Under the leadership of an ambitious CEO, YY.com is quietly becoming one of the world’s largest and most innovative social networks.
Ross Slutsky | Atlanta GA
David Li might not be a household name in the West yet, but that may soon change. Li runs the massive social network YY.com, and has developed a business model that in some respects is more interesting than that of Facebook. Specifically, where Facebook currently relies on advertising for profit, YY derives revenues from a diverse combination of gaming, music sales and virtual currency transactions.
At a recent tech conference in Shanghai, Li explained, “Before, people did not think that the engagement segment of the market was big enough, but that’s because the technology wasn’t good enough. If YY can continue to improve, in the future you wouldn’t need to have a conference like this in person, where people have to come from all over the world to China to do it.” Speaking with moderator Frank You, Li continued: “You could do it in a cloud format and allow a lot more people to be engaged. The challenge is to provide this service to tens of thousands of people at the same time and still have the same high quality of voice delivery.”
For Mr. Li, redefining expectations is nothing new. Few could have anticipated that he would grow a simple gaming platform into a massive, multipurpose social portal used by karaoke singers, educators, and gamers alike. Today, YY boasts over 400 million registered users, and according to their latest SEC filing, recently reached a monthly average of 51.7 hours spend on the site for active users.
Implications for Telework
Unlike other social networks that mostly just connect users, Li says that YY wants to engage them. He envisions YY as a collective action platform that brings large groups of users together with an aim toward solving problems. For example, during the recent “Silicon Dragon” conference, Li highlighted YY’s potential as a telecommuting application by telling a story about a pharmaceutical company with three thousand salespeople who had to educate thirty thousand doctors about a new drug. Previously the company would have had to travel and host costly seminars, but YY’s sophisticated group messaging chat and video capacities enabled them to cut costs and educate the doctors online. Whether Li will attempt to expand YY’s telework capacities remains to be seen.
Plans for Expansion
As VOA previously reported, YY includes an innovative financial exchange system that enables virtual currency transactions unlike anything available in the West. Talented singers can earn up to $20,000 per month by live streaming performances and related events on the site.
However, YY is also taking on new areas. Their SEC filing includes plans for monetizing YY’s mobile platform by allowing users to purchase virtual items and to develop relationships with new networks of advertisers.
YY’s most ambitious and potentially game-changing plan involves broadcasting e-sports – enabling millions of Chinese gamers to watch competitive gaming tournaments at the same time. Professional gaming has widely been reported as a profitable market in South Korea (see video here and start at 6:45), but also has a considerable presence in China. Given that YY’s core infrastructure evolved from a gaming platform, YY’s managers have an intricate understanding of the Chinese gaming market and may be well positioned for the e-sports market.
If they succeed, YY could become an essential social gaming hub and garner major increases in active user time spent on the site. While Western pro gaming leagues such as Major League Gaming have taken advantage of streaming websites in the past, these leagues are tiny compared to the Asian gaming scene. If it works, YY’s sports broadcasting platform could become as valuable a cultural enterprise as something like the NFL is in the United States.
Seeking out Rich Uncle Pennybags
YY is now attempting a Western IPO with hopes of raising up to 97.5 million dollars. If all goes according to plan, shares will initially trade for between $10.50 and $12.50 on the NASDAQ under the symbol YY, with Morgan Stanley, Citi, and Deutsche Bank underwriting the deal. As promising as YY may seem, whether or not it will trade well on Western markets remains to be seen. According to Forbes, 13 Chinese companies that conducted IPOSin 2012; only two of them are currently trading above their initial offering prices.
Lessons for The West
Stock value uncertainties aside, YY is a promising social network that Facebook founder Mark Zuckerberg might want to take note of. In many respects, Facebook groups fail to truly encapsulate or enable what it means to be in a group. Public groups primarily serve as a means of publicizing various entities and often end up as little more than a public spamming forum. Private groups can sometimes enable cursory threads of conversation, but still aren’t conducive to deeper forms of engagement.
Although Facebook’s Skype integration happened over a year ago, Facebook’s group engagement capacities are still thin compared to Google’s “Hangouts.” What’s more, both Google+ and Facebook fail to impress when compared with YY’s group communication services. Although building out more sophisticated group communications capacities might not yield an instant return on investment, Western social networks may soon be forced to make a choice – either offer proper group functions or don’t offer them at all.