WEBVTT - How Chao Bet $500 Million on Himself—and Got Even Richer 0:00:00.600 --> 0:00:03.120 Decrypted is brought to you by red hat, whose broad 0:00:03.160 --> 0:00:06.520 portfolio of open source technologies for the enterprise helps you 0:00:06.559 --> 0:00:08.760 get from where you are to where you want to be. 0:00:09.560 --> 0:00:12.880 Red Hat the open technology to help you realize your vision. 0:00:13.320 --> 0:00:16.079 Learn more at red hat dot com. Slash open Tech 0:00:21.360 --> 0:00:24.599 at four p m. On January nine, two thousand and fourteen, 0:00:25.079 --> 0:00:28.560 as New York shivered through a sub zero chill, Sena, 0:00:28.920 --> 0:00:31.800 a Chinese internet company, ended a day of trading on 0:00:31.840 --> 0:00:38.400 the NAS deck, down four point five percent. Initially, that 0:00:38.440 --> 0:00:41.680 didn't seem so bad. One of seen As subsidiaries, as 0:00:41.760 --> 0:00:46.360 social messaging service called wheep Or, was actually growing quite rapidly, 0:00:46.760 --> 0:00:49.440 and seen as ches had recently hit a six month high. 0:00:50.120 --> 0:00:54.440 Nobody predicted the horror to come over the next fifteen months. 0:00:54.640 --> 0:00:58.080 Seen As stock nose dived. At one point, Ches fell 0:00:58.200 --> 0:01:01.840 sixty two percent to just thirty dollars apiece. The company 0:01:01.880 --> 0:01:05.039 lost more than half of its value. Around this time, 0:01:05.240 --> 0:01:08.480 the Chinese government was clamping down on social networks and 0:01:08.560 --> 0:01:12.880 investors were selling Chinese tech stocks. Investors were worried about 0:01:12.880 --> 0:01:15.880 an overall slowdown in the Chinese economy, and a new 0:01:15.920 --> 0:01:19.560 messaging service called which Hat was taking the market by storm. 0:01:19.600 --> 0:01:22.440 Here's how Charles Chow, the chairman, have seen and remembers it. 0:01:23.000 --> 0:01:28.120 And of course you feel disappointed that your fear set 0:01:28.160 --> 0:01:30.240 a little bit, but the necessary reality he had to 0:01:30.280 --> 0:01:33.440 deal with it. You have to deal with it well. 0:01:33.800 --> 0:01:37.400 Charles certainly dealt with it. In fact, he put everything 0:01:37.440 --> 0:01:39.640 on the line. He took out a loan for a 0:01:39.720 --> 0:01:43.120 quarter billion dollars and he combined that with almost everything 0:01:43.120 --> 0:01:46.040 he had, putting much of his personal wealth at stake. 0:01:46.800 --> 0:01:49.520 With that money, he bought up nearly half a billion 0:01:49.560 --> 0:01:52.280 dollars have seen as shares right as their price was 0:01:52.360 --> 0:01:56.280 hitting rock bottom, and he engineered a pretty remarkable turnaround 0:01:56.360 --> 0:01:59.800 for his company. Today, Charles Chow is on track to 0:01:59.800 --> 0:02:15.200 be come one of China's newest billionaires. Hi, I'm Brad 0:02:15.280 --> 0:02:19.160 Stone and I'm David Rambling and this week I'm decrypted. 0:02:19.320 --> 0:02:23.400 Will hear China's biggest technology comeback story direct from Weibo 0:02:23.600 --> 0:02:27.240 CEO Charles Chow, man who pulled it off. Will also 0:02:27.280 --> 0:02:30.160 look at plans we boll has her internet video streaming 0:02:30.360 --> 0:02:33.399 and the online finance sector, and whether it holds any 0:02:33.480 --> 0:02:37.480 lessons to Twitter, us social messaging platform, which is struggling 0:02:37.520 --> 0:02:41.000 to turn a profit. It's difficult to understate the popularity 0:02:41.000 --> 0:02:43.880 of Weibo and China, a place where Internet giants like 0:02:43.960 --> 0:02:47.640 Facebook and Twitter are literally non existent, and yet despite 0:02:47.639 --> 0:02:51.160 its position of strength and it's incredible stuff market rebound, 0:02:51.639 --> 0:02:54.520 there's still big questions about where the we' boll can 0:02:54.600 --> 0:02:58.240 keep its growth story going and for how long stay 0:02:58.280 --> 0:03:10.000 with us. So we just compared way abou to Twitter. 