Xin Jing Bao·2025-11-07 02:40Core Insights - The micro-drama industry is experiencing a paradox where companies must invest in advertising (投流) despite the high costs, which can account for up to 80% of total expenses, leading to potential losses [2][4][10] - Recent developments indicate a shift towards free viewing models, allowing companies to reach more users without incurring high advertising costs [2][9] - The industry's reliance on advertising as a primary revenue source is being challenged by the emergence of free platforms and changing viewer preferences [8][12] Advertising Costs and Revenue Model - Advertising costs dominate the micro-drama industry's expense structure, with production costs typically comprising only 10% to 30% of total costs [4] - The micro-drama business model initially relied on a "free first few episodes + key plot points paid unlock" strategy, which has proven effective in generating significant revenue in a short time [4][10] - DataEye's report predicts that the advertising expenditure in the micro-drama sector will grow from 249 billion yuan in 2023 to 330 billion yuan in 2024, and further to 423 billion yuan by 2025 [5] Shift to Free Platforms - The introduction of free short drama apps by major platforms like Tencent and the shutdown of paid short drama programs by others like Kuaishou indicate a significant market shift [3][9] - The free model is seen as a way to attract users and generate revenue through advertising rather than direct payments from viewers [9][10] - The industry is moving towards a mixed monetization approach that combines in-app purchases and advertising [10][12] Industry Trends and Challenges - The micro-drama industry is characterized by a high degree of content homogeneity, with popular themes remaining largely unchanged, which poses challenges for differentiation and quality improvement [10][11] - The increasing competition and reliance on advertising have led to a "Matthew effect," where larger companies dominate the market, making it difficult for smaller players to survive [11][12] - Companies are exploring new business models, including brand collaborations and private traffic strategies, to reduce dependence on advertising [13][14] Future Directions - The industry is looking towards international markets as a potential growth area, with some companies beginning to adapt their content for audiences in Southeast Asia, the Middle East, and Europe [14] - The success of micro-dramas in international markets could provide new revenue streams and help mitigate the risks associated with the domestic advertising-heavy model [14]