

Lots of issues

As the number of users have grown so quickly, naturally some issues have emerged.

Users have complained that app servers have frequently gone down due to too many people playing online at the same time. Meanwhile, some tools that help users cheat by providing the right answers have also appeared on the market. Also there are some concerns that the security of user’s personal information may be at risk, as some apps demand users provide their bank account details if they want to withdraw the prize money.

Some platforms have already monetized this model

Low entry level, high prize value and other features such as inviting a friend to get an extra life, can easily attract a mass of user traffic. That’s why lots of companies are interested in this model. What’s the next step after generating user traffic? The answer is monetizing it.

On Jan 9, Meituan sponsored 1 million Yuan of prize money on app Bai Wan Zuo Zhan. Before the game began, the number of online user had achieved 3.43 million. Doing simple math, getting 3 million users with 1 million Yuan means the single user acquisition cost is less than 0.35 Yuan (about 5.5 cents). That’s incredibly cheap!

Moreover, another app named Zhi Shi Chao Ren just signed a 100 million Yuan (US$15.5 million) contract with Qudian. Undoubtedly the online trivia model is quite a simple and effective advertisement model. It can not only help the further development of live-broadcasting platform, but also meet the publicity requirements from the advertiser. We foresee that more and more large advertising/sponsorship will appear very soon.

What else except for cash burning?

The profitability of online trivia model by selling advertisement is clear. In the future, it may have more possibilities. But before that happens, these platforms need to survive.

Firstly, they need enough cash. Based on our observation, all the platforms are gradually increasing the prize money, if they keep this competition up, they will need lots of cash to avoid losing users – users are fickle and will follow the money.

Secondly, a successful platform needs the support from a comprehensive ecosystem. In the short run, platforms could attract users by increasing the prize. But in the long term, if they want to keep getting new users and retaining existing ones, they need a complete ecosystem to commercialize the whole model.

Same same, but different!

Currently, most of these platforms are launched by the live-broadcasting platforms. These live-broadcasting platforms already have active users, so they can build an ecosystem to retain the users and remain competitive. Some independent quiz apps such as Chong Ding Da Hui, may struggle in the future.

In general, the quiz apps will compete with the live-broadcasting platforms. Along with the increased competition, the platforms with single, and simple, functions will lose out. Whereas the ones supported by a comprehensive ecosystem will be more competitive, retain users and be able to add another revenue stream. Whether the live-quiz format continues to be popular, though, remains to be seen and will depend on the appetite of the prize sponsors. So long as they are getting new users they will continue with this cheap new source of data.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].