0:03:10.520 --> 0:03:12.600 That may be a good comparison in terms of what 0:03:12.639 --> 0:03:16.440 the product does, but in reality Weibo is much more 0:03:16.440 --> 0:03:19.840 popular in China than Twitter is in the US. That's right. 0:03:19.919 --> 0:03:23.120 Wey boar uses are concentrated in China, where three and 0:03:23.200 --> 0:03:26.600 forty million people use the app at least once a month, 0:03:27.360 --> 0:03:29.800 but Twitter, which is used all over the world, has 0:03:30.000 --> 0:03:34.320 a slightly smaller user base. And Charles webo ceo David 0:03:34.440 --> 0:03:36.280 how did you meet him? Well, he's a member of 0:03:36.320 --> 0:03:40.280 the China Entrepreneurs Club, which is a sort of billionaires playground. 0:03:40.920 --> 0:03:43.640 Every year on Earth Day they hold what's called the 0:03:43.720 --> 0:03:46.880 China Green Company Summit, where members like Charles and Jack 0:03:46.960 --> 0:03:50.240 mar who's the billionaire who co founded the online retailer 0:03:50.280 --> 0:03:53.120 Ali Baba, they get together and they talk about pretty 0:03:53.200 --> 0:03:59.040 much anything except for green issues. I'm at Childs and 0:03:59.120 --> 0:04:01.760 the tallest tower of the exhibition complex and song So 0:04:02.120 --> 0:04:04.880 the city hosting the summit this year near the top 0:04:04.920 --> 0:04:08.320 of the tower as an Australian steakhouse known simply as 0:04:08.320 --> 0:04:12.040 the Grill. What's Charles like in person? The word I'd 0:04:12.120 --> 0:04:16.080 use is measured. Despite being a former reporter, Charles is 0:04:16.120 --> 0:04:19.880 incredibly media shy. He does less than three interviews a year, 0:04:20.160 --> 0:04:22.039 and I've been chasing him for almost a year just 0:04:22.080 --> 0:04:25.039 to line up this chat. Once you set him down, though, 0:04:25.080 --> 0:04:27.960 he's quite polite and generous with this time, but he 0:04:28.000 --> 0:04:30.560 talks as though he could just stand up at any moment. 0:04:30.920 --> 0:04:34.599 It's possibly a holder from his days as an amateur boxer. Wow. 0:04:34.680 --> 0:04:37.840 So a former reporter and an amateur boxer. So if 0:04:37.839 --> 0:04:40.440 you're an American investor, it's it sounds like there's plenty 0:04:40.440 --> 0:04:43.200 of to like about Charles. He graduated from two U 0:04:43.279 --> 0:04:47.040 s universities, worked as an auditor at Price Waterhouse Cooper's, 0:04:47.200 --> 0:04:49.520 and he's a true veteran of the industry. He's been 0:04:49.560 --> 0:04:52.800 at Sena since nine, when a friend convinced him to 0:04:52.880 --> 0:04:58.159 join the finance team. I have been experienced older major 0:04:58.360 --> 0:05:03.719 I think periods up internet market in China. And I've 0:05:03.720 --> 0:05:06.760 been with this company for eighteen years already. Yeah, so 0:05:06.800 --> 0:05:09.760 it's a long time back. Then Sina was like an 0:05:09.760 --> 0:05:12.679 early Yahoo, what we used to call an Internet portal. 0:05:13.120 --> 0:05:15.720 You went there for hyperlinks to interesting websites and to 0:05:15.760 --> 0:05:18.760 look up the news. Also, like Yahoo, it had a 0:05:18.800 --> 0:05:22.040 big profile in China during those PC heavy early years. 