Xiaohongshu recently reached cooperation with Taotian and JD.com to open external links, triggering thinking about the direction of its e-commerce business. Although this measure can improve the efficiency of advertising monetization, it may delay the closed-loop process of its self-built e-commerce, which reflects the contradictions and choices of Xiaohongshu in its commercialization strategy. This article will explore the background and impact of Xiaohongshu’s cooperation in opening external links, as well as its difficulties and future directions in the path of e-commerce and advertising commercialization.
Unprecedentedly, Xiaohongshu has opened up to e-commerce platforms such as Taobao and JD.com.
On May 7, on the eve of the 618 promotion, Xiaohongshu and Taotian announced that they had reached an important cooperation, and the two sides jointly launched the “Red Cat Plan”.
According to the content of the cooperation, Xiaohongshu users can directly hang links through notes in the future, jump to Taobao product pages, and merchants can also track the entire process of users from internal grass planting to placing orders and purchases – and Taotian will pay out of their own pockets to heat and stream the merchants’ grass planting notes in Xiaohongshu.
A week later, on May 12, JD.com officially confirmed that Xiaohongshu has reached a cooperation with JD.com, and the product links in Xiaohongshu can also jump directly to the JD.com page.
For Taotian and JD.com, the core demands of this cooperation are actually based on the “growth” of traffic anxiety, and it is also an extension of their series of traffic acquisition actions in the early stage.
But for Xiaohongshu, this cooperation is of greater significance and worthy of attention.
(Source: Xiaohongshu Business Dynamics Public Account)
In fact, this in-depth cooperation marks a substantial change in Xiaohongshu’s commercialization strategy.
After all, over the past few years, Xiaohongshu has always been cautious about e-commerce external links, and its policies have been repeatedly adjusted.
Today, Xiaohongshu has not only opened 300 million monthly active users to Taobao and JD.com, but also established the first in-depth alliance in the true sense.
But the problem is that as a platform that accounts for more than 70% of advertising revenue, Xiaohongshu’s opening of external links this time can improve the efficiency of advertising monetization, but it may delay the process of building its own e-commerce closed loop.
This “traffic for revenue” approach seems to contradict the platform’s long-term commercialization goals.
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And one of the most worthy questions is: where should Xiaohongshu e-commerce go?
A more pragmatic option
Compared with JD.com, Xiaohongshu has a closer relationship with Alibaba, after all, Alibaba has invested in Xiaohongshu – despite this, Xiaohongshu’s relationship with its investor Alibaba has always been inseparable.
In the past few years, the two have tested and guarded each other, especially on the issue of whether to access Taotian external links.
The interaction between the two parties began in June 2018. At that time, in order to strengthen Taobao’s content ecosystem, Alibaba led the Xiaohongshu Series D financing of more than 300 million yuan, and launched a content interoperability test to embed the beauty evaluation content generated by Xiaohongshu users into Taobao product pages.
Although the cooperation lasted less than a month, the cooperation between the two parties did not end there.
In August 2020, Xiaohongshu opened external link permissions to Taobao for the first time, allowing some talents to display Taobao product links in live broadcast rooms and notes.
However, this cooperation was also short-lived, and in less than a year, Xiaohongshu cut off the external link. At the same time, Xiaohongshu began to cooperate with third-party service providers such as Youzan and Weimob, allowing brand merchants to open stores directly on Xiaohongshu, marking its official transformation to e-commerce.
Xiaohongshu’s intention is very obvious, it hopes to establish its own business closed loop – so that the “grass planting” content generated within the platform can be directly completed on the site, and the consumer decision-making influence accumulated by the platform can be transformed into internal business value.
To achieve this goal, Xiaohongshu launched the “number store integration” mechanism in 2021, lowering the threshold for opening a store and allowing merchant accounts to directly associate product notes.
The following year, the “Home Store Opening Program” was launched to further throw an olive branch to brand owners.
In terms of live broadcast e-commerce, Xiaohongshu has also made frequent moves, not only attracting luxury brands such as LV to settle in, but also inviting star anchors such as Yang Tianzhen and Fu Peng to bring goods.
As the e-commerce business is gradually mentioned to a more core position, Xiaohongshu has become more “exclusive”.
