Ep. 55: Kuaishou: The Anti-Douyin/TikTok?

Episode 55 of TechBuzz China is about a company we have admittedly relegated to a “supporting role” thus far here on TechBuzz: Kuaishou, which is rightfully known as the original Chinese short-video app. Rui and Ying-Ying explain that while Bytedance and its Douyin and TikTok products seem to be clear stars today, that trend was not always obvious. It is true that Kuaishou is experiencing declining market share and experimenting with new, hard-charging avenues of growth, but our co-hosts argue that its role in today’s content ecosystem has generally been understated by Western observers.

To that end, this week, we delve into the history, leadership, business models, shareholders, and self-proclaimed mission of the Kuaishou app. Listeners may decide for themselves: Do Kuaishou and Douyin really serve different demographics with decidedly different products? Or does a large 46.5 percent user overlap mean that this doesn’t matter — that it is, in fact, a battle to the death, and for a greater end purpose than simply short video?

You can find these stories and more at pandaily.com. If you enjoy our content, please do let us know by leaving us an iTunes review, liking our Facebook page, and tweeting at us! We do truly appreciate your feedback and support. Thank you also to our listeners over at our partner, dealstreetasia.com.

Of course, we are always grateful for our talented producers, Shaw Wan and Kaiser Kuo. Thank you!


(Y: Ying-Ying Lu; R: Rui Ma)

[00:00] Y: We have covered Kuaishou a few times here on TechBuzz, but probably not to the extent that it deserves.  Mostly, we talked about it as a secondary player in a bigger battlefield, like in our episode 9 on the epic Bytedance vs. Tencent war that you should totally review if you haven’t  — I know I did — or in a more recent episode on Zhihu, China’s Quora, that it sank some money into recently.

R: Well, it will be relegated no more to supporting actor status. Today, Kuaishou, the original Chinese short video app, the OG, is in the starring role.  And not because it’s newly in the news or anything like that. But because it’s always in the news these days. I know — in the West the narrative has all been about the new BAT, how Bytedance has these monster hits in the form of Toutiao and Tik Tok, but at least for Tik Tok and short video, it wasn’t always obvious that Bytedance was winning.

Y: Not at all, I mean, we’re not suggesting that it was ever close to being K-A-T, but at least in the short video world, if you were asking people a year ago who they’d bet on to be in the market leading position right now, a good portion of people might have said Kuaishou, and for good reason too. They’d been at the game for longer and were, in fact, the only sizeable player for a long while.

R: And exactly how sizeable is Kuaishou today? On September 12, the company published a Content Ecosystem Report.  In May of this year, they said, Kuaishou the company exceeded 200mm in DAU and 400mm in MAU.  Kuaishou has 1.3Bn pieces of original content on the platform. And 200mm users have published a piece of content in the last year alone.

[2:00] Y: But there are storm clouds hanging overhead. According to TrustData, the gap in DAU between Douyin, the domestic Chinese version of Tik Tok, and Kuaishou have surged from less than 80mm to more than double that, at 160mm.  Yup, Douyin now has a DAU of 365mm versus Kuaishou’s just 207mm. 

R: And it’s not just the absolute numbers that are alarming, but the trend as well. You see, Kuaishou’s numbers have slid almost 15% from a record high of 240mm two months ago in July, but Douyin has lost less than 5% since then. Sure, many of these “time-wasting” apps have some seasonality, but for Kuaishou, the situation is exacerbated by the fact that the company made a public announcement to try to exceed 300mm DAU by Chinese New Year’s, 2020, that is, by the way, January 25, less than 80 days away.

Y: So today, we’re going to talk about Kuaishou, its history, its development, how it’s somewhat similar to but also very different from Douyin and Tik Tok, and check in on its recent experiments with new avenues of growth.  At the end of this episode, you can let us know if you think that the two companies are really in a duel to the death for the same business, or if Kuaishou is not really Douyin’s nemesis, but the “anti Douyin / Tik Tok.”

[3:59] R: Hi everyone! We are TechBuzz China by Pandaily, powered by the Sinica Podcast Network!

Y: We are a biweekly podcast focused on giving you a peek into what’s buzzing within the tech community in China.    

