START-UPS

Why Chinese tech start-ups are wooing users overseas

As the domestic market becomes more crowded, technology firms are increasingly trying to give their products more global appeal

PUBLISHED : Wednesday, 21 December, 2016, 6:20pm
UPDATED : Wednesday, 21 December, 2016, 10:51pm

As competition in China’s technology industry intensifies, more start-ups have begun to look beyond their home market, using their knowledge and expertise to woo users in the United States and beyond.

Musical.ly, for example, an app which lets users record 15-second videos of themselves lip-syncing to famous hits, was founded by Chinese entrepreneurs Alex Zhu and Louis Yang in 2014, and has since gone on to amass more than 130 million registered users, most of whom reside in the US.

Musical.ly started out as an app for creating videos, with users sharing their clips with friends through other social networks such as Instagram.

“When Musical.ly was built, [the founders] threw it out to different countries to see which one would stick. Interestingly enough, the people who responded were teenagers in the US,” said Hans Tung, managing partner of venture capital firm GGV Capital and a board member at Musical.ly. GGV Capital is an investor in Musical.ly.

“They have more time to create content, which they cannot make as easily on Snapchat or Instagram.

Musical.ly eventually grew into a social network,” he said.

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Musical.ly currently ranks as the top Chinese social app outside China, according to Cheetah Mobile’s 2016 Chinese App Overseas Performance report.

Until Musical.ly, few Chinese social apps succeeded outside their home market.

Larger tech companies like Tencent, which has more than 700 million Chinese users on its social networking app WeChat, have tried and failed to target overseas users.

Despite taking on a series of high-profile personalities to promote the app, Tencent was forced to scale back its international expansion plans.

IDC China managing director Kitty Fok said: “It is more difficult for such apps to succeed overseas, mostly because of cultural differences. When an app is developed to target the overseas market first, then it has a higher chance of becoming successful.”

The fact that he [Alex Zhu] had lived in the US for years allowed him to understand the market in the US, understand how consumers behave and how they use apps
Hans Tung, GGV Capital

GGV’s Tung attributed much of Musical.ly’s success to the “cross-cultural DNA” of its founders. Zhu had spent several years in Silicon Valley, working for German software company SAP, before launching Musical.ly with co-founder Yang.

“The fact that he had lived in the US for years allowed him to understand the market in the US, understand how consumers behave and how they use apps,” Tung said.

Cheetah Mobile, which is known for its utility apps such as Clean Master, also has more than 80 per cent of its over 600 million users outside China.

Cheetah chief technology officer Charles Fan said chief executive Fu Sheng first made the “bold” decision to focus on the overseas market in 2012.

“It was a surprising decision, given how big the Chinese market is and how fast it had been growing. At the time, there were not many global genes in the company,” Fan said.

Fan said Cheetah knew it had to start pivoting towards another market – content – as the utility app scene became increasingly crowded with competitors.

The company has also found a measure of success in its social and content apps, attracting millions of users from the US for Live.me and News Republic.

Fan believes the cultural differences when it comes to content are sometimes “exaggerated”.

Live.me, for example, has implemented the Chinese style of virtual gift-giving – users can purchase virtual gold coins with cash and use them to buy gifts such as virtual sports cars and cakes for their favourite live-streaming hosts. In just seven months, Live.me has already processed over US$1 million in virtual gift payments to its streamers, proving that users in the US are also receptive towards purchasing virtual items.

“I don’t deny the existence of cultural differences – they exist, they are very real and sometimes big. What’s bigger are the commonalities among people,” Fan said. “Strategically, [exporting Chinese models overseas] is doable, but tactically we must do it differently from how people do it in China.”

Live.me has overtaken the American app Periscope to become the top live-streaming app in the US, according to Cheetah’s data.

I don’t deny the existence of cultural differences. What’s bigger are the commonalities among people
Charles Fan, Cheetah

Cheetah established dual-headquarters, one in Silicon Valley and the other in Bejiing as it sought to deepen its roots in the US and hire more global talent, according to Fan.

“We want to be an American company, to think and feel like an American so that we can build a product for the US,” said Fan.

David Ko, co-founder of Beijing-based hardware start-up Jide Technology, also believes Chinese start-ups who wish to expand outside China need a global mindset right from the start.

Jide produces devices based on the Android operating system - last year, it launched Remix Mini PC, and in October, it followed up with Remix IO - a PC, gaming console and set-top box all in one.

Ko, who used to work at Google together with his two other co-founders, said the company’s main focus was on emerging markets, although the start-up is headquartered in Beijing.

“Our advantage is that we [as co-founders] were educated in the US and worked for a long time there, so the cultural exposure and understanding we have has helped us to grow globally. At the end of the day, your company has to have that DNA - you cannot rely on a public relations firm to do your [overseas] marketing for you.”