Yousheng Feng: Many firms are destined to fail | iAsk Top Leaders
Abstract: "Live streaming will always exist"
"Do you believe that live streaming will always exist?
Yes, it will."
About Yousheng Feng, some people say that he has made over one billion yuan through live streaming and that he aims to cash out by going public. Some other people comment that he is a survivor after the battles in the live broadcast industry. However, more people admire Yousheng Feng and view Inke as a role model in the live streaming industry.
In the post-mobile era, like the majority of live broadcast platforms, Inke has gone through a process of wild growth to gradually organized management. On July 12, 2018, Inke officially went public in Hong Kong and became the first entertainment live broadcast stock at the Hong Kong Stock Exchange.
Two months ago, we met with Inke CEO Yousheng Feng at Harvard. During the interview with him, we felt his genuineness and simplicity. Just as when he first arrived in Dongguan 17 years ago, he still stays low-key and inconspicuous, with the belief that hard work will bring good luck.
He once mentioned that people are destined to be alone in life, but technological means can alleviate loneliness under certain scenarios. That's why he founded Inke.
This time, he told iAsk that he believes that creating happiness for everyone is the ultimate pursuit of life.
In this issue of "iAsk Top Leaders", we interviewed Inke CEO Yousheng Feng. Who is going to pay for the future of live broadcasts?
iAsk: Is short video a terminator to live streaming?
Live streaming will always exist.
Gloria Ai: When you heard about the news that Panda TV announced the shutdown out of the blue this year, did you think this industry was too young, or too conventional that it has entered the life cycle from growth to decline?
Yousheng Feng: This is normal. Both businesses and humans have normal life cycles. Alibaba has only been established for 20 years, right? In fact, there are few companies in China that have existed for over a century. The logic is applicable here as well. People often notice how fast the capital market can facilitate the growth of a company or an industry through the Internet. However, people rarely focus on the operational cash flows and the financial health of a company, which is crucial.
In fact, a large number of Internet companies in China are barely making profits or struggling to make profits. Moreover, it is very likely to generate the Matthew effect, where the monopolies obtain the largest shares of profits.
Back on the topic of private enterprises, to assess whether a company is healthy or not, we need to pay attention to its ecology, the customer base, the entire operating cash flow and see whether its profits can really support a company's long-term development.
Gloria Ai: But with the rapid growth of the short video industry, some people claim that short video is the terminator to live broadcast. What do you think?
Yousheng Feng: People thought long videos would replace TV, but TV still exists. It's just that nowadays social hotspots are shifting rapidly, which is also in line with the Internet characteristics and the entire technology industry. This is the "Moore's Law". It updates at a very high speed. It used to be every three years, yet now there're new hotspots every year. This reflects the accelerated social development.
No matter whether live streaming gradually evolves into a tool on the Internet, a business model or a form of existence, it still stays in this ecology. From long videos to live streaming, short videos, and even various forms of videos possibly in the future, live streaming will still exist well in its ecology.
Gloria Ai: So you believe that live streaming will always exist?
Yousheng Feng: Yes, it will.
iAsk: Many companies are doomed to go bankrupt?
Everyone is wondering whether they can secure the next round of funding and another round.
Gloria Ai: In July 2018, Inke was listed in Hong Kong and became the final survivor of the "Battles of 1000+ live streaming platforms". I remember you mentioned in your speech to your team that even though your company was not backed up by BAT (Baidu, Alibaba, Tencent), it survived the "Battles of 1000+ live streaming platforms" with its own technological innovation and efforts.
Yousheng Feng: Yes, this is actually a process. For many entrepreneurs, it is a dream to scale up the company step by step, survive, and then go for the IPO, right? During the process, I think things worked out naturally. It also proves that if you can survive the cruel competition, it's a reward to yourself. After the firm goes public, you will return to the state and mentality of entrepreneurship.