R: We uncover and contextualize unique insights, perspectives and takeaways on headline tech news that don’t always make it into English language coverage. So you can be smarter about the world of China tech. TechBuzz China is a part of Pandaily.com, an English language site that tells you “everything about China’s innovation.” I’m one of your two co-hosts, Rui Ma.

Y: And I’m your other co-host, Ying-Ying Lu. We’d like to acknowledge our partners DealStreetAsia and SupChina, creator of the Sinica Podcast Network! In addition to TechBuzz, you can also find Sinica which covers current affairs, NuVoices and Ta for Ta on women, the business-oriented ChinaEconTalk, and the Caixin-Sinica Business Brief from China’s leading business magazine.

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R: Oh, and one more thing before we start, we want to tell you about a brand new Master’s program nearby, at the University of San Francisco. USF’s Master’s in Applied Economics combines econ training with the practical skills in data analytics that you really need to understand today’s new digital economy. Their curriculum covers skills like R and Python, machine learning, and experimental design. To learn more and to get a fee waiver for the Fall 2020 class, please go to usfca.edu/techbuzz.

[5:10] R: OK, so per usual, let’s start with a brief company overview. Kuaishou actually started off in 2011 as a company called GIF Kuaishou, which was like a tool for making funny GIFs that you can use in your Weibo posts. It was started by this person named 程一笑, who is formerly an engineer at 点点网, a Chinese clone of Tumblr, and had also worked at Renren, which early on, if you remember, we did an episode on it, was basically China’s Facebook clone. Cheng had two other co-founders and they received funding from this venture capital fund called Morningside Ventures 晨兴资本, it’s a really really well regarded early stage fund in China and they invested in megahits like Ctrip, Xiaomi, and the like.

Y: Fast forward two years, and the app had run out of money. Morningside decided that instead of just letting the company die, it wanted to bring in new talent and recapitalize the company by diluting everyone 50%. That’s a pretty aggressive move, but it turned out to be the right one, because the new talent they had their eyes on was a guy named Su Hua 宿华, who was made the new CEO.

R: Su Hua turned out to be pivotal.  He’s your typical precocious nerd turned entrepreneur. Per his Tsinghua University Distinguished Alumnus biography, at the young age of 12, he was already coding away on his PalmPilot-like studying device.  

[6:39] Y: He came from a small town in Hunan, home of spicy food and Chairman Mao, as well as Chinese entertainment.  It’s not one of the big provinces in China, ranking 7th, but it’s had a disproportionate influence on Chinese culture and modern-day entertainment in particular.

R: I wish I can say Su Hua took advantage of that cultural richness, but by every report, he is just a big nerd  After completing his bachelor’s degree at Tsinghua’s School of Software, he enrolled in the PhD program, only to drop out halfway to work for Google. Two and a half years in, he got bitten by the entrepreneurial bug and launched his first startup, a video-based advertising system. 

Y: This was in 2008, so it wasn’t the greatest timing. Video advertising was nascent, and add to it the Great Financial Crisis … well, you can guess how that company ended. 

[7:31]R: Jobless but with excellent credentials, he next went to Baidu where he was on the engineering team that created Baidu’s, back then, new advertising system which launched in late 2009.  According to him, it was there that he learned how to lead a team and not just create a product, and when it came time to quit a few years later and launch his second startup, he picked the search vertical. 

Y: Well, that didn’t work out either but wasn’t a complete waste — Alibaba bought the assets and integrated it into UC browser.  And now he was one of those most sought after people in China tech — someone with both Silicon Valley and Beijing blue-chip tech company experience but he was also a serial entrepreneur with an exit under his belt.

R: And this was when Morningside suggested to him that he should go to GIFKuaishou.  According to him, the “really interesting” users in the Kuaishou community — as we can imagine GIF animators must be — fascinated him and so he agreed to join.  The stupendously generous option pool that was created — 50% or so –was probably also a key factor.

Y: And what a great decision that was, because on paper at least, Su Hua is now worth over $2Bn dollars.  But he couldn’t have known that when he was joining this effective restart of a failed social media tool maker back in early 2014.

