Play the small cards well, play the good cards big, and win the big cards.
Wen 丨 Marcoshin
Editor 丨 Song Wei
In 2010, the year China entered the mobile Internet, BAT just became a code name. Like a fork in the road, a group of startups have a premonition that China's future will be the Red Sea, so they choose to go beyond the border to find the next blue ocean.
They got out of the shadow of BAT as they wished, but fell into the world ruled by Google and Facebook. Very few people who went to sea at that time have survived to the present, and there are almost no survivors and growers. Until a younger group of entrepreneurs came to power, TikTok, SHEIN, Mihayou and other companies appeared, so that China has a truly global Internet giant. The essence of this is that China's internal Internet capabilities spill over to overseas, and their play style no longer adheres to Chinese characteristics.
But between the old and the new, between the big and the small, there is the only team that remains at sea.
Zhou Yahui and the Kunlun Wanwei he founded were survivors. They were the first overseas publishers of games, more than a decade of journeys to the sea, they went to Southeast Asia, the Middle East, Europe, North America, South America, Africa to explore, tried games, tools, browsers, content, social, payment, O2O - all the areas you can think of that can give birth to large companies. They have worked tirelessly to distribute the Chinese model and Chinese products almost to the whole world.
Zhou Yahui once said that he believes the best business is to find areas that do not compete. It was his fear and his motivation.
Compared with the previous generation of seafarers, they have a sense of awe and know how to abandon short-term interests to look far away, so they can survive and gain an absolute dominant position in the local market, and their past experience proves that they know how to play small cards well.
But a new generation of global enterprises, from the most competitive Chinese market, directly into another big battlefield. They know how to win the big names. From going to sea to internationalization to globalization, behind the change in concept is a change in cognition.
Between the old and the new, Kunlun Wanwei was still looking for a fertile territory that could gain a dominant position. The fate of Kunlun Wanwei is a microcosm, which reflects how the previous generation of Chinese companies explored unfamiliar countries, and how a person, a team and a company recognized the limitations of self and the times and constantly looked for breakthroughs.
From China to Southeast Asia to Africa
Within a year of graduating from Tsinghua University's Master of Precision Instruments Department, Zhou Yahui had an experienced partner, Wang Liwei. A team of twenty people made the world's third largest software download site, earning $10 or 20 million a year, and Zhou Yahui began to think about "what can be bigger."
In 2007, the team transformed into overseas game distribution, Zhou Yahui did not play games, but was familiar with traffic, and the two major industries with the greatest traffic monetization value were games and e-commerce. The following year, Kunlun Wanwei was founded, originally called Kinet, transliterated from "Global Net". They were once the biggest mobile game publishers in Southeast Asia, Japan and South Korea, but that advantage only lasted a year or two. Since then, the crowd has risen together.
Zhou Yahui has a strong sense of crisis, and 360 cooperated with mobile phone guards, once the world's second, with an annual income of hundreds of millions of dollars, but he felt that this product was too thin, could not hold, and decisively gave up. 2010 is the first year of China's mobile Internet companies to go to sea, the early hundred flowers bloomed, the first success is the tool products, but most of the team only look at short-term interests, every day to think about how to fight with Google's rules. Fang Han, CEO of Kunlun Wanwei, concluded that the main reason why Kunlun can survive is that the overall culture does not deceive itself, cares about the profit model and cost control, does not make money and does not do, and at that time, peers almost did everything.
In 2015, Kunlun Wanwei was listed on the Shenzhen Stock Exchange as a game company, and on the night of listing, Zhou Yahui told executives that in the next game industry, Tencent and NetEase would squeeze everyone to death. "We ask for life."
Not long after going public, Zhou Yahui went to Silicon Valley alone and rented a house near Facebook's headquarters. Crazy to meet people, dig people. "The whole person's eyes exploded." Fang Han recalled.
Zhou Yahui believes in the importance of the main track and dares to "think big picture". From the perspective of scale, finance, e-commerce, social networking, and entertainment games are big lanes and have big opportunities. But if they all do it themselves, it is too slow, so they choose to incubate by investing in overseas products, and then inject Chinese technology and traffic models after acquisition, so as to enter different major tracks.
