From "Silicon Valley's China whisperer" - Connie Chan
|Nityesh Agarwal||May 20|| 4|
I have been intrigued by China’s progress ever since I read this Palladium Magazine article last year - The American Dream is Alive in China.
Its author, Jean Fan, is of Chinese origin but she grew up in the US. She goes to China every year for a few weeks to visit family.
Talking about the dystopian side of the Chinese government that we are all familiar with, the author writes how -
“this discourse, though often correct, has felt increasingly disconnected from my personal experiences in China and the more fundamental problems at hand. In particular, it fails to comment on the larger, more important context: how much better life has become for many Chinese people, China’s new self-confidence, and America’s struggle with development, optimism, and sovereignty.”
The American Dream is Alive in China, Palladium Magazine
This success of China is difficult for most of the world to acknowledge, much less adopt, because China -
"has succeeded beyond expectation, despite consistently contradicting all the wisdom of our public worldview. The Chinese are becoming increasingly wealthy and developed, but aren't democratic and aren't about to become democratic. They aren't really capitalist the way Americans mean it, but do have markets and entrepreneurial billionaires. They don't have political freedoms, but do have a fairly responsive government. They don't do free trade, but they do more trade than anyone else."
The Problem of China, Palladium Magazine newsletter
It is unfortunate for the curious minds that the Chinese way of life is mostly a mystery to people outside of China. Language barriers, strict censorship and our own media prevent most of us from tapping into what’s happening in that country.
That’s why I was ridiculously excited when I discovered this Andreessen Horowitz (aka. a16z, one of the best venture capital firms in Silicon Valley) General Partner who has been given the title of “Silicon Valley’s China whisperer”.
How cool is that!
What follows is an account of my journey as I dived deep into Connie Chan’s thoughts on tech in China and what the rest of the world can learn from it.
Here’s what became a cool (web) surfing story:
"After looking at the broader ecosystem, she decided that we needed to understand the innovations in China much better if our companies were going to compete, so she took that on personally. Yes, you read that right. She took on China. And, as with everything Connie did, she quickly became the best at that."
Connie Chan by Ben Horowitz
This story started last week when I was looking for ‘product management’ articles to teach myself the basics. I decided to search for the term on a16z’s blog because knew that a16z writes high quality articles related to everything startup. Now, I’m going to tell you how that search ultimately led me to learn a tonne about startups and innovation in China.
This was the first article that I read in my journey.
Written in late 2018, this article talks about how most of the big tech from the US have either one of the following two sources of revenue -
Ads - for companies like Google, Facebook, Snapchat
Transactions/Subscriptions - for companies like Amazon, Netflix, Uber, Spotify
Is such a singular focus on one model for a revenue stream the best long term strategy for growth? And perhaps more importantly, does this lead to the best product for customers?
Connie then talks about how China skipped the PC and credit cards because they couldn’t afford them. This has led to companies building products that aren’t just mobile first, but mobile only. This, in turn, has led them to innovate to business models that use a hybrid of the 2 revenue streams mentioned above.
In part because a mobile ad is much more annoying on a small screen, the emphasis on advertising vs. other revenue streams is very different in China today than it is in the US.
This has led businesses in China to create some novel, creative user experiences in the familiar industries of books, podcasts, videos, music etc.
Expanding sources of revenue not only pushes us to think beyond what we know, but forces us to create the infrastructure to go after new opportunities. After all, revenue is simply a proxy for how you are serving your customers. As you diversify and experiment in generating revenue in new ways, you are effectively honing in on your ability to give customers what they want, how they want it.
Why you should dive deeper:
To learn more about the online books industry (Kindle) in China:
“Books are also sold as bite-sized snacks. Readers pay per 1,000 words, for often-serialized works… Because authors can publish chapters piecemeal, they are also able to incorporate reader feedback to quickly change plots or even kill off characters.”
“In China, purchasing books is not about a one-time transaction for the platforms. There are elements of social media, gamification, and enhanced discovery — ultimately creating an experience that drives more sales. It all seems to be working. In China the ebook industry grew over 35% from 2016 to 2017; the same industry in the same time in the US trended the opposite direction.”
In the year of 2019, we have seen significant growth of the podcast industry. It seems to me that this customer trend might have been predicted by looking at China.
“The audio platform Dedao (“iGetGet”) essentially takes the MOOC format and applies it to podcasts. Below are two economics professors from Peking University. Xue Zhaofeng, the professor on the left, actually resigned after making $8 million in one year with his economics podcast series.”
To learn more about video streaming (YouTube) and music streaming (Spotify) industries in China.
“In China, Baidu spinoff iQiyi, one of the bigger video players, uses AI and machine learning to figure out what’s happening in the content, and play relevant advertising.”
“In Tencent Music’s other flagship app, WeSing, users can livestream their own karaoke room or open up the floor to anyone who wants to sing karaoke. Singers keep 30% of the tip revenue. It’s fun, social, and makes a lot of money for both platform and customer.”
A Whirlwind Tour Through Tech Trends in China
I came across this video on Connie Chan’s personal website. Connie walks us through the different tech trends that are happening in China using screenshots and photos.
