How is Zuo Hui, founder of Chinese property site Beike that is yet to make a profit, worth US$20 billion?
- Shares of KE Holdings, the company behind Beike, have more than tripled since a New York listing in August, pushing Zuo Hui’s fortune to US$20.5 billion
- Beike has 226 million homes on its platform and 39 million monthly active users on mobiles, according to its website
Zuo Hui is on a mission to bring transparency to China’s murky property market, where buyers must navigate fake listings and sometimes fraud.
To pull this off, his KE Holdings uses a national chain of physical real estate offices that has been around for almost two decades, paired with a two-year-old digital platform that helps match buyers and sellers with artificial intelligence algorithms.
Building and running the site, known as Beike, or “seashells” in Chinese, is expensive – the company as a whole spent 1.6 billion yuan (US$241 million) on research and development last year and another 8.4 billion yuan on general and administrative costs, and is yet to make a profit. To Zuo, it’s worth it.
“The most difficult part is that doing the ‘right’ thing often comes with short-term sacrifices in economic interest,” the KE founder and chairman wrote in the company’s initial public offering prospectus this year. “Initial challenges pave the way for long-term success.”
So far it has worked out. KE sales surged 80 per cent to 46 billion yuan last year from 2017, and it has become China’s largest platform for housing transactions and services – no small feat for a market whose real estate brokerage services are a US$1.6 trillion affair forecast to almost double by 2024.