0:05:22.400 --> 0:05:25.360 Charles arrived at Sena just as the company was preparing 0:05:25.400 --> 0:05:28.520 for its I p O. And that's the reason joint company. 0:05:28.600 --> 0:05:31.080 They need somebody whould help to do the I p 0:05:31.200 --> 0:05:35.240 O from professional saying. It was a career defining move 0:05:35.360 --> 0:05:39.479 for Charles. Sina went public in April two thousand and six. 0:05:39.560 --> 0:05:43.159 Years later, Charles took over a CEO. As a young 0:05:43.240 --> 0:05:46.720 public company, Sena suffered a few setbacks. It had tried 0:05:46.760 --> 0:05:49.600 to launch an auctions business with Yahoo in two thousand 0:05:49.600 --> 0:05:52.679 and four, but the online retailer Ali Baba was growing 0:05:52.720 --> 0:05:55.320 so fast that competing efforts really got crowded out by 0:05:55.360 --> 0:05:59.880 the market. Then Sena branched into search engines, only to 0:06:00.000 --> 0:06:03.640 it beaten by bay Do. Incidentally, Sina wasn't the only 0:06:03.680 --> 0:06:06.960 loser in search. Google tried to establish itself in China, 0:06:07.000 --> 0:06:09.360 but pulled out in two thousand ten before getting blocked 0:06:09.360 --> 0:06:12.360 by the Chinese government, effectively leaving bai Do with a 0:06:12.440 --> 0:06:15.320 monopoly in the search space. Then in two thousand nine, 0:06:15.600 --> 0:06:19.080 three years after Twitter first launched, Sina created we Bow. 0:06:19.520 --> 0:06:22.359 Twitter stint in China didn't last long either. In the 0:06:22.400 --> 0:06:25.039 same year that we Will launched two thousand and nine, 0:06:25.440 --> 0:06:28.159 the Chinese government blocked Twitter because it refused to go 0:06:28.200 --> 0:06:32.240 along with censorship guidelines. It left we bore an open market, 0:06:32.320 --> 0:06:34.880 although Childs will tell you that we Will also had 0:06:35.000 --> 0:06:38.600 a better product, like for example, which is much better 0:06:39.200 --> 0:06:42.440 in many ways on Facebook, right, And I think I'll 0:06:42.480 --> 0:06:45.880 product is much better than Twitter, and I think it 0:06:46.160 --> 0:06:50.839 fits local market much better, and so that's the difference. 0:06:55.960 --> 0:06:59.479 Initially things went fairly well for we Bow. Fourteen months 0:06:59.520 --> 0:07:03.640 after waunching, we both had fifteen million registered users. It 0:07:03.720 --> 0:07:06.960 took three years to hit that milestone. By fall of 0:07:06.960 --> 0:07:09.320 two thousand and eleven, it had two hundred and twenty 0:07:09.360 --> 0:07:12.600 seven million uses, and this became four hundred and twenty 0:07:12.600 --> 0:07:15.760 four million just a year later. But by two thousand 0:07:15.760 --> 0:07:19.920 and fourteen things were going awrve. What has really been 0:07:19.960 --> 0:07:25.720 an unprecedented widespread public protests from Alexandrians. The Arab spring 0:07:25.800 --> 0:07:29.480 was taking off, galvanized by social networks like Twitter. Margaret, 0:07:29.520 --> 0:07:31.520 we heard this again and again. They wanted to make 0:07:31.600 --> 0:07:34.880 Tunisia happen here, and a big question was the Chinese 0:07:34.880 --> 0:07:38.880 government facing its own sort of Jasmine revolution. Online was 0:07:38.920 --> 0:07:42.160 prompted to track down as well, and there were economic 0:07:42.200 --> 0:07:45.840 worries at home. China's gross domestic product growth was starting 0:07:45.840 --> 0:07:48.640 to slump to levels not seen since the nineteen nineties, 0:07:48.800 --> 0:07:52.240 and tech companies, even Mighty Ali Baba, we're seeing