Ex-Google is turning virtual gifts into a $ 61 billion business

Photographer: Qilai Shen / Bloomberg

In China’s popular online streaming industry, virtual gift giving is great. You can send your favorite performer of anything from a 5 yuan (80 cents) rose to a 500 yuan space rocket.

The present is just a symbol, but the money is real – and that’s what made Kuaishou Technology so successful.

Rival ByteDance Ltd. has become the largest live streaming platform for virtual gifts, with more users paying monthly than anyone else in the world. The company, which takes some of the advice fans give to performers, has raised $ 5.4 billion in Hong Kong in the largest initial online public offering from Uber Technologies Inc. in 2019, the terms of the agreement reached by the Bloomberg show.

Read also: Chinese video Application Kuaishou Raises $ 5.4 billion in Hong Kong IPOs

It is set to create at least four billionaires with a combined fortune valued at $ 15 billion, based on the property revealed in Kuaishou’s prospect. Co-founders Su Hua and Cheng Yixiao will each be worth more than $ 5.5 billion, according to data Bloomberg Billionaires Index.

Kuaishou, which means “fast hand”, is one of the biggest success stories in China in the last decade, part of a generation of start-ups that have thrived with the support of Tencent Holdings Ltd. Together with ByteDance, the father of TikTok, the outfit was the pioneer of the live-streaming and bite-size video format that has since been adopted worldwide by Facebook Inc.

“The key resource of the internet is attention,” Su wrote in Kuaishou’s official biography in 2019. “It can be focused on a large number of people like sunlight, rather than on a spotlight only on a certain group of people. This is the simple logic behind Kuaishou. ”

Su, originally from China’s central Hunan province, studied computer programming at the prestigious Tsinghua University before joining Google in Beijing in 2006. There, he earned about $ 23,000 a year, eight times more than the country. the average salary at the time. While he said he was “extremely happy,” a stay in Silicon Valley inspired him to start his own business, according to Kuaishou’s biography.

The 38-year-old gave up Google during the global financial crisis to start his own video advertising business, which did not materialize. After a short time with Baidu Inc., he became acquainted with Cheng in 2011 and soon decided to mate. In 2013, the duo transformed Kuaishou’s GIF-maker app into the social-video platform they have today, initially gaining popularity with their videos about life in rural China.

With the appearance of Douyin from ByteDance, the Chinese twin application of TikTok, Kuaishou has expanded its appeal, enticing influencers supported by talent agencies and pop stars, such as Jay Chou from Taiwan. Along the way, it has accelerated the generation of money by creating advertising space and stores in applications for brands and merchants.

While virtual gift purchases are still bread and butter – they account for nearly two-thirds of its revenue – the company is delving into higher-margin businesses such as e-commerce and online gaming. Its sales rose nearly 50 percent to 40.7 billion yuan in the first nine months of last year, according to the IPO prospectus.

Viewers spend an average of almost 90 minutes on Kuaishou every day and about a quarter of monthly users produce and content. While this robust commitment differentiates Kuaishou from rival live streaming platforms such as Joyy Inc. and Momo Inc., recent the launch of a short video stream by Tencent’s WeChat super-application took the competition to another level.

Kuaishou’s debut could also be overshadowed by the IPO potential of his much larger rival, ByteDance, whose 600 million daily Douyin users are more than double that of Kuaishou. Last evaluation at It was said to be $ 180 billion, the largest startup in the world exploring a list of some of its Hong Kong businesses since the US tried last year to ban TikTok and force a sale of the app for national security reasons.

“Kuaishou has revised its product and become more like Douyin,” Wang Guanran, an analyst at Citic Securities Co., said in a Jan. 26 note. “The two will face direct competition in the future.”

Kuaishou is not immune to geo-political tensions either. While Su told investors in a Jan. 25 call that non-Chinese markets have the potential to become a big profit factor, his platforms, including Kwai and Snack Video, are banned in India, along with hundreds of Chinese applications. , as New Delhi and Beijing face cross-border disputes. In the US, its TynTok-style Zynn service has gained little traction since its launch in May last year.

The company will also have to deal with a recent live-streaming repression. China said in November that it would require performers and performers to register with their real names, ban minors from tipping, and urged platforms to limit the value of virtual gifts.