[8:58] R: Well, yes and no. Before officially joining, Su Hua was already advising the company, and GIFKuaishou had already, under the advice of Morningside and because its original tool was simply not sustainable, started transitioning into a community / social network.  The tool was great and all, and experienced good growth the first few months, but there were all sorts of problems with being just a utility app.

Y: Yeah, Kuaishou could see that the only way to survive in the long term was to become a content platform where people stayed to consume videos other people made, not just make them and leave.  But while that decision sounds intuitive today, it was a dark period in the company’s history because it resulted in a 90% decline in active users.

R: That must have been exceedingly painful to watch from the driver’s seat, but it was ultimately the right decision, and has really informed the company’s core strategy over the next five years.  Kuaishou, to this day, is still obsessed with creating community and connection between its users. It was the one insight that saved them from the brink early on and then created its unstoppable growth in the next five years.

Y: And the company was really pretty unstoppable, by 2015 standards anyway.  Douyin and Tik Tok have smashed records of how fast a mobile product can grow but back in 2014, even in China with its large internet population, Kuaishou was doing very well. Just a few months after Su Hua joined, Kuaishou hit 1mm DAU.  Well-known VC fund DCM showed up and invested $15mm.  Right after that, Sequoia China jumped in as well, so now it had some of the most notable investors in China on its cap table, that’s not bad.

[10:47] R: But it was really when DST sank in $100mm and nearly made it into a unicorn that things began to feel really serious. We all know before Softbank’s Vision Fund, one of the most aggressive investors was DST.  So while Kuaishou had grown its DAU to almost 9mm in just six months from 1mm if you remember, and this was indeed very impressive, I do think that not too many funds were looking to deploy $100mm at a time yet, not for a barely 100 person company that had no revenues whatsoever, anyway.

Y: Kuaishou, though, had hit upon a pressing user need, because it continued to grow like wildfire to 20mm DAU, where it hit a snag.  It wasn’t declining, but users were being lured at the time to competing video apps like 小咖秀 Xiao Ka Xiu  and 秒拍 Miaopai for those of you familiar with China tech. These apps had deep Weibo integrations and tons of celebrity endorsement so understandably were getting most of the spotlight.

[11:49] R: Sounds a little similar from what it might be facing today from Bytedance, but for whatever reason, Kuaishou didn’t get into the celebrity game. Puzzling, really, because it’s such a common tactic used by media companies in China, which you probably can guess from our last episode on KOLs and idols, but the external narrative told by Kuaishou, and which has stayed fairly consistent in the last five years, is that Kuaishou is an app for the masses and the company is determined to entertain the “grassroots” , 草根of China, not its elite.

Y: That’s definitely a central and defining characteristic of the company, which we will go into in just a second. But before we do that, back to Kuaishou’s fundraising history, which now has us in 2016, when Baidu decided to invest a cool $200mm into the company, who had yet to start monetizing, but was considering advertising as the key revenue stream.  Remember, Su Hua had spent a few years at Baidu in search advertising, so it just seemed like a natural fit.

R: And it was true that at the time, that option was indeed available to Kuaishou. But this was 2016, remember, and there was a bubble going on at the time and that bubble we’ve covered numerous times now, and that was the livestreaming bubble. Definitely, go back to TechBuzz Episode 7 if you want to understand how that all came together, but yeah, before the short video craze in China, there was livestreaming.

Y: So obviously, if you’re Su Hua and you aren’t quite sure what the proper way is to monetize your product, what do you do? You experiment. And Su Hua’s reasoning was this — Kuaishou is a product that’s centered around people, not products. It’s hard to have an algorithm that was great at creating people-to-people connections and recommend them products at the same time.  So when it came down to it, he decided bet on livestreaming.

[13:51] R: It could have failed, and maybe he would’ve gone back to building out the advertising platform, but no, it was a great success from the get go.  And that’s where we are today, with Kuaishou rumored to have a revenue forecast of over $4Bn USD this year, a 50% increase from last year, and essentially all of it from livestreaming, with some de minimis amount from advertising.

Y: But let’s finish the story of Kuaishou’s fundraising.  After Baidu, Tencent jumped in and led a $350mm investment in 2017, following up the year after with another few hundred million, and finally, rumored to top up with a pre-IPO round of $1Bn this fall.  The rumor is that the post-money valuation will be $25Bn, which is a number that’s actually been thrown around since the beginning of this year.

