by Jason Costa
Back in 2008 / 2009, I spent time working for Google in Beijing. This month as a part of GGV, I had the chance to return to Shanghai and Beijing for the first time in years, and wow — have things changed! It was very exciting to get a feel for the mobile landscape, and also to see how quickly local talent is evolving in the region. Plus, far more people are online in China now, enabling some apps to grow to 50M or 100M MAUs in just a year’s time. The scale is staggering.
There’s been a wave of consolidation in consumer apps since I was last in China. When I left in ’09, the consumer app market was still largely the wild west — apps could rise and fall with a quickness. Now, much of the traffic in China is occupied by incumbents (WeChat, Weibo, YY, Momo, etc.). It’s undeniably harder for a new app to breakout in China today, though certainly not impossible. There have been a number of new apps that have emerged, seemingly out of nowhere, the past few years: Kuaishuo, Toutiao, Keep, Inke, Xiaohongshu, and more.
Most interesting to me though were the very real trends in China that are extremely unique to the region, and fundamentally different from western interaction models. A few interesting things that stood out during my trip…
Broadcasting
Live broadcasting is still largely nascent in the US, and in my opinion hasn’t necessarily caught on as a major trend. While Facebook is pushing billboardsfor Live, and Twitter is integrating the functionality directly into the app — live broadcasting is on fire in China. Apps like Inke (literally just over a year old), Douyu, Momo, and others are all tackling this red hot space. This is increasingly becoming a lifestyle form of entertainment for China’s younger generation. In the 2nd, 3rd, and 4th tier cities people often have more free time; and I was told several times that live broadcasting is increasingly a way to fill that abundance of time. Often times, a host can simply broadcast themselves eating, watching tv, or just sharing details about their day.
Virtual gifts
People spending money to share “virtual gifts” with others is truly something to behold in China. This monetization approach actually goes hand in hand with live broadcasting. When young women decide to do a live broadcast (think reality tv), many men will tune in and send her virtual gifts in exchange for being entertained. Often times, some men will even jockey to gain her attention — this results in a bidding war (sending more gifts to outdo the other: from hugs and cherry flowers, to virtual yachts and Ferraris), much to the delight of the host and platform. Furthermore, the Twitch type model in China exists on steroids. When gamers are streaming, many users will send gifts as a show of respect for sharing tips and tricks.
Self-Expression (Filters & Stickers)
Filters on Instagram were the original value proposition in the very early days, but eventually they became a secondary utility behind the social nature of the service. In China, apps have productized this feature. Meitu has an app called Meipai that seemingly every woman in China uses to beautify her photos. The editing capabilities are vast: far beyond what we see with Instagram filters. An individual can apply virtual blemish makeup, lighten their skin tone, slim their cheeks down, and much more. The parent company Meitu even offers a separate phone for taking selfies, which people actually own and use. Then, they share to WeChat back on their main iPhone or Android phone. Stickers are also all the rage in China — everything from sending them within WeChat itself, to a standalone app like Faceu.
Commerce
In the west, where our ad ecosystem is very mature and powers the economics of consumer internet, ads are monetization. In China though, the ad ecosystem hasn’t evolved in the same way and consequently apps in China have looked to commerce as their means to monetize. Obviously Alibaba / Taobao still dominates this space — but then an app like Xiaohongshu is filling out a real need: building a sense of curation and taste making. Lifestyle TV, magazines, etc. have been largely absent the past several decades in China, and there’s a material opportunity to see a massive new ecommerce player come along that nails taste making. Or JD, which delivers authentic goods with higher quality and faster delivery; there’s a growing appetite for premium goods with the latest generation in China.
Payments
This game feels like an all-out battle between two giants in the market: Alipay (from Alibaba) and WeChat. I couldn’t walk into a hotel, coffee shop, or restaurant without seeing one of the signs to “Pay with Alipay”. Alibaba is doing a full on marketing and partnership blitz to ensure that they own the payment mechanism. That said, far more people I spoke with in China said that they preferred paying for things on WeChat because their friends were there: and often times they were brokering peer payments to their colleagues and friends. It will be very interesting to see if this social aspect is enough to wrestle market share away from Alipay.
WeChat: one app to rule them all
In China, WeChat is the undisputed king. As Facebook continues to decompose their functions into different apps (General consumption: FB, Photos: Instagram, Communications: Messenger, WhatsApp); WeChat continues to centralize massive functionality into a single app. We’ve written about this atomization vs centralization trend previously at GGV. Simply put though, the usage of this app in China is just staggering. Literally every meeting I walked into, everyone would bust out their phone and proceed to scan one another’s WeChat QR code. While that behavior never really took off in the US, it’s literally second nature in China. QR codes are also used well beyond just friend connections; their popularity spans other spheres (businesses use it to guide people to social media channels, online stores, etc.) in China as well.
QQ: What’s old is new again
The younger generation in China is turning to an old friend: QQ. Back in ‘08/09, QQ was all the rage. Everyone was on the service, and it was growing like a weed. However, as WeChat rose to prominence, QQ seemed to take a backseat (along with many other long deceased social networks in China: 51.com, RenRen, etc.). Not to say that QQ ever went away, but imagine MySpace making a massive comeback amongst Generation Z in the US! It’s worth noting here too that Tencent owns both QQ and WeChat. They have a stranglehold on social in China.
What about Facebook?
One thing that kept coming to mind for me was, if Facebook ever got the clearance to operate as a JV in China, would they even be able to locally compete against Tencent? Yes, and no. For the 3rd, 4th, and 5th tier cities: that game is over. There will be little to no reason for those users to have a Facebook account. But for the 1st and 2nd tier cities (think Beijing, Shanghai, Hangzhou, Shenzhen, etc.) — Facebook could absolutely get a major foothold in those markets.
There are far too many Chinese citizens in these cities who’ve studied or worked abroad, have family or friends in regions outside of China, and just generally have diaspora ties outside of the country. Here Facebook has a real competitive advantage against Tencent (which doesn’t have meaningful reach outside of China), and could easily build an engaged user base in these cities. As someone who saw firsthand Google depart from China after entering just a few years prior, I’ll be very intrigued to see what Facebook does in the region. My sense is that they will take a very different approach.
Final Thoughts
More than anything, there continues to be a massive sense of excitement and hope for a brighter future in China. I distinctly remember that being the case when I left in 2009, and it’s nice to see that remains intact. Equally impressive is the work ethic in the region. I will not forget going to meetings at 9pm on a Friday night or 2pm on a Saturday afternoon, only to find that at least half of the office was still there working furiously. When I asked others about this, the gist of what I heard was: “my parents didn’t get opportunities like this, so it’s my responsibility to make the best of this moment.” There’s a real hunger to learn and to do great work there. It was heartening, and I suspect that this spirit will continue to drive the ever growing tech ecosystem in China forward for some time to come. I look forward to returning there again in 2017 and beyond!