Gloria Ai: If you look at the live streaming companies that failed, shut down or are declining
in the "Battles of 1000+ live streaming platforms", what do you think they did wrong?
Yousheng Feng: First of all, when the market is at its climax, the entry of new startups is a completely wrong choice. When the timing window has been sniped by others, if you chase after them and think you would outsmart them on this path with the same business pattern, 99% chance is that you're doomed to fail.
As for those who have already been established in this sector with premium resources, advantageous backgrounds and abundant funding, most of them failed to pay enough attention to cash flows. Instead, they squandered their funding on snatching resources and creating industry chaos. They ignored the true essence of running a business, that is, whether your customer acquisition cost is low, whether user growth is strong, whether the business model is reasonable, how long the business can last and what the next step would be.
In reality, many people don't have much time to think this through during competition. Everyone is wondering whether they could secure some market shares, obtain the next round of financing and seize another round. That's the logic behind most of the businesses.
iAsk: Is live streaming meant to make users pay for happiness?
Five years ago, Chinese users took free resources on the Internet for granted.
Gloria Ai: Your startup business in Internet music didn't succeed. How did you realize that the live streaming sector was a fit to start your business in?
Yousheng Feng: During the process of exploring the business model of the music sector in 2014, we noticed that Chinese users were not used to paying for content. If you ask them to pay RMB 8 yuan per month, they would accuse you for making them pay. Users are accustomed to enjoying free resources online. They take it for granted. Hence, it intrigued us to think under which scenarios users would be willing to pay.
Based on our analysis, there are several business models in the Chinese Internet sector. Firstly, the advertising model relies on large traffic, an example being Baidu; secondly, the gaming industry enjoys a huge market size in China. You may notice that users are willing to pay for games. When we studied the market and heard about Shanda Games' experience sharing, it was said that some users would spend RMB 80 million on games annually, which was an astronomical figure beyond our imagination.
Why would people be willing to pay this much? We tested it out with an audio community, where users could chat and sing via their phone. We just built a small-scaled community with a donate button for virtual gifts and the user demand grew exponentially. Based on our conclusion, users wouldn't set a price limit for emotions because they are willing to pay for happiness. If they have to pay for content or functions, it's about lifting restraints and purchasing convenience, which makes it painful for users.
Gloria Ai: There is no price limit for paying for happiness.
Yousheng Feng: Right. We decisively upgraded the community. Such a business pattern with audios has been proved viable. As time went by, 4G has become more common. Therefore, live streaming via phones would be a business opportunity. At least the business model is very straightforward.
iAsk: The stock price has fallen by nearly 60%. Are you worried?
All of this is only temporary.
Gloria Ai: As of the end of 2018, Inke's publicized revenue was RMB 3.861 billion, down by 2.1% year-on-year. However, during the period, the company turned losses into profits, with a net profit of RMB 1.1 billion. What is the current main source of revenue for Inke?
Yousheng Feng: Now it is still interactive revenue, which is based on the users' donations. Another source is from advertising.
Gloria Ai: Is it sustainable to rely on donations and advertising?
Yousheng Feng: I think in terms of sustainability, for the Internet industry, the business model of live streaming itself is sustainable for the industry. I treat it as a model. But if I view it as a formula, in essence, the company needs a sharp business acumen to seek innovation, opportunities and transformations for the future and new consumer base. You will need to constantly make changes. No matter it's extended from live streaming or interactive entertainment, you should start thinking from here.
Gloria Ai: Regarding the next step of Inke's development, many investors of Inke are also very concerned. Inke's cash flows look promising with abundant cash. However, in the capital market, the stock price has fallen at present since going public. What do you think?
Yousheng Feng: I think all of this is only temporary.
Gloria Ai: Is it because investors didn't understand the big picture or because you didn't convey the message clearly?
Yousheng Feng: Maybe both. We are leading on the leaderboard of revenues and profits among Chinese Internet companies, but people are skeptical about our growth. We actually deliberately keep some things from the public. We tend to announce to the public when we're almost done building a certain product, so that we can provide our team with enough space and protection duration and allow them to refine the product with sufficient time.