R: The company has been mum on its fundraising, but it seems that it’s raised about $2Bn so far and it allegedly reached breakeven last year, with hopes for an IPO in the spring.  That’s a pretty big company right? And at 200mm DAU, why has it been covered so little in the press relative to a company like Bytedance and its products? Sure, $25Bn is no $75Bn, which is Bytedance’s valuation, but I always thought that even before the success of Tik Tok, there were some murmurs of Bytedance here in the West. But never any Kuaishou.

Y: Well, it turns out that at least in terms of media exposure, Kuaishou wasn’t even well-known inside of China until mid-2016.  How’s that possible, you ask, when there’s such an active tech media community in China?  To put it delicately, yes the management team’s reticence has something to do with it, but most of the silence was because Kuaishou serves a population that doesn’t have much of a voice in China. Yup, we’re talking about the poor, the rural, the less educated, and basically the downtrodden.

[16:00] R: We’ve talked about the rural-urban divide in detail already, which is the reason for the rapid rise of companies like Pinduoduo, the subject of Episode 17, from 0 to $23Bn in 3 years.  We’ve also explained that it isn’t just foreigners who find this chasm difficult to cross, but also local Chinese people.  Unfortunately for Kuaishou, its first major exposure on mainstream media was this very scathing opinion piece from a popular blogger called 残酷底层物语, which I will translate loosely as “Notes from the Cruel Underworld.”

Y: That was a pretty disturbing piece, with lots of shock value. Basically, it describes how bizarre — in a bad way — the content on Kuaishou was, this uber-popular video app that was everywhere if you looked at top appstore rankings, but would have never heard of unless you lived in rural China.  An example of popular Kuaishou content may be this one villager who posted daily videos of himself setting off firecrackers in his pants in all sorts of situations. Or another middle-aged lady who ate all sorts of things on camera — broken lightblubs, human feces, you name it, she’ll eat it.

R: The Chinese internet was horrified. Who were these people doing such horrible things to themselves for views and likes and virtual gifts? Yes we know there are weirdos on the internet in general, but Kuaishou’s content, the portion that was highlighted at least, was downright psycho. And urban dwellers didn’t find these videos entertaining. They found it sad and incomprehensible. Kuaishou showed them a part of China they didn’t know — millions of people who led sad and pathetic lives, but what was worse was that these people didn’t even realize it.

Y: Of course, that was the subjective opinion of the urban elite, and came with a lot of judgment and derision. And obviously, just a fraction of Kuaishou content would fall under the category of “disturbing to watch.” But the stereotype for Kuaishou has stuck.  Everyone in China thinks that Kuaishou is for villagers. Or maybe migrant workers. But basically, it’s not for the rich or hip. And I think we would say that stereotype is still largely correct.

[18:33] R: Right, referring back to Kuaishou’s own Ecosystem report, as of now, still only 30% of users are from first- and second-tier cities, versus more like half or so for Douyin. And the Chinese internet still likes to say that it’s 南抖音,北快手, or Douyin the South, Kuaishou in the North, because the south has been historically more economically developed. In reality though, as of September, 40% of Kuaishou users are from the South. So not that bad.

Y: But honestly, the two apps are unmistakably different if you just bother to download and try them.  Kuaishou you can download directly from the Appstore, but Douyin you can only download the international version Tik Tok if you live abroad.  No worries though, Tik Tok gives you a good feeling for Douyin, and you can always search YouTube for viral Douyin clips to get an idea. Basically, the feeling you should get from Douyin is that it’s a hip person’s product, from the logo design, to the interface.  It’s almost instagrammy in its aesthetic, and that’s on purpose. But what happens when you log on Kuaishou?

R: Well, if you log on Kuaishou, like I just did, chances are you aren’t seeing wicked dance moves synced to electronic music like you’d see on Tik Tok or Douyin. Despite logging in with my WeChat account which has my location set to San Francisco, I was immediately recommended a bunch of videos under the “Trending” option that showed people karaoke-ing or cooking or doing something otherwise utterly normal. There was a good mix of pretty girls, but there were also plenty of very unremarkable looking people, and that’s after filter effects. And when you clicked on the clips, a lot of the background music are folk songs or something similar.  Like this: plays five seconds of music.