In May 2022, Xiaohongshu promulgated the “Community Business Convention”, emphasizing that transactions must be completed on the site, and requiring bloggers to “not guide transactions outside the site in personal pages, comments, private messages and other scenarios” – the intention behind this move is obvious, and Xiaohongshu wants to firmly grasp the initiative of commercialization in its own hands.
Since then, Xiaohongshu has clearly prohibited off-site transaction diversion, and strictly restricted diversion to external platforms such as WeChat, and Xiaohongshu’s e-commerce ecosystem has entered a relatively closed stage.
Nowadays, Xiaohongshu’s e-commerce business has gradually matured, and its unique “buyer economy” model has successfully led to many consumer trends, and live streaming has also become a key driving force for the growth of e-commerce.
It stands to reason that Xiaohongshu should continue to improve the closed-loop ecology, why did it choose to open up to the outside world and cooperate with large e-commerce platforms such as Taotian and JD.com?
This may be related to the practical considerations of traffic monetization.
According to public reports, Xiaohongshu e-commerce’s GMV in 2024 will be at the level of hundreds of billions, and there is still a gap compared to other trillion-level GMV e-commerce platforms – the problem is that its growth rate is slowing down.
From another point of view, Xiaohongshu’s internal traffic has not been fully converted, and e-commerce giants are facing traffic bottlenecks.
Step by step, finally open
Xiaohongshu is a diversion of Taotian and JD.com, which will directly affect its core advertising revenue.
As the most direct way to monetize traffic, advertising has always been the core source of income for content communities.
According to the February 2024 research report of GF Securities, advertising and marketing will contribute about 70%-80% of Xiaohongshu’s revenue in 2023, and the rest of the revenue will mainly come from the e-commerce business.
However, its advertising business is currently under pressure to grow.
In the context of the overall downturn in the market, brands are paying more and more attention to the quantification of marketing effects.
Although Xiaohongshu strives to create a closed loop of “planting grass and pulling weeds”, the reality is that the grass planting content generated by the platform often completes the final transformation on other e-commerce platforms.
This leads to a key problem: although brand merchants can see front-end data such as note readings and likes, it is always difficult to accurately track where users end up placing orders, what the actual conversion effect is, and whether advertising funds are wasted.
This situation of “only planting grass and not harvesting” has affected advertisers’ confidence in advertising.
To this end, Xiaohongshu had to start using external sales data to carry out data cooperation with major e-commerce platforms, and formed Xiaohongxing, Xiaohongmeng, and Xiaohong Chain with Taobao Alliance, JD.com, Vipshop, etc. respectively.
(Source: Xiaohongshu Business Dynamics Public Account)
An interesting phenomenon is that the degree of data openness between the two parties may not be high at first.
Xiaohongshu and Taotian’s “Little Red Star” project began in 2022. The mechanism initially tracks users’ Taobao consumption behavior after browsing grass planting content through sampling, helping merchants scientifically measure the value of grass planting.
However, in August 2023, Xiaohongshu officially suspended the normal use of Xiaohongxing, citing that “due to the large amount of feedback received by the platform, the complaint star mission return data is missing, affecting the accuracy and experience of statistical analysis.”
The shift occurred in 2024, and this data collaboration suddenly became more in-depth.
After a system upgrade, Xiaohongxing relaunched version 2.0 in February 2024, increasing the data sampling ratio to 50%.
By July of the same year, the newly launched version 3.0 of Xiaohongxing achieved 100% return of note data.
This means that merchants can fully obtain consumers’ full-link behavior data such as Taobao searches, store entries, and transactions within 15 days after browsing the grass planting content, which greatly improves the accuracy of advertising effect evaluation.
If you look at it from this perspective, this “Red Cat Plan” can be said to be a step forward in the big span.
Specifically, the “Red Cat Plan” once again emphasizes the data sharing between the two parties: Xiaohongshu opens front-link data such as reading, commenting, and liking, while Taobao and Tmall provide back-link conversion data such as store entry, search, and transaction.
For Xiaohongshu, it is of great significance to open up external transaction data – if the advertising effect becomes quantifiable and visual, brand merchants will naturally increase their spending budget and bring more considerable advertising revenue to the platform.
Of course, it is obvious that the cooperation between Xiaohongshu and JD.com is similar to the “Red Cat Project”.
