A Dark Horse of China's Internet Shows the Potential in Engagement
In China, the likes of Weixin, Sina Weibo, Xiaomi, and 360Buy have been hogging headlines about the country’s most exciting new Internet companies. But one low-profile startup that may be set to file for an offshore IPO rarely gets a mention. That company is Guangzhou’s YY.
YY specializes in interactive streaming and provides a platform for users to host their own “channels”, through which they can perform, teach, or just hang out, earning money along the way. The technology and the ideas behind it are similar to Google Hangout and Airtime, but more scalable and flexible.
Oh, and it has 300 million users.
In a talk at a “Silicon Dragon” tech event in Shanghai late last week, YY’s founder David Li said that, among other things, his company is rejuvenating the music industry in China. On YY, singers can perform live to an audience over video or audio, and listeners can reward them with virtual currency, helping to get around the piracy problems that plague China’s music industry.
“We are making their original music profitable,” Li said, according to a transcript provided by blogger Leonard Bogdonoff. “You can sing in real time and perform for people around the world.” One popular artist on YY is from a small town in China and attracts as many as 20,000 fans. She makes more than RMB300,000 (US$47,500) a month, Li said.
YY has attracted $95 million in venture backing, and is eyeing up an offshore IPO for perhaps as early as 2013. It has apparently already engaged bankers in preparation for the move. When I visited the company in Guangzhou in July, the company’s CFO said YY was sitting on more than $100 million in cash. Last year, none of its revenue came from music, but this year it accounts for 35 percent of the cash flowing into YY’s coffers. It gets a further 20 percent of its revenue from advertising.
YY’s other metrics are impressive too: it boasts 11 million channels on the platform, each of which can support more than 100,000 users at one time. In December, it hit a peak of 8.45 million concurrent users.
At the event, Li stressed that engagement is key to YY’s success. “Our engineers provide good software to create high engagement,” he said. “People don’t think the engagement section of the market is big enough, but that’s because the technology wasn’t good enough.” He said we should be able to host more than a million people in one online event, and allow people to communicate and contribute by video.
Li, a 38-year-old philosophy graduate and former newspaper reporter, also said that he doesn’t fear the mighty power of Tencent, which commands three times the audience of YY and is making moves into a similar space. “We have over 300 million users. Tencent has just over 1 billion. How can you move a third of your users to a specific function? That is one of their issues.”
The moderator asked Li if it’s possible for Chinese startups to grow big in the shadow of the giants, such as Tencent, Baidu, and Sina. Li put an optimistic spin on what has been a long-burning issue in the industry. “The platform changes all the time, so every time there’s platform shift, a new opportunity can emerge,” he said. “The big boys don’t always get it right and when they need to pivot, we can take advantage of it.”