Y: Yeah, OK, definitely two very different apps in terms of content.  But that difference in content is the outcome, not the cause, of making a video product for two vastly different demographics. The cause is actually a fundamentally different product vision. While both companies work on short video, they aren’t just products with just a different user base and different UI/UX.  There’s actually very different companies.

[21:20] R: I’d like to draw upon Zhihu, China’s Quora where a topvoted answer did a great job of answering the question — what is the key difference between Douyin and Kuaishou? This person tried to arrive at the answer quantitatively, not just qualitatively.  First they looked at the number of likes on “Recommended” videos on Douyin and Kuaishou front pages when you log in.  There was a clear trend that Douyin recommended more videos with a large amount of likes, say over 10,000, than Kuaishou, which means that it was recommending videos that were already hot, whereas Kuaishou was trying to distribute the traffic amongst more videos by having a majority of its video recommendations with much fewer likes.

[22:53] Y: The creators behind these “recommended” videos are also very different. A higher percentage of creators that made it to the recommended section already had a large number of fans, whereas again, for Kuaishou, it was more evenly distributed.  This is in line with how the companies describe themselves, actually.  Remember we said that Su Hua’s narrative has always been that he wanted the average person to have a chance to succeed on Kuaishou, whereas for Bytedance, its algorithm has been known to create 爆款, which basically means “super popular” viral videos that sometimes make it into the mainstream.

R: I mean, don’t get us wrong, it’s not that Kuaishou doesn’t also try to create trends, or means or virality. but that it does so to a lesser degree than Bytedance.  And that’s because since its first original pivot from GIF making tool to content platform, it has always stuck to the philosophy of “social networking” in its product.  In as much as you can make friends on a short video platform anyway. But you can see it in small product decisions, like allowing for nested comments where people can and do reply to each other and have virtual conversations that way, versus on Tik Tok where you can upvote a comment, but your replies won’t be nested underneath and it won’t feel like a conversation.

Y: If you go back to our episode on Livestreaming, and watch, if you haven’t, the excellent documentary The People’s Republic of Desire, you’ll find that for many rural Chinese residents, indeed it is the human connection they are craving, and authentic connection, not some aspirational lifestyle, like you see in the cities or on urban influencer apps like Xiaohongshu.  Many of the top livestreamers are just normal people who make good conversation and make you feel like they’re your friends. They’re really different from the social media influencers showcasing you their luxurious vacations and lives.

24:52] R: And that philosophy is what helped Kuaishou thrive for such a long time. And for a while, even in early 2018, the two apps weren’t even comparable in scale.  But as we all know, Douyin exploded in popularity and exceeded Kuaishou shortly thereafter.  Kuaishou has lost its undisputed lead in this category, at least  in terms of active users, and that has spurred the usually quiet Su Hua to finally make a big announcement earlier this year.

Y: I don’t think Kuaishou’s BHAG (Bee-hag), that’s Big Hairy Audacious Goal for those of you who haven’t read the Jim Collins classic, is well known in the US.  But in China, pretty much everyone has heard of this “charge towards 300mm  DAU before Spring Festival 2020” goal from Kuaishou management.2020年春节之前,3亿DAU.

R: That’s right, on June 18, 2019, Su Hua wrote a company-wide memo that proclaimed a new phase for Kuaishou, a company that the founders felt was no longer living up to its name, which means “quick hand,” Kuaishou had in fact become a complacent and unacceptably slow 8,000-person company.  Which is true, if you compare it to the frenetic pace of change over at Bytedance, anyway. 

Y: I think a degree of rigidness is to be expected of any large organization, but what Su Hua announced next is what stunned the China internet startup community.  In beginning this “battle to defend the future” — remember militaristic metaphors come easily to those educated in mainland China — Su Hua’s first move was to proclaim a goal for 50% DAU growth in six months’ time.

