Ep. 59: China Tech 2019 in Review

Episode 59 of Tech Buzz China takes a retrospective look at 2019 in China internet culture and business happenings. Co-hosts Rui Ma and Ying-Ying Lu review their top picks of the need-to-know trends, occurrences, and players that shaped the landscape in 2019. From the saturation of Chinese mobile internet users to the rise of the rural consumer and a decline in funding for tech companies, listen and decide for yourself: do you agree with our analyses and predictions as we enter the New Year of the Golden Rat?

You can find these stories and more at pandaily.com. If you enjoy our content, please do let us know by leaving us an iTunes review, liking our Facebook page, and tweeting at us! We truly appreciate your feedback and support. Thank you also to our listeners over at our partner, dealstreetasia.com.

We are grateful for our talented producers, Caiwei Chen and Kaiser Kuo.

Transcript

(Y: Ying-Ying Lu; R: Rui Ma )

[00:00] Y: Happy Chinese New Year! 新春快乐! By the time you hear this episode, sometime after January 25, 2020, we will already have said goodbye to the year of the Golden Pig, and officially ushered in the year of the Golden Rat. And for the first time in Tech Buzz China history, we are going to do an annual review. A retrospective of sorts for 2019, with a few updates.

R: If you want a more prospective view … that is, our predictions for 2020, you’re going to have to sign up for our new bi-weekly paid newsletter, Extra Buzz, which is longform commentary, opinion and analysis on China tech, and meant to be a supplement to our podcast. It’s only $2 a month, and with our current Chinese New Year’s promotion, you get an entire year’s worth of Extra Buzz for just $18.88 a year or 22% off. That’s right, for the price of a hardcover book, you’re going to get a year’s worth of reading on China tech that I’m pretty sure you won’t find elsewhere. Go to bit.ly/techbuzzextrabuzz to sign up!

Y: Our first issue, by the way, which went out last Friday, was on the implications of some of the announcements made at WeChat’s annual developer conference last week. If you want to know what Allen said about the responsibility of platforms, how WeChat aims to boost creative output with shorter content formats, and how Work WeChat diverges from Western enterprise communications tools like Slack, subscribe and read what we have to say.

R: Hint: on that last point, one tends to be designed for managing people, and the other more for data and processes. It’s a reflection of different working cultures, and is the type of context that we want to continue to provide here on the show and now in the Extra Buzz newsletter as well. It’s definitely one of the great joys and benefits we have of being bilingual and bicultural, and we love sharing it with you.

[2:26] R: Hi everyone! We are TechBuzz China by Pandaily, powered by the Sinica Podcast Network by SupChina!

Y: We are a biweekly podcast focused on giving you a peek into what’s buzzing within the tech community in China.

R: We uncover and contextualize unique insights, perspectives and takeaways on headline tech news that don’t always make it into English language coverage. So you can be smarter about the world of China tech. TechBuzz China is a part of Pandaily.com, an English language site that tells you “everything about China’s innovation.” I’m one of your two co-hosts, Rui Ma.

Y: And I’m your other co-host, Ying-Ying Lu. We’d like to acknowledge our partners DealStreetAsia and SupChina, creator of the Sinica Podcast Network! In addition to TechBuzz, you can also find Sinica which covers current affairs, NuVoices and Ta for Ta on women, the business-oriented ChinaEconTalk, and the Caixin-Sinica Business Brief from China’s leading business magazine.

R: If you wanted to get a first-hand look at China’s Tech scene but didn’t know where to begin, check out DecodeChina, Pandaily’s one-week immersion program into China’s tech ecosystem. The latest installment, which involves visiting companies like Tencent, Didi and Ant Financial, as well as courses, workshops and networking events, will take place in Beijing and Shenzhen from March 23–29. To learn more, visit decode.pandaily.com. And as a final note, if you enjoyed listening to our podcast, please leave us a review on iTunes or whatever other platform you use to get your podcast.