Instead of buying big, successful products, they choose to buy small brands and make small things bigger.
According to this logic, from 2016 to 2019, Kunlun Wanwei invested in the overseas short video platform Musical.ly, acquired the same-sex social platform Grindr, Norwegian veteran browser companies Opera and StarGroup, and StarGroup's main product is StarMaker - you can understand it as an overseas national K song.
They can see the opportunities that the times bring, so they react quickly and turn around quickly, but it turns out that in the past they lacked imagination about the size of the opportunities.
The team has reflected that when making games before, the space of the overseas game market was too small, and it was not expected that the entire European and American mobile games would blow up. If they start again, they will spend a lot of money to push this market. In 2016, one of the key judgments of the whole team was that there were not many opportunities to become a $10 billion company at home, so it was necessary to go overseas. But the rise of Pinduoduo and Douyin proves that this is not the case.
From 2015 to 2017, a large number of content products with good profit models such as live video began to go global, from 2017 to 2019, short video products went overseas and achieved rapid growth, and after the outbreak of global-level productStikTok, e-commerce and game startups emerged.
Short videos and live broadcasts, Kunlun Wanwei gave up after trying. 2017 coincided with the sale of Musical.ly, and Zhou Yahui had the right of first refusal, but he thought, "The project in hand is still tossing, and the acquisition of Musical.ly will exhaust me." Later, ByteDance acquired the company and hatched TikTok.
Xia Fan, the current STARMaker CEO who joined Kunlun Wanwei in 2016, said that he proposed internally in 2018 to give him 100 million yuan, and he had half the probability of making short videos 10 million DAU in one year. But management calculated that it would cost at least $1 billion. At that time, all the giants were staring at the track of short videos. They gave up.
Many entrepreneurs have seen this big opportunity in the same period, such as Fu Sheng of Cheetah Mobile and Li Xueling of the Happy Gathering Era, who are trying to rush in and compete with TikTok, including the fast hand who went to sea in the later stage. But they all failed.
Long video, movies, music, etc. are all PGC models, and there is no way to scale, so the final market pattern of these industries is the coexistence of multiple oligopolities. However, short videos are UGC plus PUGC, which is likely to form a single oligarchy. Because in a bilateral market with strong network effects, the latecomers are completely hopeless. Fang Han said that observing all the short video companies going to sea, only Byte can insist on investing at any cost.
One overseas entrepreneur said he believes that among Chinese companies going to sea, TikTok is the uncrowned king, and only policies can correct him.
A new generation of overseas startups dare to gamble and win. When ByteDance went to sea, most people did not expect Byte to be so determined. Tencent and Alibaba both chose to go to sea after making too much money in China, resulting in people who went to sea thinking that domestic money was better earned, "Why should I come over?" ”
Mihayou has been more successful in globalizing than game startups of the past, essentially because decision makers are crazy game lovers who love games and want to make a game they like, rather than a business-wise decision. The 700 million yuan research and development investment of a product of the original god is completely irrational even in the eyes of a game manufacturer like Tencent.
"We know better our destiny and ourselves." Fang Han said. Because not everyone has the ability to play a big card well.
"It's too competitive to be our dish." Xia Fan said.
Kunlun Wanwei continued to look for direction. After acquiring Opera, an old Norwegian browser company in 2016, they found that Opera had many users in Africa, and felt that Africa was a blue ocean and had great opportunities. So they decided, then simply retreat to Africa. Zhou Yahui is currently focusing most of his energy on the payment platform OPay, and he wants to build an Alipay in Africa, where smartphone penetration is less than 50%. Opay is a big card in Zhou Yahui's hand.
Fang Han said that their experience is that a country's per capita GDP of $1,000 to $2,000 is a hurdle, and the per capita GDP is over $2,000, and China's Internet e-commerce, entertainment, and game products are suitable for entry. The best markets in Southeast Asia are the Philippines, Thailand, Vietnam and Indonesia, and other countries can not look at it. Only finance goes to sea, it is the per capita GDP that can be done no matter how low, because even the poorest need the most basic payment services, so they go to Africa to do finance. Poor countries can also do news clients and short videos, but they can't make money. Just like doing live broadcasting in India, the main paying users are overseas Indians rather than local Indians.