their 0:07:52.240 --> 0:07:55.840 share prices falter. But the biggest problem was actually we 0:07:56.080 --> 0:08:02.320 Chat has been going through some difficulties in the challenging market, 0:08:02.480 --> 0:08:08.680 especially with ours. Say that they that the introduction of 0:08:09.200 --> 0:08:12.120 we Chat, I mean that has a big impact on 0:08:12.240 --> 0:08:16.080 the usage and under gross of way board. We Chat 0:08:16.160 --> 0:08:18.680 started out as the WhatsApp of China, but it has 0:08:18.760 --> 0:08:21.920 quickly become the Swiss Army Knife of apps in the 0:08:21.960 --> 0:08:24.360 sense that you can do so many more things than 0:08:24.440 --> 0:08:28.440 just messaging inside this one app. Perhaps because of that, 0:08:28.560 --> 0:08:31.920 we Chat has spread through China like wildfire. Today it's 0:08:31.960 --> 0:08:35.760 the undisputed king of the country social messaging market. We 0:08:35.920 --> 0:08:40.760 Chad's launched coincided with China's seismic shift to mobile. By contrast, 0:08:40.880 --> 0:08:44.280 seen it was more oriented towards desktop browsers. And also 0:08:44.400 --> 0:08:46.560 we've we were starting to see its growth rate slow down. 0:08:47.160 --> 0:08:50.640 It's a significant impacted gross rate of way board and 0:08:50.679 --> 0:08:54.400 also the mentality and the momentum how I say, we 0:08:54.600 --> 0:08:58.839 boss growths. The combination of mobile we chat and the 0:08:58.960 --> 0:09:02.320 slowing Chinese on we came at the worst possible time 0:09:02.360 --> 0:09:06.200 for childs, you know, the internet product. If once you 0:09:06.240 --> 0:09:11.240 have lost momentum, it's very hard to come back. You see, 0:09:11.280 --> 0:09:13.720 Charles was trying to spin off weep Or from Sina 0:09:13.960 --> 0:09:17.400 and floated on the NASDAC as a separate company. Charles 0:09:17.440 --> 0:09:20.160 was trying to reduce risk because Sena had pumped huge 0:09:20.160 --> 0:09:24.040 amounts of money into making wee boar success. Charles was 0:09:24.120 --> 0:09:26.920 betting that if you could just convince rural Chinese and 0:09:26.960 --> 0:09:30.640 people living in provincial cities and industrial towns to start 0:09:30.720 --> 0:09:33.760 using webor, he'd be able to unlock a huge new 0:09:33.800 --> 0:09:37.439 customer base for his company. But now the numbers were 0:09:37.440 --> 0:09:40.079 trending the wrong way. If the attempt to I p 0:09:40.240 --> 0:09:42.600 O had come a year or even a few months earlier, 0:09:42.760 --> 0:09:45.480 it may have gone off without a hitch. I would 0:09:45.480 --> 0:09:48.079 say that's major reasons for people had a pret d 0:09:48.960 --> 0:09:52.760 pessimistic view about Webor and for that fact, I mean 0:09:52.800 --> 0:09:56.960 because we Bo was the major gross area for Sena. 0:09:57.200 --> 0:10:02.280 That also em passiness start price investors started hitting the 0:10:02.360 --> 0:10:07.240 cell button on Sena shares. Charles City was kind of 0:10:07.320 --> 0:10:10.880 blindsided by the reason why foreign investors were feeling so 0:10:11.000 --> 0:10:14.200 nervous about his stock. Usually they have a Chinese anrist. 0:10:15.400 --> 0:10:19.400 They were earlier users and the strong users, very heavy users, 0:10:19.400 --> 0:10:21.160 and way by saying I alway don't use that anymore. 0:10:22.240 --> 0:10:25.199 But actually they wanted to present a part of elite users. 