[4:07 ]Y: OK, I have to confess, even though we call ourselves Tech Buzz China, most of our content really centers on Chinese internet companies, with the occasional hardware business thrown in. So let’s be clear, that’s what this retrospective will primarily be about — China internet. And if we narrow it to Chinese internet businesses, then the word that many would use to describe the industry, at least when it comes to their core performance in domestic China in 2019, would probably be this: “unremarkable.”

R: Unremarkable, or if we’re being kinder and gentler … unsurprising. For the most part, companies that were already showing their strength in a big way in 2018, continued to do so, and those already on their way down? Well, they simply met their end. But a large part of that was because macro conditions weren’t favorable to anyone. Chinese mobile internet usage has basically reached saturation. The easy growth of previous years has disappeared.

Y: In 2018, for example, mobile internet users still grew by 4%, which isn’t a lot, but nets out to be over 46mm users. For the first 9 months of 2019, however, that growth was nearly imperceptible. We’re talking about a tenth of a percentage point here. And even when you multiply that by the extra-large base of 1.1Bn, the result is just barely over 2mm new mobile internet users. That is a major slowdown for a country used to double digit million growth.

[5:41] R: It’s not like Chinese entrepreneurs and investors didn’t know that. The death of the so called “population dividend” or 人口红利 has been predicted for a few years now. You only needed to know simple arithmetic to know it was coming. But still, this is the first year where it hit the industry really hard. And it wasn’t just reflected in the number of new users either; the number of minutes an average user spent on mobile per day also increased by just a smidge, from 5 hours and 41 minutes to 6 hours, growing just 5%.

Y: For reference, the number quoted for the US is only about 3 hours, because TV watching is still massive. But at already 6 hours a day, how much more could Chinese usage time grow? And that’s why with both user growth and time spent plateauing last year, there is a general sense that you actually have to really focus on product development and the user experience now, instead of just burning money on distribution and user acquisition.

R: That’s not to say that there aren’t plenty of cash burning businesses still, but that on the whole, investors are less willing to tolerate them. Whereas before you could easily make the argument that there are a ton of newbies or 小白用户 coming online using your product for the first time, so you have the opportunity to define the category for them and build a brand new habit, now you have more experienced users who are more discerning.

Y: Less easily hoodwinked, in other words. But still manipulable, with the right incentive, so it’s not like subsidies are going away for good. That is just something Chinese users have come to expect, and if that’s something that puzzles you, now is a great time to review our Tech Buzz episode from a year ago, at the start of the Year of the Golden Pig.

[7:25] R: Right, in Episode 38: Battle of the Red Packets, we went over how WeChat used digital red pockets and leveraged existing social relationships to onboard millions of users onto its payments platform virtually overnight. But that was a special circumstance. Nowadays, the red pocket incentives are back to what they used to be, effectively coupons to acquire users or to get them to spend more inside the product .

Y: Which brings us to our first major bullet point of 2019 and a topic that we’ve done multiple episodes on this year: short video. You see, the app that paid for exclusive rights to this year’s CCTV’s annual New Year’s Gala, the most watched television program in the world with nearly 1.2Bn viewers last year, is none other than short video app Kuaishou, also known simply as Kwai, spelled K-W-A-I.

R: Remember earlier we said that in 2019, the average mobile internet user time spent per day grew only by around 5%. That number, however, calculated on a monthly basis, would be 64% if you are in the short video category. And in that category, you must have heard of Tik Tok, its domestic China equivalent Douyin, and their parent entity, Bytedance. No wonder then that from September 2018 to September 2019, in terms of time spent, the Tencent family of apps, which includes the ubiquitous WeChat, fell from 46% to 42%, which translated into gains for Bytedance and others. About half to each, if you must know.

[9:04] Y: At Tech Buzz, we covered Bytedance pretty early on, including its first hit app, Toutiao, known for personalizing the news through AI. We saw significantly less coverage on Kuaishou, which actually got its start much earlier than Douyin, AKA Tik Tok, and began with a fundamentally different strategy. In fact, our Episode 55 suggested that Kuaishou was the Anti- Tik Tok / Douyin.