China's Internet competition is too fierce, and entrepreneurs look at the blue ocean outside. Fang Han used to think that as long as you take a plane from China, you need to change planes once Chinese don't like to go, this is also a blue ocean, Brazil, Mexico, Argentina, each market is not smaller than Indonesia, but it is too far. Later, he saw that because of the epidemic, some large foreign markets have also become markets without competition, because Chinese have returned. At the same time, policy changes will also make the blue ocean appear, such as Egypt's liberalization of mobile payments in August 2021.
Zhou Yahui wrote in his investment notes released in 2015 that if entrepreneurs choose the right battlefield, they will be half successful. His method of choosing the battlefield was to "find the best 'girl' and chase her 'girlfriend'". Because of the direct pursuit of the best girls, the probability of success is very low. But the best girls' girlfriends are not bad, and the probability of catching up can be much higher.
Going to Africa, "retreating to a land that needs to be cultivated for ten years, everyone has no patience, we have patience," Fang Han said, which was the logic of their thinking at that time.
In response to our question of "how determined do you have to do Africa", Zhou Yahui replied: "I can always plant land for ten years." ”
"It shows that you have patience."
"Patience is the best determination. People generally have no patience and no determination. ”
Play the small cards well first, and then play the good cards big
Before joining Kunlun Wanwei, Xia Fan was the product leader of the core product cleaning master of 360 company, And Zhou Yahui came to him and said, "You work in a listed company, what you do is the icing on the cake, you work with me, do a product to a listed company, that feeling is very different." Xia Fan was impressed.
At that time, Zhou Yahui personally invested in the live broadcast platform Yingke, Xia Fan's first idea was also to do live broadcasting overseas, but after research, he felt that although the commercialization efficiency of live broadcasting was high, the scale was not large, and the DAU of YY and Yingke did not exceed 10 million.
With a certain category + live broadcast, the imagination of the business is greater. Momo is stranger social + live broadcast, and the national K song is K song + live broadcast. Xia Fan believes that the latter is easier to do than the former, when the national K song was 40 million DAU and contributed more than half of the revenue of TME (Tencent Music Group). So they decided to make K-pop products overseas. When the project started, Zhou Yahui's first thing was to find a copyrighted target acquisition overseas, and in 2016, he spent less than $10 million to acquire Starmaker and began to incubate.
Xia Fan used to do tool products can easily do more than 100 million DAU, he is very confident, the initial strategy is also simple, that is, the domestic K song products are fully imitated, iterative on a weekly basis, "very hard". But the retained data could not go up, so after three months, "I began to be anxious." He reflected that his copy of the national K song was only a function, and the logic behind it was not understood at all.
Doing content is different from making tools, the former depends more on the ability of the entire system than on the ability of the product manager to break through at a single point. For example, the accuracy of the user's search for matching, whether the recording timeline and lyrics can be aligned, and the quality of the accompaniment sound effect and recording effect. "It's all about it, but it's something I haven't experienced before." Xia Fan then made two decisions, one is to start making audio and video and recording algorithms, and the other is to solve the content supply and build a large-scale music library.
They have done a lot of hard work to improve the user experience, such as improving the quality of user song recording, the team made the underlying adaptation for each model. This is a huge workload, and there are tens of thousands of models in Indonesia alone. They only completed the adaptation of hundreds of mobile phones in the first year, and now they have made more than 20,000 models. StarMaker's CTO, Weihao Wu, says their vocal cancellation technology is currently among the best in the world.
Retention went from 20% to 30%, and DAUs stagnated in the hundreds of thousands, and they didn't rise again. After 5 months, Xia Fan was more anxious, and he began to think about a problem - singing it earlier than the national K song, but only a few million DAU, and the national K song has tens of millions of DAU, why? He previously believed that Tencent's traffic support for the national K song coupled with the help of the social relationship chain, the two factors accounted for 50% each. But after the study, it was found that traffic is not the key, the social chain is, and the ratio of the two factors to the outcome is at least 2:8.
