Issue 32 | April 16, 2018

A Big Deal: Pressured by Beijing, Toutiao Shuts Down One of Its Apps
In an effort to clean up online content, Chinese authorities have pressured Bytedance (a.k.a Toutiao)—the online media giant most recently valued at $30 billion—to shut down Neihan (内涵段子), a popular joke-sharing app.

Zhang Yiming, CEO of Bytedance, issued a formal apology and officially shut down Neihan. “The product went down the wrong path, presented content that did not accord with core socialist values, and did not guide public opinion properly. I accept the punishment, and all responsibility lies with me,” Zhang wrote in his public letter, which went viral on WeChat. He also wrote that Bytedance will increase the size of its content censoring team from 6,000 people to 10,000.

Launched in 2012, Neihan was one of Bytedance’s earliest products. It has brought laughter to over 200 million users—most of whom live in third- and fourth-tier Chinese cities. The app had 20 million daily active users as of July 2017.

Meanwhile, Douyin, a short video app owned by Bytedance, announced it has launched an “anti-addiction system” to keep users from lingering too long in the app.

Hans Tung, managing partner at GGV Capital, told the New York Times that he was confident Bytedance would continue to add more types of material, not just the lowbrow kind, to its platforms. “The Toutiao we see today is not the Toutiao it will be five years from now,” he said. “It’s better to go through this rodeo a few times.” This way, he said, the company will be motivated to move more quickly in courting users who want higher-minded content.

Listen to Liu Zhen, senior vice president at Bytedance, discuss why Toutiao is unique on the 996 Podcast, available on iTunesOvercastSoundCloud, and wherever else you listen to podcasts.

Note: GGV Capital is a shareholder of Bytedance.

Two Numbers
$1 Billion: amount raised by e-commerce startup Pinduoduo
The Chinese e-commerce company Pinduoduo, or PDD, has raised more than $1 billion at a valuation of about $15 billion, roughly 10 times the level just a year ago, according to Bloomberg.

Founded in 2015, PDD is one of the fastest growing e-commerce unicorns in China and has accumulated around 300 million users on its app. In 2017, PDD’s gross merchandise volume (GMV) exceeded RMB 100 billion – a milestone that took Taobao five years and JD 10 years to reach.

PDD’s meteoric rise shows there is a large segment of low-income Chinese consumers from small cities and towns who are underserved by the country’s dominant e-commerce sites like Taobao.

Founded by an ex-Googler, PDD is backed by Tencent and relies heavily on the WeChat ecosystem. On PDD, users can enlist their friends’ help to win discounts by sharing items in WeChat groups. The jacket in the screenshot below costs RMB 72 normally, but only RMB 48.9 if you manage to “pin dan” (拼单, “buy collectively” in Chinese) with friends or strangers who want to buy the same thing.

Pinduoduo

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$600 Million: amount raised by Chinese AI company SenseTime (商汤) in Series C

The deal reportedly valued the facial recognition company at over $4.5 billion, making it the most valuable AI startup in the world. The round, led by Alibaba, also included Singaporean sovereign wealth fund Temasek Holdings and retailer Suning.com.

SenseTime, which specializes in systems that analyze faces and images on an enormous scale, raised $410 million in its Series B last July and announced a strategic investment agreement with Qualcomm in November.

SenseTime has about 400 clients, including the Chinese government, and its partners include Qualcomm, Nvidia, and Xiaomi. It is projecting several billion yuan in revenues for 2018.
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A Quote:
“Going forward, Mobike’s biggest competitor will be Hellobike, not Ofo.”

– Wang Xing, CEO of Meituan-Dianping, which acquired Mobike recently

Note: GGV Capital is an investor in Hellobike.
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A Graph: Silicon Valley Has a Challenger

An analysis by the Wall Street Journal showed that Silicon Valley no longer has a monopoly on tech investments, as venture capital from Asia skyrockets.

Chinese-led venture funding today is about 15 times its size in 2013, outpacing growth in US-led financing, which roughly doubled in that time period, the Journal’s analysis shows.
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996 Podcast: Nathan Blecharczyk on Lessons from Airbnb’s China Expansion
On the first live show of the 996 Podcast, we interviewed Nathan Blecharczyk, Airbnb’s co-founder, chief strategy officer, and chairman of Airbnb China. In front of 150 audience members gathered at Airbnb’s San Francisco headquarters, Nathan discussed Airbnb’s China strategy, how it has evolved over the years, and what lessons he has learned working with China. He also explained how to build relationships in China, how the company thinks about local competitors, and why Chinese authorities might actually be more open-minded than those elsewhere.

GGV Capital is an investor in Airbnb, and Managing Partners Hans Tung and Glenn Solomon have advised the company’s China strategy.

Listen now on iTunesOvercastSpotify, or SoundCloud.
We’re on XimalayaFM too! Just search “GGV996.”