0:10:26.000 --> 0:10:27.880 I have to say, David, I've also heard from my 0:10:28.000 --> 0:10:30.920 Chinese friends and colleagues too that they're migrating from way 0:10:30.920 --> 0:10:33.840 Aboard to whet chat. So that's why investors didn't want 0:10:33.840 --> 0:10:37.480 to buy seen A stock. Yeah. Put simply, yes, a 0:10:37.520 --> 0:10:40.080 lot of investors were very excited about China, but they 0:10:40.120 --> 0:10:43.480 simply didn't have any local no. How So when deals 0:10:43.520 --> 0:10:45.840 came up, they did what most of us would probably 0:10:45.840 --> 0:10:49.000 do if we're planning a holiday. They asked a colleague 0:10:49.000 --> 0:10:51.040 with a connection to China. I mean, they did not 0:10:51.760 --> 0:10:54.400 really know that. You know, Okay, these people actually more 0:10:54.559 --> 0:10:57.680 using more weak chat now, but we actually have a 0:10:57.720 --> 0:11:02.360 lot more new users not from group and she from 0:11:02.440 --> 0:11:07.600 lautier cities, younger generations, and so that's the market. They 0:11:07.600 --> 0:11:12.439 did not understand how that's Charles's rural strategy again, lower 0:11:12.520 --> 0:11:16.760 tier cities, younger generations. Basically, he's saying that he was 0:11:16.840 --> 0:11:19.760 sure his product would still grow. It's just that financial 0:11:19.760 --> 0:11:23.000 analysts went picking up on that in the highly educated, 0:11:23.320 --> 0:11:26.800 urban social circles. The result, to hear Charles tell it, 0:11:26.960 --> 0:11:29.960 was absolutely brutal. The rest of its story is coming 0:11:30.040 --> 0:11:38.960 up right after this word from our sponsor. You know 0:11:39.080 --> 0:11:41.679 where you want to be. Red hat has the broad 0:11:41.760 --> 0:11:45.400 portfolio of open source technologies to get you there. Meet 0:11:45.480 --> 0:11:49.120 your evolving business challenges head on with secure solutions for 0:11:49.160 --> 0:11:54.520 the enterprise, including Linux platforms and containers, hybrid cloud infrastructure, 0:11:54.800 --> 0:12:00.200 application integration and development, operations management, and beyond the at 0:12:00.240 --> 0:12:03.000 red hat dot com slash open tech to learn more, 0:12:03.440 --> 0:12:16.840 red Hat the open technology to help you realize your vision. Okay, 0:12:16.840 --> 0:12:19.000 we're back and things are about to get rocky for 0:12:19.080 --> 0:12:23.280 we both CEO Charles Chow. Chinese internet users are switching 0:12:23.320 --> 0:12:26.880 to mobile a dangerous new competitor. Wee Chat is taking off, 0:12:27.240 --> 0:12:29.880 and the national economy as a whole is slowing down. 0:12:30.360 --> 0:12:32.920 Sena shares are starting to take a beating in the markets, 0:12:33.280 --> 0:12:35.560 and Charles is trying to take his company public at 0:12:35.600 --> 0:12:39.040 what turns out to be the worst possible time. I mean, 0:12:39.080 --> 0:12:44.840 if you're looking our presentation for i PO three years ago, 0:12:45.760 --> 0:12:49.600 we out land our state intense. Nobody believed does okay, 0:12:49.640 --> 0:12:53.079 it was totally disaster. I mean intense to I p 0:12:53.320 --> 0:12:57.760 O show, I can tell you I never experienced anything 0:12:57.800 --> 0:13:05.160 like that. Weibo eventually listed with an initial share price 0:13:05.240 --> 0:13:07.440 that was at the bottom of the proposed range at 0:13:07.480 --> 0:13:10.839 seventeen dollars a share. The I p O raised half 0:13:10.880 --> 0:13:13.240 of what it was supposed to. Instead of five hundred 0:13:13.280 --> 0:13:16.120 million dollars, the float raised only two hundred and eighty 0:13:16.200 --> 0:13:20.600 six million dollars. To make matters worse, Sena became unprofitable 0:13:20.880 --> 0:13:23.600 as users shifted