The solution has not been thought out, and it has reached the end of 2018. The annual review meeting began, and it was Xia Fan's turn to review, "very embarrassing" The short video failed, starMaker lost 6 million a month, and there was no improvement. "The internal frustration is very strong." At the end of the review, Xia Fan went home and lay in bed for a full 24 hours. He didn't find the answer, he just felt unwilling. Later, he ran to Zhou Yahui and said, "Do it for another year, if I can't do it, I will resign, I will admit it." ”
Xia Fan tries to precipitate users through the two grippers of social relationship chain and content. He went to see Zhu Yiwen, former CEO of NetEase Cloud Music, and realized that the team's investment in content and appreciation level were simply not enough, and at that time, on the platform, the content produced by ordinary people did not have consumer value, and could not even be called content.
There is only one road left. But StarMaker can't get a Facekbook relationship chain overseas, so it can only build its own relationship chain.
Xia Fan creates a decentralized community within StarMaker, which mimics the family relationship in the live broadcasting platform, and the division of labor in the community imitates the game union. Most of the families in the live broadcast ecology are for commercialization purposes, and the relationship is to monetize, and a family can have tens of thousands or even hundreds of thousands of people. Usually, the maximum number of families in StarMaker is 50 people, and a user can only join one family at a time. However, the clan leader can increase his upgrade to 200 people by satisfying the Active Behavior Boost XP. Each family is mainly composed of three categories of people - the rich, the poor and the talented. Here, users do not pay for theme groups such as Jakarta Dating Club and Jay Chou Fan Club, but prefer non-theme groups, such as "who fights with the front" and "dominate the world" and other groups that have no specific meaning.
This type of community is different from courtship dating, not limited to age, and aims to allow users to make friends in the virtual world. The national K song DAU once fell for a while, and then rose again, because the "square dance mothers" began to use the national K song. StarMaker can serve such groups overseas, and all they need to do is keep amplifying that demand.
The largest K-song software overseas is Smule in the United States. StarMaker focuses on areas that Smule doesn't reach, doing long-tail markets, those poor, diverse — people and markets that big companies don't look up to.
Fang Han said that paying attention to long-tail traffic and providing a very accurate exit for long-tail traffic, you will have a very good self-growth, and the long-tail traffic of music is particularly obvious.
Mainstream languages have a lot of content, and the user base of small languages is also very large, but there is not enough small language content (including language, music, long and short videos) to satisfy them. StarMaker makes its own corpus, costs millions of dollars per language, and currently only makes nine languages.
After the ROI model was tuned out, StarMaker ranked in the top three of the music and audio download charts in the core countries of Southeast Asia and the Middle East. It then took the Latin American and Russian markets, with a focus this year on Europe. In the first half of 2021, StarMaker users averaged 49 minutes online per day, second only to YouTube (77 minutes), Tiktok (71 minutes), and Facebook (55 minutes).
There are three markets of songwriting (creation), K song and listening to songs, and the scale is from small to large. StarMaker's idea is to first attract K-song people, then attract creators, and then find a way to cut to a listening market ten times larger than the K-song market.
Xia Fan said that he hopes to precipitate a capability - the ability of users to form a relationship chain after being attracted to a certain traffic category, such as being able to do long audio + family + voice room, a certain game + family + voice room, etc. "The family is PGC, I am pure UGC, based on the relationship chain to monetize, and the gross profit is high." He said that next he hopes to test whether the methodology of traffic gripper plus community can be generalized and eventually form a particularly large community.
Chinese companies go to sea like to translate successful domestic products, but the success rate is very low. Fang Han said that their overseas operation idea is from the bottom up, because "what the company wants to do and what the user wants are two different things."
They're also not too worried about competitors, because "the giants in this field don't look at it at all."
While knowing the destiny of heaven, he was not reconciled
The development strategy of playing small cards first and then playing good cards big has shaped the way the whole company behaves and the team culture, and its organizational and capital structure is also built around this goal.