R: I’d say we went much farther than just suggesting. I think we proved our case. The two apps represent two different camps of internet entrepreneurship these days in China. They have different algorithms and KPIs and different business models, but all of these because they evolved from serving two different audiences.

Y: I would say that even though their audiences have huge overlap now — I mean, they have to, now that Douyin is over 400mm DAU and Kuaishou has been over 200mm since May — the apps still have a different look and feel because of this initial differentiation. And that differentiation is still very much the rural-urban divide, the same phenomenon that gave rise to a company like Pinduoduo.

R: Which brings us to our second point, the rise of the rural consumer, a name we are using for those living in third-tier and below cities in China, that is, not Beijing, Shanghai, Hangzhou, or any other city you see any regular coverage of. Unless you are literally tuning in for the first time to Tech Buzz, or just starting to look at China tech, I’m sure you’ve heard of Pinduoduo, ticker PDD, the subject of our episode 17, Zero to $23Bn in 3 Years. Speaking of which, we should update the episode to say Zero to $46Bn in 5 years. But basically, Pinduoduo built an ecommerce empire out of selling cheap goods to rural consumers in China, in a fun way that took full advantage of the WeChat ecosystem, a great deal for Tencent, one of its major investors.

[11:09] Y: Without going into detail on how it works — you should listen to our episode on it, it’s one of our most popular — all you need to know is that Pinduoduo and others, including Kuaishou, and Qutoutiao, sometimes together called PKQ, discovered the worth of the rural Chinese user and along the way, found some intuitive and unintuitive market characteristics.

R: Intuitively, the rural Chinese user tends to have a bit more free time than their urban counterparts. Also expected, they are a bit more price sensitive. So sometimes, they’re willing to jump through more hoops for better deals. What’s unintuitive, however, is that just because they tend to make less money, doesn’t actually mean they have less money to spend, as many Chinese internet companies found out.

Y: Yeah, there are a few factors contributing to this, but the overwhelming one is the price of real estate. Real estate in first and second tier cities in China is outrageous, and downtown Beijing is the same price as downtown San Francisco. For those of you who are interested, we did a pretty detailed analysis back in Episode 20, when we tried to figure out whether startups are behind rising rents in Beijing. One of the companies we covered in there, by the way, Danke 蛋壳, just went public with a mediocre but not horrendous offering.

R: Some interesting facts in their prospectus, which we might go over sometime in our Extra Buzz newsletter, but the main takeaway is that for your average, middle class white-collar worker, housing has become so prohibitively expensive that your actual discretionary income isn’t that much. Not fundamentally different from what we see here in the San Francisco Bay Area, where extreme housing prices means that a household making $117,000 a year qualifies as “low income.” I know … crazy.

[13:00] Y: Just goes to show — when considering who to sell to, don’t just look at your customers’ topline number, figure out what their bottom line is. And for rural consumers in China, which usually refers to non-first-and-second tier city dwellers, because real estate prices are often a fraction of what they are in Beijing and Shanghai, we’re talking about less than one-sixth, maybe as low as a tenth, and they are often completely debt-free and own a car. This means that potentially all their income, about $700 or so every month, can go to consumption.

R: What’s less intuitive though is that despite the tremendous growth in China’s transportation and logistics networks and decades of economic development, offline retail in rural China is still pretty crappy. You really only have to go outside of Beijing’s fifth ring road — meaning its outskirts — to see for yourself. Again, those of you who are retail experts probably find this easy to understand, but today’s shopping mall infrastructure in America took decades to build, since 1950, actually, and so rural China of course, is really really far behind when it comes to providing a pleasant offline shopping environment.

Y: I wouldn’t actually say that’s the part that’s unintuitive. The dearth of aesthetically pleasing or well-designed offline shopping experiences is not a surprise. The surprise is the high price of the goods that are available. While groceries might be cheaper in rural areas, and that’s only for locally grown foods, not for imported fruits or meats, electronics are often not, not for the same quality anyway, which makes sense if you think about it. Since there’s less density, so there’s less volume discounts available to the seller, plus the cost of transporting and holding inventory is expensive, and so all that just gets passed on to the consumer.

