Ben Gilbert: belief

Transcript context

…Yeah. We now enter 2017. Musical.ly is still on fire from a growth perspective. They’ve just come out of these discussions with Facebook, with renewed resolve to be an independent company and continue growing not as part of Facebook. The big priority for that year that the team that Alex and Louis decide on is to launch and grow back in their homeland, in China. I remember they had launched the initial experiment in a bunch of countries including China, but then they’ve totally deprioritized and focused on the West. First in the US and then had grown throughout North America and Europe. But in China, it was a different story and it was a different story for a couple of reasons. One, because everything is different in China. If anyone, if any kind of Western social network or Western-adopted social network is positioned to succeed in China, you would think it was Musical.ly because the founders are Chinese and at least half of the company more than half of the company is based there. But there are a couple of things that are different. One, the business model for content is very successful in China but very different from how it is in the West. In the West, almost all media companies from traditional media companies through all the social media companies monetized their advertising. In China, the advertising market at this point was not yet anywhere near the level of maturity that it is in the West. Instead, direct monetization is the most powerful business model for social lapse in China. Which wasn’t something I realized until we did that Tencent episode. I realized that really, Tencent invented the modern video game business model and a lot of were content in the West is shifting. Virtual goods, gifting, tipping, payments being a huge part of that, and a revenue generator for the platforms. But the gifting and tipping is really, really interesting. Now I’m back to what we are talking about a minute ago with the management of the economy of the network effect between creators and consumers on a platform like Musical.ly and TikTok. The China business model is actually really elegant way to do that. If you allow for virtual goods, gifting and tipping that the consumers can show their appreciation to the creators for any given piece of content or a series of pieces of content, and then those creators are able to exchange those gifts, convert it in part or whole into actual cash, now you can start to make a living and build a middle class on a platform. This is happening in China and Kuaishou is the pioneer of this. Remember, Kuaishou’s user base is primarily rural, so advertising, ecommerce companies and the like, don’t really have all that much interest. This is pre-Pinduoduo days (which we should definitely cover on another episode), but don’t have all that much interest in reaching these audiences. Instead, they’re able to monetize through this direct monetization. That’s one big thing. Musical.ly has to figure out how to navigate this new business model or different business model in China. Two, though (and this is going to become much more important as we get towards the end of the story) any time you talk about a media business in China, whether social or otherwise, you are operating in a very, very different political environment than you are in the West. We touched on this a little bit in the Tencent episode. Tencent and ByteDance is going to come in here in a minute. Basically, any content company—platform or non-platform—in China employs thousands and thousands of censors that are going through all the content, working with the Chinese Communist Party, making sure that the content on the platform is upholding the laws of the party but even the wishes of the party that is super different from a Western social network, be it Facebook, Instagram, or Musical.ly at the time where anything goes. In late 2017, after working on this for most of the year having this be the major priority in the company, Louis gives the talk at a GGV even where he—imagine he must be a pretty funny guy—says, “I regret not having entered into China’s market earlier. Now I can hear vibrating sounds everywhere making me uncomfortable.” Most Western listeners aren’t going to get what he means there, but by “vibrating sounds everywhere making me uncomfortable” he’s referring to Douyin, which is at this point has been launched by the number one content company in China, most valuable startup in the world, ByteDance. And Douyin means literally vibrating sound or shaking music.…

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