[26:40] R: Internally, it’s apparently known as K3.  And trust me, Kuaishou is all about the K3. When I visited Kuaishou headquarters in late June, it was pasted everywhere … including in the bathroom stalls.  But how is it actually executing on the K3? Well, it’s doing a lot of small experiments, hoping to create the next hit.  Not at all different, by the way, from nemesis Bytedance, who’s always launching new products, just that Kuaishou has stepped up the volume.

Y: Since 2018, it’s made attempts at gaming livestreaming, a Tinder-like product, an e-learning app, even one focused on EDM, which has a fast growing fan base in China. But let us tell you about the latest two products, because we think they give you an idea of where the company is trying to innovate. 

R: 快手极速版, which translates to Kuaishou Super Speedy Version, doesn’t have an English name, and was launched in August of this year. It works like Qutoutiao, a mobile content company in China that listed on the NASDAQ last year under ticker QTT. If I have to summarize Kuaishou’s Super Speedy’s main strategy in one sentence? It’s that it basically pays to users some minuscule amount of money for using your product and for promoting it to their friends.  Sounds odd? Well, not really, it can work for people with lots of time and who have a high sensitivity to money, even if it’s just pennies we are talking about.

Y: I tried to find this Super Speedy app, by the way, but you can’t even find it on Apple’s AppStore, which makes sense, since its target users are probably not using iPhones. At a slim 40M, a little less than half the size of Kuaishou proper, it’s primarily for people on basic Android devices.

[28:39] R: Well, Super Speedy might not have been speedy enough in generating additional DAU, because just a few weeks ago, Kuaishou announced a new app to its family called 态赞 Taizan。Unlike Super Speedy, it is available on the Apple AppStore, so we downloaded it for fun.

Y: It had a cleaner UX but wasn’t that different from Kuaishou itself.  In fact, we couldn’t figure out the difference initially. But that was precisely the point, we found out. Taizan is actually just an app that collects the “best of Kuaishou” and shows it to you. All you can do is consume and comment. There isn’t even an upload option, at least not for now.

R: Something that you notice immediately upon logging in, though, is that the videos are organized by hashtag.  For example, the pet video in the middle of my feed actually had a crying emoticon on it, followed by “看着看着就哭了,” or #mademecry.  Sure enough, the video is devastatingly sad, and if you swipe right, you can see the near 600 videos also categorized under this same hashtag.

Y: The second micro-innovation is the auto-scrolling comments at the bottom of the page, instead of the comments being effectively another page you manually scroll through. You can still do that, of course, by clicking on the speech bubble icon, but if you ask me, it’s a nice way of feeling like you’re interacting with everyone else who’s viewed the video without the messiness that comes with bullet comments that’s popular in communities like Bilbili.

[30:16] R: How this is going to take the Kwai Family of apps to 300mm DAU and beyond? I don’t know, but I’m not convinced that they’ve launched anything worth watching just yet.  I mean, I don’t want to be mean here, but it seems to be struggling. Its core business so far still seems fairly safe from Douyin, primarily thanks to the really different business model — Douyin’s is advertising, as is the entirety of Bytedance’s vast empire — but how long will that last, especially with Douyin also getting into livestreaming ecommerce? E-commerce is a subset of activities Kuaishou creators use the platform for, but it’s a vast opportunity and attracting a ton of competition, as we discussed on the last episode.

Y: Well you’re not the only one. Other analysts are confused as well. Some have pointed out that aside from animation video platform ACFun, which Kuaishou purchased last June, none of Kuaishou’s ten plus new product attempts in the past two years have been particularly successful.  And as for staving off Douyin, well, not only has Bytedance made a big push into lower-tier cities, new statistics show that there is high overlap between the user bases.   We don’t know exactly how it’s calculated, but the number is 46.5% and we think it means that half of the users of Kuaishou are also on Douyin. But that sounds pretty high, right?

R: Well, unclear really. I mean, does it mean that the two platforms are so differentiated that people are installing both, like you might want to subscribe to both, oh, I don’t know, ESPN and HBO, and use it for completely different purposes? Or that you’re not particularly attached to either, and when you’ve got a few minutes here and there, you’re equally likely to use Kuaishou or Douyin to alleviate your boredom?