[14:54] R: There’s also a lot of fraud. Lots of dishonest sellers taking advantage of the less educated rural consumer and sometimes straight up selling fake goods, misrepresenting products, and other times not honoring warranties. Of course, there is plenty of fraud with online sellers as well, but the bigger platforms at least were more transparent to deal with. Better than the hawker at the electronics stand that you can’t find next month. So In 2019, what we saw was that everyone in ecommerce went for the rural buyer in a big way.

Y: Many started doing so back in 2018, but it was in 2019 that the first batch of truly impressive results came in. Most companies experimented with a Pinduoduo-like style of group buying, and when it came to the various shopping festivals in China, such as the now world-renowned Singles Day, you could see the power of the rural consumer. Alibaba, for example, said that of Haier’s most popular consumer electronics products this year, over 60% of orders came from third-tier and below cities in China.

R: Haier is a mass-market, middle-class brand, so it’s not like rural Chinese consumers are all of a sudden buying Nespresso machines or something like that. And while 60% is impressive, it’s actually on par with the distribution of total mobile internet users in China — just under 60% come from third-tier and below cities. The main thing to note is that after all these years of development, rural China is growing into a real market force, and the internet has accelerated that.

Y: And there’s so much room to grow, too. I mean, right now, the distribution of income and resources is nowhere near the actual distribution of geographic area or population. We’ve been referring to the urban and rural divide but what does it look like numerically? Here’s an easy way to remember it all — China has about 1.4Bn people right? 400mm of those people live in first and second tier cities, and the remaining 1 billion live in what we are calling “rural China.”

[17:01] R: It’s not really all that rural because we’re including nearly 300 third-tier and below cities in it, many of which have well over a million in population. And in addition to those 300 cities, there are 3,000 county seats, 40,000 townships, and over 660,000 villages. All spread out over 97% of the land area in China. So now, boom, 2019 — remember it as the year that these billion people became the focus of Chinese internet entrepreneurs and executives everywhere.

Y: Yeah, if 2018 was when it became the next thing, 2019 was when it became basically the only thing. The newfound purchasing power of the rural consumer, besides making possible the mega-unicorn status of companies like Pinduoduo and Kuaishou, also created many opportunities for new ways of interacting and selling to them.

R: And this is where we circle back to short video apps, who’ve really scaled up last year, as we’ve already mentioned. They contributed to two major happenings that again, have been building for a while, but really reached a crescendo last year. One was in the domestic market, and the other was internationally. I’d like to think that these both happened because Chinese companies besides YY finally figured out how to get Gen Z and millennial users to create high quality, entertaining content at scale.

[18:31] Y: The thing that happened in the domestic market was the rise of livestreaming ecommerce. China was already the undisputed king of livestreaming, as we covered in Episode 7 and later on in Episode 43, which was wholly devoted to e-sports livestreaming, a totally fascinating and ginormous industry as well, and Kuaishou and Alibaba had already built livestreaming shopping functions, so it wasn’t exactly new. But 2019 was the year it became mainstream, and very very profitable.

R: Yeah, for the last two months of the year especially, after the success of another record-smashing Singles Day — that’s $38Bn worth of goods sold through Alibaba for those of you who missed it — all anyone ever talked about was livestreaming e-commerce. It just made so much sense in many ways. It was so much more interactive and interesting than looking at a webpage or watching an asynchronous video. And the livestreamers knew how to entertain. Mostly Gen Z’ers or younger millennials, they have a great knack for meme-ifying things, that is, making things into memes.

Y: That’s what the internet is, right? For making things go viral. And none figured out how to do it better than Austin Li 李佳琦, AKA 口红一哥 or “Lipstick Big Brother,” who honed his presence selling L’Oreal cosmetics at a counter offline before going into livestreaming. While he didn’t take first place on Single’s Day — another livestreamer named Viya did, she sold almost $400mm worth of goods in 2018 — I’d say Austin was better at making himself into a trending topic.

