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Billionaire who missed out on TikTok now tries to beat it


Like all of China’s tech companies, Kuaishou has extra motivation to expand abroad as Beijing cracks down on its domestic industry. Chinese authorities have focused on leaders like Tencent Holdings and Alibaba Group, but uncertainty over future regulations have ignited a broad market rout. Kuaishou’s stock nearly quadrupled after its debut and has since dropped near its offering price.

Orchestrating the company’s overseas push is Su’s lieutenant Tony Qiu, a former Bain Capital investor and Didi executive who helped the Chinese ride-hailing giant build its presence in Brazil. Since joining Kuaishou last August, he’s been putting his knowledge of the local market to the test, leading a team with hires from Google, Netflix and TikTok. In April, Kuaishou also welcomed on board Wang Meihong, a former Facebook senior engineer, to oversee tech for its global products.

“It’s not only creative minds or young, trendy users doing lip-syncing and dancing who come to our platform,” said Qiu. “Kuaishou is more universal.”

Kwai has been downloaded more than 76 million times in the first half of 2021 in countries such as Brazil and Mexico.Credit:Bloomberg

Take João Paulo Venancios, a 22-year-old Kwai creator living in the Paraíba state of northeastern Brazil. Since he started on Kwai in March 2020, Venancios has built a following of 2.6 million people with clips where he and his 70-year-old grandmother reenact daily life and movie scenes. Local merchants hire him to make appearances in their stores, earning him about 6,000 Brazilian reals ($1572) every month — enough to rent a house and pursue his dream to become a professional singer. It’s a fame he couldn’t have built on TikTok or Instagram, whose algorithms make it more difficult for little-known creators to go viral.

“My grandma is very funny, and we created a bond,” he said. “People on Kwai find my videos more relatable.”

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That down-to-earth nature of Kuaishou’s platforms reflects its founder’s humble beginnings. While Su now has a net worth of nearly $US9 billion, he was born and raised in a small village in China’s central Hunan province. From there, Su aced the country’s gruelling college entrance exam and won entry into the prestigious Tsinghua University, where he studied software programming, before working as a developer at Google and Baidu.

“As I grew up, I saw more people who didn’t have a chance like I did,” Su said. “So I hope Kuaishou will provide another way for them to interact with a world different from their own.”

His experience drove Su to entrepreneurship: before Kuaishou, he had dabbled in more than 30 projects in areas spanning video advertising to mobile search and e-commerce. All of them flopped. Ruby Lu, a venture investor who made an early bet in Kuaishou for DCM Ventures, spotted Su’s engineering talents then.

“He came across as a super geek,” she said. “In my book, that is a compliment.“In 2013, he met fellow software engineer Cheng Yixiao over a dinner that lasted till 2 am. Together, they transformed Kuaishou, which Cheng launched two years earlier as a GIF maker, into a video-sharing platform that featured all sorts of content, including vignettes of life in rural China.

By mid-2016, it had garnered 50 million monthly users, according to QuestMobile data. Larger rivals like Weibo and Tencent Holdings whipped up their own short-video offerings but couldn’t build a loyal community, until ByteDance came along with Douyin, which appealed to a younger — and potentially more lucrative — demographic.

Kuaishou Technology’s headquarters in Beijing.

Kuaishou Technology’s headquarters in Beijing.Credit:Bloomberg

Su almost landed TikTok. In 2017, Alex Zhu and Louis Yang, founders of the Musical.ly karaoke app, were shopping around their three-year-old outfit, which had amassed 10 million users in the US — mostly kids and teenagers. They met with Facebook and YouTube executives, but it was Su who went the furthest in talks with them. Then ByteDance founder Zhang Yiming, flush with cash from his hit news app Toutiao, swooped in and offered to buy the startup for close to $US1 billion, people familiar with the matter have said.

“We didn’t have much money,” Su recounted. “It’s an episode of significant impact, but not one that determines everything.“

TikTok inherited Musical.ly’s user base, interface and licensing deals with record labels, becoming the first Chinese consumer app to go global. That success — it has about 100 million monthly users in the US alone — drew the hostility of the Trump administration, which argued that its Chinese parent posed a potential national security threat.

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Today, Kuaishou has 1 billion monthly users across all products globally, versus ByteDance’s 1.9 billion. Online ads have surpassed virtual gifts to become Kuaishou’s biggest earnings driver, making up half of the 17 billion yuan ($3.6 billion) revenue for the March quarter. That contribution may reach 60 per cent by year’s end, Su said, though the firm remains deep in the red as it adds new businesses like e-commerce and gaming.

Some analysts argue that at its size, Kuaishou should already be generating profits rather than burning cash for user growth. Its IPO sponsor, Morgan Stanley, recently downgraded its stock rating and slashed its target price by 57 per cent to $US130.

“If Kuaishou can’t grow organically and smooth out costs when competition deteriorates, that means its business model may face great challenges,” said Wang Guanran, a Shanghai-based analyst with Citic Securities.

Back at home, both ByteDance and Kuaishou are grappling with Beijing’s crackdown on its tech giants. Kuaishou’s relatively unpolished vibe — which once featured everything from underage mums to rappers praising drugs — has drawn the censure of the internet regulator over the years. It was among internet firms fined this week for spreading sexually suggestive content involving children. Both short video pioneers were among 34 tech giants ordered to comply with Beijing’s anti-monopoly rules in April.

Kuaishou is working closely with antitrust regulators, who haven’t found any wrongdoing at the firm, the CEO said. Su, who in 2018 issued a public apology for the teenage-mum videos, says content moderation is the “red line” for internet platforms, adding that he has always recognised his firm’s social responsibilities.

Kuaishou won’t become another Douyin or TikTok, Su says. Even though his company is now relying more on top influencers and celebrities to juice ad and e-commerce sales, it will continue to be a platform for small creators like the street busker, pop-science writer and factory worker that Su himself follows and tips anonymously.

“We are trying to strike balance between efficiency and fairness, and we would still be the ones that give fairness the most consideration in the industry,” he said.

Bloomberg



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