Kunlun Wanwei exists as the headquarters of the group, and the game industry accounted for more than 90% of the total revenue in the early years, but now it has dropped to less than 40%, and it is still declining. Now its main businesses include Opera (social information distribution platform), Star X (voice social platform, StarGroup renamed Star X), Ark Games (UGC game platform), leisure entertainment (competitive entertainment platform) and investment sector. When Kunlun Wanwei went public, game revenue accounted for more than 95%. Opera and StarMaker are currently the main sources of its revenue.
This is not all, there are new businesses incubated outside the system, the largest business is OPay, which is held by Opera, and a series of biomedical companies invested by Kunlun Capital, including Pumis Biological, Heyuan Biological, Coscelius Biological, Chuangxiang Biological, Huida Gene and so on. Among them, Heyuan Bio was listed on the Science and Technology Innovation Board last month, and its current market value is 10 billion yuan. Last summer, Opay also valued it at $2 billion after completing a $400 million Series C funding round.
The four main businesses correspond to four CEOs, who are responsible for exploring different areas. To paraphrase Zhou Yahui's theory, these people are like "the best girls' girlfriends." A CEO with all-round strategy, business, and management capabilities is hard to find, but the probability of finding someone who can play a small card well is much higher. CEOs of various businesses are first product managers with ideas and abilities, and then qualified professional managers.
The subsidiaries are relatively independent, but with the core teams such as Zhou Yahui and Fang Han as the link, they provide financial support for the subsidiary, help the CEO find senior talents, hand over the core strategy to the CEO, and give a full trial and error period. Fang Han's address book has a group of "people to be dug", and every morning, he sends greeting messages to these people. The day before the interview, he invited an 18-year-old esports player to dinner.
In 2016, Wu Weihao, who was "staying quite cool" at a large factory, received a call from an executive of StarMaker, who asked him if he could meet and talk, "I will wait for you downstairs in your company." The executive had already flown in early. Then the executive's wife made a phone call to his wife, and then Wu Weihao's biggest opponent on the road to job hopping became a supporter, and he brought his family to Beijing, now starMaker's CTO.
Every business has a goal – tens of billions of dollars. Employees of public companies don't want to work after making money, and the success rate of early-stage startups is too low – the above mechanism hopes to take both into account.
Fang Han said that only by letting these people achieve benefits in this company is greater than the benefits of starting their own businesses, can people be left behind.
These businesses are often supported by capital from incubation to maturity. Zhou Yahui invested in the primary market to avoid directly letting the listed company lose money after the acquisition, and after the project became a high-quality asset from small to large, it would consider selling to the listed company, and then continue to invest in new investment projects after recovering cash.
The business of selling to a listed company may be spun off or re-listed after the value is increased. For example, in July 2018, Opera returned to the open market and is currently worth $700 million. On the day of the re-listing, opera CFO said that Opera's previous old investors can re-understand the value of Opera because they understand the model of today's headlines in China.
But the problem with this mechanism may lie in how much return Kunlun Wanwei has contributed to shareholders as a listed company.
Kunlun Wanwei's closing price on the day of listing in 2015 was 29 yuan, and after seven years, the current stock price is 15 yuan. The last time the company went up and down was because ByteDance signed a game product of its agent, which shows that the team has been struggling in the overseas market for many years, but investors still recognize that this is a game company.
In the ten years of his career at sea, Kunlun Wanwei has suffered a lot. It acquired the gay social app Grindr and had planned to spin it off, but was opposed by CFIUS in the United States, demanding that Kunlun Wanwei sell Grindr. In 2020, Kunlun Wanwei had to sell this high-quality asset for 4.2 billion yuan.
It has also accumulated some experience. It has designed its corporate structure in every country overseas in accordance with local regulations. Chinese enterprises go to sea, and the awareness of compliance is generally weak. However, in order to do business overseas for a long time, compliance and isolation are indispensable.
To do overseas markets, you need to integrate into overseas mainstream values, Kunlun has a product that once wanted to do a separate topic for Catholicism, but was opposed by European colleagues, on the grounds that it cannot increase the weight of a religion on the platform because of its large scale.