R: And the point is, he’s gotten so many fans now who watch him and trust his recommendations that he is able to negotiate rock-bottom prices, even with major brands. In fact, when he found out that Lancome gave him slightly higher prices than archrival Viya, he openly declared that he would never work with the brand again. And don’t worry, he now sells way more than cosmetics, even if that remains his main schtick.

[20:39] Y: Yeah, A-list movie stars are coming onto his show to promote their movies these days! Buy your movie ticket for a discount, while the stars banter with the host. Thanks to over a decade of livestreaming, as pioneered by YY, and also the recent rise of short video, there are now lots of talented hosts like Austin who are finding a new career in livestreaming ecommerce. For brands, there is no doubt that this is where they have to be.

R: Remember how earlier we said short video was the category in which time spent shot up the most last year? Well, obviously all these livestreamers, being great at video, occupy some of the top spots in terms of fans count. On Douyin, Austin has over 37mm followers. On Kuaishou, he has 5.9mm. For more details, we really suggest you go and listen to Episode 54 if you haven’t already. We explain everything about China’s wacky ecosystem of influencers, KOLs, idols and more there.

Y: While the domestic expansion of short video has been into e-commerce, with livestreaming as an especially hot segment, these companies have also been experimenting abroad. And if you think about it, that makes sense. User-generated content is an asset-light business and there are many countries now with sufficient smartphone and broadband penetration — thanks to Chinese manufacturing — where these models can now survive or even thrive.

R: In fact, short video might be the lowest barrier export of all, because so much content translates without, well, even needing to be translated, as we saw initially when some Douyin content like the “Karma’s a b-i-t-c-h” hashtag would go viral here in the West. Maybe the world is pretty flat after all … Bytedance would certainly agree — Tik Tok was the number one app downloaded last year on the iPhone, and broke many other records as well. And it did all that without localizing its core product, believing instead that the app is flexible enough to be accepted all over the globe.

[22:41] Y: The overwhelming coverage given Tik Tok has obscured the bigger trend though, which is that it certainly isn’t the only Chinese short video app to try its hand overseas, and not the only one to succeed either. We covered YY and others’ efforts in detail in Episode 56, Not Just Tik Tok, a Short History of Chinese Short Video Abroad.

R: The moral of the story being, China tech is now sophisticated and deep enough that there are actually multiple large players trying out different strategies and competing in foreign markets with each other at any given time. While at the end of the day some of them are still affiliated with either Tencent or Alibaba, there is a handful that are strong enough in their own right to have the ambition to become global powerhouses.

Y: The bulk of their attention is focused on Southeast Asia and India though, a trend started at least 5 years prior. Which brings us to our last point, one that coincides nicely with our first one of stagnation when it comes to new user growth within China. A slowing domestic market encourages companies to look to other sources of revenue, but to do so cautiously.

R: Yeah, remember when growth was easy and capital was easier, just 2 or 3 years ago? All those bike-sharing companies and their unprofitable unit economics not just raising money like crazy but also expanding all over the globe. I just took a look at our episodes 15 and 16 on ofo and Mobike, which were released not even a year and a half ago. They were already on the decline then but are basically nonfactors now. I mean, Ofo denies being bankrupt but at this point I’m not sure anyone cares what it does.

[24:21] Y: With total funding into tech companies down 55% from $112Bn to $51Bn last year, and the number of deals down 36%, you kinda have to have a visible path to profitability, or at least some semblance of positive unit economics, to get investment. Which explains why there was a little bubble of investment into e-cigarettes last year, and which fell off sharply after new regulations prohibited online sales, all of which we covered in Episode 45.

R: Yes, I think that was a load of hot air, which we said as much on the show but could probably have been more confident in our assessment. But this lack of easy money is also responsible for another slew of startup deaths recently, in the previously well-regarded grocery e-commerce sector. People are starting to figure out that it’s really, really hard to operate these things profitably, and even cash-rich companies like Alibaba are not just blindly throwing money at the problem but instead trying a bunch of small experiments.