Y: If I had to guess based on corporate spin, it would be the former, and it’s kind of validated by our personal interactions with the apps too. But it’s really hard to know what the collective experience is for hundreds of millions of users. So, I guess we’ll just have to wait and see. What do you think, Rui, shall we wrap this up and summarize our learnings today?

[32:51] R: Yup. This industry is so interesting and changing so quickly that it’s really hard to know when to stop with our research and analysis.  But I think this is as good a point to stop as any. Let me start. So, first off, we explained the history of Kuaishou, which was founded in 2011 as a GIF maker, and had to undergo a painful transition to video-based social network, which is how it defines itself today. But transition it did, and despite losing 90% of its users in the process, it came out of the other side much stronger than before.

Y: Another key event that further strengthened it was the recruitment of former Googler and Baidu engineer Su Hua to be their CEO after the transition. Also a painful transition because everyone had to agree to 50% dilution.  But again, worth it because the company was breakeven last year, expects to generate over $4Bn in revenue this year, and is supposedly negotiating a pre-IPO round, led by long-time investor Tencent, at a $25Bn valuation.

R: Almost all of that revenue comes from livestreaming, which makes it totally different from Bytedance’s Douyin, which has started off very strong on advertising, true to its Bytedance roots. In fact, in 2018, the two products were both rumored to have generated almost $3Bn in revenue, but their revenue splits were essentially reversed. 90% from livestreaming for Kuaishou, and 90% from advertising for Douyin.  All alleged, of course, and unconfirmed by the companies.

[34:34] Y: But besides the difference in business model, which might change, by the way, as livestreaming ecommerce becomes the next big thing, the real difference is in the two company’s philosophies. While Douyin is really good at engaging the mostly white-collar, young urban youth with their filters and hip music, Su Hua has maintained that Kuaishou’s users are not cool, but instead 社会平均人 or “the mean person in China.”

R: And by mean he doesn’t mean temperament, but the fact that arithmetically, only 7 percent of all total possible Chinese users are in first-tier cities, while 93 percent of the population is in second- and third-tier cities. So that averaged out person, who by the way isn’t so well-educated nor rich and doesn’t really care about luxury goods because they’re  still focused on getting by in life, are entertained by and need very different things.  And most importantly, they aren’t interested in seeing influencers showcase some lifestyle that will be forever out of reach for them.  They’re interested in feeling some emotional connection to others online, people just like themselves.

Y: A great way to put that would be, “生活”和“表演”的差别, or the difference between “real life” and “performance.”  So as Su Hua says, if you don’t get Kuaishou, which I’ll have to admit I don’t really, that’s because I’m part of the 20% “elite.” As for the remaining 80% of the population, well except for QQ and WeChat, very few companies in China have served this group of people because of their low purchasing power.

[36:22] R: When you put it that way, I am almost moved by Su Hua’s social mission.  But then I remember that Pinduoduo, Qutoutiao, and basically a whole ton of Chinese companies are taking on this exact narrative and selling stuff to this group of people, and it’s just a big macro trend, nothing special.

Y: Alright, Techbuzzers, what do you think? Do you think that Kuaishou is the anti Tik Tok and that the two really serve very different demographics and have actually pretty different products? Or do you think that that’s not really the point and especially with the high user overlap — now 46.5% — regardless of how the platforms brand and market their strategies, users basically treat them the same, just places to get entertained and turn off your brain, and maybe, if you’re in the mood, interact with your favorite creator in a livestreaming session and buy some stuff?

R: In other words, all this stuff about Douyin as catering to users’ more aspirational desires and Kuaishou being more grassroots, authentic, down-to-earth and therefore sometimes ugly and weird and disgusting, What do you think? yay or nay? Agree? Disagree? Or it doesn’t matter? Tweet at us and let us know what you think!

[37:51] R: OK, that’s all for this week folks! Thanks for listening. We really enjoyed putting this together, and we are always open to any comments or suggestions. You can find us on twitter at thepandaily, at techbuzzchina, and my personal Twitter account is RUIMA.

Y: And my Twitter is spelled GINYGINY. Techbuzz China by Pandaily is powered by the Sinica Podcast Network on SupChina. Pandaily.com is an English language site that tells you “everything about China’s innovation.” Our producers are Shaw Wan and Kaiser Kuo. Thank you for listening!