Inke has several products that generate tens of millions of monthly revenues, but the majority of people aren't aware. Do you know what tens of millions of revenues imply? An annual profit of RMB 30 million reflects the profitability of startups from the SME Board. We didn't publicize the information in a rush, in that I believe it takes three to five years for some products to grow into industry leaders.
iAsk: After the company was listed, you started acquiring frequently?
The worst kind of investor is those who boss you round all the time and consider themselves experienced on all fronts.
Gloria Ai: I heard that you desire to acquire more small teams to collaborate with Inke's business.
Yousheng Feng: Yes, in fact, we have already acquired a couple of teams. After the acquisition, we discussed about our future directions with them and developed more products.
Gloria Ai: Is your approach explicitly to attract the so-called younger teams and more cutting-edge technology by investing?
Yousheng Feng: It is definitely a clear approach right now. With so much cash on the bank account, we need to create value. It can't show its value by staying in our bank account. Eventually, only by operating the business and making investments can we maximize value and facilitate development vertically in the industry chain.
Gloria Ai: Based on your experience in starting a business and making investments, what do you think is the biggest difference?
Yousheng Feng: The difference is that when you start your own business, you must focus on internal management, growth and products. With investing, your vision becomes broader, which is a good thing. You can see a bigger picture from small things. You can join a sector that you're interested in by investing just 5% or 10% in the company. Most importantly, you can obtain happiness by helping people succeed.
Gloria Ai: Are you accustomed to such a change in the role and mentality?
Yousheng Feng: Since I have started my own business and received investments from plenty of investors, I can feel the influence on the entrepreneur from various investor styles. Some investors don't care about your company's development after investing, right? This is a neutral type, where investors don't interfere with your business after investing. The worst type of investors is those who boss you round all the time and consider themselves experienced on all fronts. The best investors would help entrepreneurs analyze situations when needed, set a clear strategy and pinpoint business problems.
iAsk: What's your vision for Inke?
Make happiness easier.
Gloria Ai: What do you expect to see for Inke's future development in ten years?
Yousheng Feng: Make happiness easier. In ten years, it is conceivable that 5G technology will basically be well-established. We yearn to create a newer, interactive and entertaining way with the new technology to bring about convenient user experience.
I have always imagined that offline entertainment in the future must be perfectly integrated with online entertainment, rather than being separated as it is now, where everyone stays alone in a room to entertain themselves. It should be possible to interact and communicate with friends from different regions and far away from home through the combination of virtual world and reality.
Gloria Ai: What will Yousheng Feng do in ten years?
Yousheng Feng: In ten years, let me see, I'll be 50 years old, right? I think that I will keep following up with the development of new technologies and the needs of new users. I hope that in the coming decade, I can help a group of companies we've invested in and support some true entrepreneurs to succeed.
iAsk Media offers in-depth coverage, distribution, and brand-building services for founders in both China inbound and outbound markets. Over the past five years, iAsk Media has published over 1300 pieces of founder-focused original text and audio content, and produced over 120 premium video dialogues with leading entrepreneurs and investors.
iAsk Capital further supports founders by complementing media, brand-building, and marketing solutions with a wide range of investment and advisory services, from growth capital and direct equity investment to fundraising, asset management, and M&A support. To date, iAsk Capital has completed investments in some of China's fastest growing ventures, including Bytedance, Himalaya, Movietime, and Horizon Robotics.
Gloria Ai is the founder of iAsk Media and the founding manager of iAsk Capital, and a former venture partner at the Softbank Asia Infrastructure Fund. She serves as the international brand ambassador to her hometown of Huangshan, and was Forbes 30 Under 30 in the Media, Marketing & Advertising category. She is a graduate of Harvard Kennedy School and Peking University. Prior to founding iAsk, she served as a financial news correspondent for China Central Television in New York.