Y: As we explained on the show, it’s one of those things that’s for sure going to be big, but I don’t believe anyone has discovered the winning format yet. This Wuhan coronavirus supposedly originated from a wet market, which still accounts for over 70% of Chinese grocery shopping.

R: Yeah, people have been clamoring to have those places be better regulated and cleaned up for a while now, so I really hope this is the last time we see this sort of thing happen, because it is really tragic. And scary! But unlike the SARS epidemic of 17 years ago, China is in a much better place to deal with such disasters, a lot of it is due to internet companies, actually, and many of them are doing some pretty helpful things and not taking advantage of the situation, so I’m pretty impressed. Well, on that somber but hopeful note, let’s wrap up our review here of 2019.

[26:21] Y: In terms of numbers you have to remember about the year that just passed by, there are probably only two of importance. One we mentioned at the very beginning, and one at the very end. Flat — basically 0% — growth when it came to mobile internet users, and 55% decline when it came to funding for tech companies. So … almost no new users and much less money!

R: Obviously that meant a lot of business closures, layoffs, cutbacks, and a lot of anxiety and unease for many. 996 — working 9AM to 9PM 6 days a week became a point of contention between employers and employees. That’s Episode 42 of Tech Buzz, if you’re interested. But one sector grew like a weed despite all the headwinds, and that is short video. We did multiple episodes by now on both Bytedance’s Douyin AKA Tik Tok overseas and its competitor Kuaishou. But if there is one thing to take away from these two, it’s that users are spending more and more time on them, and that this is definitely now a pretty mainstream form of entertainment, no longer just for the young or idle like a few years back.

Y: But there are a few different ways to make money in these apps, and the main one to stand out in 2019 is e-commerce. You can already make money promoting goods via short video, but an even more direct way to do it is via livestreaming, which is actually Kuaishou’s main monetization method anyway. It’s up against Alibaba though, who’s also gotten into livestreaming e-commerce in a big way, and of course, earlier this month WeChat announced it would also make livestreaming easier from its mini-apps.

[27:58] R: Lots of predictions we can make there, which we’ll save for the newsletter, but something that’s already happening is that this is a sector that’s pretty eager to expand abroad. We’ve already dissected why we think that’s the case so we won’t repeat it here but there seems to be some business logic to their strategies. This is quite different from the nuttiness a few years back, where easy money made entrepreneurs believe they are invincible.

Y: Yeah, the “capital winter” this year really reinforced the fact that even if you are a high-flying unicorn, you can die pretty quickly. You just have to run out of money. So operational excellence and sound business fundamentals became top of mind by the end of 2019. I mean, if even food delivery giant Meituan could manage to turn a profit while locked in a war against Alibaba, really, everyone in a business that makes sense should be able to.

R: For us, we hope that this means China tech matures even further and that companies become more disciplined, instead of just throwing money at topline growth. Sure, we’ve seen more caution being thrown around in Silicon Valley as well, but with spectacular fails like WeWork not widely considered a Valley deal, I don’t think the fear is here nearly as much as it is in China. We are hopeful, anyway, that the capital winter leads to higher quality businesses, and more innovative business models, not less. What are your thoughts? Let us know!

[29:35] R: OK, that’s all for this week folks! Thanks for listening. We really enjoyed putting this together, and we are always open to any comments or suggestions. You can find us on twitter at thepandaily, at techbuzzchina, and my personal Twitter account is RUIMA.

Y: And my Twitter is spelled GINYGINY. Techbuzz China by Pandaily is powered by the Sinica Podcast Network on SupChina. Pandaily.com is an English language site that tells you “everything about China’s innovation.” Our producers are Caiwei Chen and Kaiser Kuo. Thank you for listening!