There are 656 million smartphone users in China - twice the population of US! This results in very densely populated cities where the online world is connected to the offline world in ways we might not have seen:
Parents can check up on their kids when they are at kindergarden. They use WeChat for things like getting status updates on how their kids are doing and see the photo of the person who picked up their kid after school.
Hundreds of restaurants have QR codes pasted to the table. They enable customers to see the menu, order food and pay the bill. All of this saves a restaurant significant waiting costs.
QR code are printed on a piece of paper that vendors then paste on their shop walls to accept digital payments. No need to buy expensive Point of Sale solution (like the one shown in picture below) to accept digital payments.
(This article by Connie covers 16 ways in which QR codes are being used in China.)
Livestreaming, which, for us, is just a thing that Instagram influencers do during quarantines, is big in China. Almost as big as their box office industry! Over 46% of internet population used a mobile livestreaming app.
It provides social media influencers another way to earn money
Livestreaming is becoming an alternative to television. People livestream themselves while eating! Connie believes that this culture is born out of loneliness stemming from the one-child policy in China. Why eat alone when you can put your mobile on the other side of table and watch/talk with others?
Social media influencers in China are able to monetise their personal brands beyond just advertising. They sell merchandise to their followers… kind of like what Kylie Jenner did to become the youngest self-made billionaire. Except this phenomenon is not a one-off fluke in China- 5 out of the top 10 female clothing brands in China are run by female influencers!
Why you should dive deeper:
To see screenshots of various Chinese apps and how they are used in the above mentioned activities
To see how even the big premium western brands, like Starbucks, Sephora and Burberry, use the Chinese apps to do marketing and commerce. (They don’t need to create a separate Starbucks app or a Burberry app to engage with users. They only need to create an “official account” on WeChat.)
Beyond a zero-sum game
I came across this talk on Connie’s website too.
This talk begins with an analysis into our feelings for China.
"Everyone loves to see a good fight. So, these two countries are often pitted against each other. The media has trained us into thinking that the world is a zero-sum game - if the US wins then China loses; if China wins, the US loses. This is the narrative that we have been sold because of what sells magazines."
Connie is talking about how the media often pits the US against China as if they are two teams competing against each other.
Now, I believe that this media behaviour is even more prevalent than she tells. If I substitute “India” for “the US” in the above talk, it will describe the narrative of the Indian media. I’m sure, there are atleast a few other countries that we can substitute in place of the US and get the same conclusion.
In this video, Connie tries to make the case for why the US doesn’t have to fight with China. She tries to convince the audience that the world is not a zero-sum game where only one country can win. She calls the US vs. China construct an “artificial battle”.
If China is strong, it’s great for the US. We have more customers to sell products to. And the same thing is true vice-versa.
Why you should dive deeper:
We all get some feelings evoked when we hear the terms “Chinese company” or “American company”. Connie spends a lot of time making the case why this model of thinking is incorrect.
What makes up a company anyway? Employees, customers or investors? Almost every global company, be it Chinese or American, has these entities spread across multiple nationalities. So, how “American” or how “Chinese” is that company?
She gives examples of some real-world companies to drive home the above mentioned argument. This was one of my favourite:
One week before this talk was recorded, Alibaba (China’s mega e-commerce giant) sold 25 Billion dollars worth of merchandise on the Single’s Day in China. But interestingly, the top products that were sold that day were not Chinese… they were American! Products from brands like Adidas and Nike. It becomes even more interesting if you take a look at the tags these products- they say “Made in China”!
China has developed in a way that is very different from the western world. I see 3 factors that uniquely shape its development:
A mobile only society
China has a smartphone penetration of 62% (that’s almost 1/3 of its population). It’s population has “leapfrogged” over the PC era directly to mobile. WeChat, China’s most popular messaging “superapp”, shows what’s possible when a country does that.
“WeChat was not a product that started as a website and then was adapted for mobile, it was (to paraphrase a certain movie) born into it, molded by it.”
This is unlike most consumer products that we use, like Amazon, Facebook or Spotify.
Being the most populous country on Earth, Chinese cities Beijing, Shanghai and Shenzen are very densely populated. This has led to the innovation of new kinds of business models that can only work in densely populated areas using low-cost labour and economies of scale.
Increased appetite for social interactions
Every person needs healthy social interactions to survive. But I suspect that the Chinese population, in general, has an unusually large craving for social interactions that stems from the one-child policy.
All of these have combined in a beautiful way to produce a futuristic tech-enabled society in China.
If we remove our blind spots for China, we can spot some these trends that have not yet made it to our countries. This might just allow us to seize some business opportunities of the future.
And what excites me the most is that a lot of the factors that are unique to China - mobile-first population, low cost labour, high population density - are present in other developing countries too! Countries like India (where I live) and Brazil.
This makes me think that China might be a better model for developing countries like India and Brazil than the US or the UK is. Maybe, if we see beyond the media narrative of China, we can see some opportunities for the future.
That’s all from me for now! I’ll send you another email when I find something similarly amazing in one of my web surfing sessions.
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