The commercialization paradox of Xiaohongshu
Through cooperation with Taotian and JD.com, Xiaohongshu has indeed shown an openness that has not been seen since its inception – even from the perspective of the overall development milestone of Xiaohongshu’s commercialization, this open strategy for large e-commerce platforms can be said to be a major turning point.
However, this open strategy seems to run counter to Xiaohongshu’s goal of building a closed loop of e-commerce on the site, which in turn affects the development of its e-commerce business.
There are also comments that this implies that Xiaohongshu attaches less importance to e-commerce business.
More commentary voices exclaimed: Is Xiaohongshu going to give up business e-commerce?
Indeed, Xiaohongshu’s e-commerce development process can be described as full of twists and turns.
From the early days of cross-border e-commerce business, to the development of self-operated e-commerce, to the closure of self-operated projects such as “Little Oasis” and “Welfare Society”, Xiaohongshu has been looking for an e-commerce development model that suits it, but unfortunately, these attempts have not achieved the expected results.
After adjusting its strategy in 2023, Xiaohongshu turned to the differentiated route of “lifestyle e-commerce” in an attempt to find a breakthrough in the e-commerce market full of giants.
From focusing on non-standard categories such as clothing, beauty, and home furnishings, to cultivating characteristic products based on the community content ecology, Xiaohongshu tries to avoid head-on competition with large e-commerce platforms in standardized products and low-price strategies.
This strategy is closely related to Xiaohongshu’s “traffic equality”. It intends to dilute the head effect, support small and medium-sized brands that are in line with the tone of the community, and connect the needs of market segments with the help of high-quality bloggers.
Unlike traditional e-commerce that pursues the lowest price on the whole network, Xiaohongshu pays more attention to the lifestyle value behind the products, attracting consumer groups that focus on quality rather than price.
Although this approach maintains community characteristics and avoids competition in the Red Sea, it also slows down the development of e-commerce.
At present, compared with mature e-commerce platforms, Xiaohongshu’s merchant scale is insufficient, the richness of goods is not enough, and the supply chain system is not perfect.
In this context, opening backlinks does bring new challenges.
Although cooperation with Taotian can complement Xiaohongshu’s e-commerce category, at the same time, the products on the Xiaohongshu platform will compete with Tao’s products on the same stage, and users can compare prices and purchase on the site, which may weaken the competitiveness of Xiaohongshu e-commerce.
Moreover, the convenient conversion brought by external links may further solidify the user habit of “planting grass in Xiaohongshu and transacting on other platforms”, making it more difficult to achieve the goal of building a closed loop of business.
However, at present, Xiaohongshu only opens external links in some industries, and does not open all categories.
In the future, backlinks may open up further or stagnate – no one can predict.
meanwhileXiaohongshu is also increasing its e-commerce business.
In fact, since the beginning of this year, Xiaohongshu has successively launched the “comment area link” function, launched a service provider recruitment plan, and launched a number of support policies to continue to improve e-commerce infrastructure; Not only that, Xiaohongshu also tried to carry out e-commerce overseas business this year, but it was gone.
And this cooperation is an unexpected move of Xiaohongshu on the road to commercialization.
Obviously, Xiaohongshu is standing at the crossroads of commercialization: it must not only open external links, but also maintain its own competitiveness; It is necessary to give full play to the advantages of grass planting to obtain advertising revenue, and to cultivate its own e-commerce business.
Over-opening may lead to the loss of commercial autonomy, but it is completely closed and faces the growth pressure of commercialization.
For Xiaohongshu, with the blessing of idealistic labels such as “humanistic spirit” and “fireworks in the world”, commercialization has always been a destined difficult road.
On the one hand, it is not willing to “make wedding dresses for others”, it only serves as a content drainage platform, and has become a traffic entrance for other e-commerce platforms; On the other hand, if the content keeps idling and cannot effectively move towards high-value commercialization, then how can Little Red Hand support its extremely expensive “humanistic spirit” and “human fireworks” for a long time.
What’s more, opening external links will only make the long-term path of Xiaohongshu e-commerce monetization a bigger and bigger question mark.
Therefore, so far, on the commercialization path of the two major content communities of e-commerce and advertising, Xiaohongshu is still struggling and swaying from side to side – this is probably not a problem that can be solved in the short term, and Xiaohongshu’s entanglement may continue.