: Yes, I think that was a load of hot air, which we said as much on the show but could probably have been more confident in our assessment. But this lack of easy money is also responsible for another slew of startup deaths recently, in the previously well-regarded grocery e-commerce sector. People are starting to figure out that it’s really, really hard to operate these things profitably, and even cash-rich companies like Alibaba are not just blindly throwing money at the problem but instead trying a bunch of small experiments.

Y: As we explained on the show, it’s one of those things that’s for sure going to be big, but I don’t believe anyone has discovered the winning format yet. This Wuhan coronavirus supposedly originated from a wet market, which still accounts for over 70% of Chinese grocery shopping.

R: Yeah, people have been clamoring to have those places be better regulated and cleaned up for a while now, so I really hope this is the last time we see this sort of thing happen, because it is really tragic. And scary! But unlike the SARS epidemic of 17 years ago, China is in a much better place to deal with such disasters, a lot of it is due to internet companies, actually, and many of them are doing some pretty helpful things and not taking advantage of the situation, so I’m pretty impressed. Well, on that somber but hopeful note, let’s wrap up our review here of 2019.

[26:21] Y: In terms of numbers you have to remember about the year that just passed by, there are probably only two of importance. One we mentioned at the very beginning, and one at the very end. Flat — basically 0% — growth when it came to mobile internet users, and 55% decline when it came to funding for tech companies. So … almost no new users and much less money!

R: Obviously that meant a lot of business closures, layoffs, cutbacks, and a lot of anxiety and unease for many. 996 — working 9AM to 9PM 6 days a week became a point of contention between employers and employees. That’s Episode 42 of Tech Buzz, if you’re interested. But one sector grew like a weed despite all the headwinds, and that is short video. We did multiple episodes by now on both Bytedance’s Douyin AKA Tik Tok overseas and its competitor Kuaishou. But if there is one thing to take away from these two, it’s that users are spending more and more time on them, and that this is definitely now a pretty mainstream form of entertainment, no longer just for the young or idle like a few years back.

Y: But there are a few different ways to make money in these apps, and the main one to stand out in 2019 is e-commerce. You can already make money promoting goods via short video, but an even more direct way to do it is via livestreaming, which is actually Kuaishou’s main monetization method anyway. It’s up against Alibaba though, who’s also gotten into livestreaming e-commerce in a big way, and of course, earlier this month WeChat announced it would also make livestreaming easier from its mini-apps.

[27:58] R: Lots of predictions we can make there, which we’ll save for the newsletter, but something that’s already happening is that this is a sector that’s pretty eager to expand abroad. We’ve already dissected why we think that’s the case so we won’t repeat it here but there seems to be some business logic to their strategies. This is quite different from the nuttiness a few years back, where easy money made entrepreneurs believe they are invincible.

Y: Yeah, the “capital winter” this year really reinforced the fact that even if you are a high-flying unicorn, you can die pretty quickly. You just have to run out of money. So operational excellence and sound business fundamentals became top of mind by the end of 2019. I mean, if even food delivery giant Meituan could manage to turn a profit while locked in a war against Alibaba, really, everyone in a business that makes sense should be able to.

R: For us, we hope that this means China tech matures even further and that companies become more disciplined, instead of just throwing money at topline growth. Sure, we’ve seen more caution being thrown around in Silicon Valley as well, but with spectacular fails like WeWork not widely considered a Valley deal, I don’t think the fear is here nearly as much as it is in China. We are hopeful, anyway, that the capital winter leads to higher quality businesses, and more innovative business models, not less. What are your thoughts? Let us know!

[29:35] R: OK, that’s all for this week folks! Thanks for listening. We really enjoyed putting this together, and we are always open to any comments or suggestions. You can find us on twitter at thepandaily, at techbuzzchina, and my personal Twitter account is RUIMA.

Y: And my Twitter is spelled GINYGINY. Techbuzz China by Pandaily is powered by the Sinica Podcast Network on SupChina. Pandaily.com is an English language site that tells you “everything about China’s innovation.” Our producers are Caiwei Chen and Kaiser Kuo. Thank you for listening!