Kunlun Wanwei has more than 4,000 employees, including more than 1,000 foreign employees. Local country managers are mostly local people, and where business or functional lines that need to coordinate resources are involved, such as technology, operations, human resources, etc., a two-way reporting mechanism is adopted. There is a local HRBP (Human Resources Business Partner) that reports to the local country manager and the HR head at headquarters. The product line, on the other hand, is reported from the headquarters independently. They learned to design different but similar upward passages for local employees and Chinese employees, and in terms of grade management, all subsidiaries have opened up, the original employee rank is from 1 to 13, and now it is compressed to only 5 levels. From the customer service staff upwards, the demand will be directly opened to the business boss. From the first line to the CEO, only three layers are allowed.
These management methods cannot be said to be efficient, but they are practical and flexible.
Kunlun Wanwei's culture encourages making hard money, doing hard work, and being "more tenacious," Fang said. At the height of the virus, the CEO of a subsidiary of the group still decided to go abroad, and since then he has contracted the new crown and chosen to work outside the country.
If the water is too shallow, then don't drive the boat inside. Huawei summarizes this theory as a "waterline", that is, some businesses do not enter the market with a profit margin of less than a certain degree. "The thinking logic of the large and medium-sized factories is to burn the scale first, and we are the first to seek the profit model, which is a completely different path." Fang Han said.
At the beginning of Kunlun Wanwei's founding, Zhou Yahui did not take money from investors, but sold several houses in Beijing. Because it is more comfortable to spend your own money, the money for financing will be repaid, and the control over the company will become weaker. But save your own money to the extreme. In previous years, Zhou Yahui would personally order servers every quarter, and a business revenue fell by 10%, and the server cut by 20%. A company will never have an empty server.
Fang Han commented that they were a group of people who got up early, but there was still no area where they felt particularly safe. Opera News has the largest market share in Africa, but it's not a fertile business. They tried a lot, such as Opera, the world's first browser with a built-in blockchain wallet, in early 2021, they bought the game development system GameMaker Studio 2, hoping to invest in the game UGC, and in September 2021, the game community platform GXC went live. In the social and financial fields, they have achieved results in local markets, but they need to expand the basic plate and gain a monopoly position on a larger track. For example, StarMaker wants to cut into a larger listening market.
In the past, for them, the decisive factor in success was not winning the competition, but whether they could make a good enough product without dying. Today their thinking about the Red Sea has changed, "When the Red Sea has a basic disk, it will not withdraw, and the Red Sea fights for organizational ability." And we have a methodology that can fight a hard battle. ”
When Grindr was forced to sell, the company's board members were sitting together for a meeting, and after the meeting, Zhou Yahui said, "We must sell." Fang Han said, "Okay, then let's do something else." ”
It is often said that everyone knows the destiny. In Fang Han's understanding, the Mandate of Heaven is that as long as you wait, there is always a chance.
"I think our company's destiny will always be hit by a pie once, but there is nothing to regret if it really doesn't hit it," Fang Han said, "Many people work harder than us and don't have a chance, the world is so cruel." ”
Fang Han is one of the founders of Chinese Linux and one of the earliest people in China to contact the Internet. Born in Chizhou, Anhui Province, he was admitted to the University of Science and Technology of China in 1990 with the second place in the province. During the conversation, he called several CEOs of first-line Internet companies "big guys" and said that Kunlun Wanwei is an ordinary second-tier company that dreams of becoming a big company.
Fang Han compared these people around him to small towns as problem makers, and the purpose of studying and starting a business before was to prove that he was not worse than others. Originally they thought that ten billion dollars is called big, and then they found that if they really want to be big, they can be bigger, and they can change the lives of many people, maybe 10 million people, maybe 100 million people. They finally found a position for themselves – to enhance the mobile Internet experience for people in underdeveloped countries. "Of course, with a vision, it's better to recruit people, especially R&D personnel, who believe in these the most," Fang Han added.
More than a decade of going to sea, they are full of fear of survival, full of obsession with survival, they insist on finding the last inch of blue ocean. This could be because they're afraid of losing, or it could be because they're more eager to win than anyone else.