their attention to we chat and now 0:13:23.679 --> 0:13:27.760 the platforms like video streaming services. Right China went through 0:13:27.760 --> 0:13:31.080 a really dramatic shift to mobile. Many people never had 0:13:31.160 --> 0:13:33.920 desktop computers in the first place, and had been accessing 0:13:33.920 --> 0:13:37.679 the web via Internet cafes. Now the smartphone became their 0:13:37.720 --> 0:13:41.400 first personal internet device, and Sina started to rely more 0:13:41.400 --> 0:13:44.640 and more heavily on Weibo to generate revenue. It was 0:13:44.679 --> 0:13:47.400 the only part of Sina's business that really tapped into mobile. 0:13:47.960 --> 0:13:50.480 Charles did try a number of other experiments to get 0:13:50.520 --> 0:13:53.240 growth going again. I mean, he partnered with Ali Bomber 0:13:53.320 --> 0:13:56.439 and a digital wallet that that didn't work out. I'm 0:13:56.440 --> 0:13:58.960 trying to imagine the stress Charles was under at the time. 0:13:59.360 --> 0:14:02.200 By the end of two dozen fourteen, after a lackluster 0:14:02.280 --> 0:14:06.200 weebo ip O, equity analysts were downgrading the reading some Sina. 0:14:06.760 --> 0:14:10.040 Speculation was actually building that a big rival like Ali 0:14:10.080 --> 0:14:13.199 Baba would actually come along and buy out the business, 0:14:13.280 --> 0:14:15.439 and that could lead to Charles basically getting kicked to 0:14:15.480 --> 0:14:17.840 the curb. But it was at the height of this 0:14:17.920 --> 0:14:27.280 turmoil that Childs did something really remarkable. Child says he 0:14:27.320 --> 0:14:30.720 always felt the market didn't understand how good his companies were. 0:14:31.520 --> 0:14:34.360 Investors were treating Sena as if we Bore was the 0:14:34.440 --> 0:14:38.000 only business in its portfolio with any value. So Charles 0:14:38.040 --> 0:14:41.760 made the bet of a lifetime. He scrounged, he saved. 0:14:42.120 --> 0:14:44.120 He went to Credit Sweet to take out a two 0:14:44.240 --> 0:14:47.600 hundred and thirty million dollar loan. That's nearly a quarter 0:14:47.640 --> 0:14:51.640 of a billion dollars. Then in June two thousand and fifteen, 0:14:51.920 --> 0:14:54.960 Senior announced to the market that Charles had bought four 0:14:55.040 --> 0:14:58.640 hundred and fifty six million dollars worth of Senor shares 0:14:59.000 --> 0:15:01.840 right when it's stopped. Price was near rock bottom. This 0:15:02.000 --> 0:15:04.880 new stern traders in the financial world who are following 0:15:04.880 --> 0:15:08.280 the company. One of those people was Brendan A. Hearne, 0:15:08.600 --> 0:15:12.040 the chief investment officer at Crane Fund Advisors living in 0:15:12.080 --> 0:15:16.720 New York. Imagine him going into see his bankers and 0:15:16.800 --> 0:15:20.360 saying he wants to borrow several hundred million dollars in 0:15:20.440 --> 0:15:22.920 order to invest in his company. He's he's become so 0:15:23.040 --> 0:15:27.640 frustrated with the lack of market recognition that the true 0:15:27.760 --> 0:15:31.200 value of of sena know. It's almost like a poker 0:15:31.240 --> 0:15:34.240 player where he's pushing the chips out into the center 0:15:34.240 --> 0:15:38.160 of the table. In other words, Charles was going all in. 0:15:39.840 --> 0:15:42.800 Here's why Charles's decision to buy so much company stock 0:15:42.880 --> 0:15:44.920 is such a big deal. Apart from the fact that 0:15:45.000 --> 0:15:48.520 Charles was taking quite a massive personal risk by taking 0:15:48.520 --> 0:15:50.800 on all the debt and putting his entire fortunate stake. 0:15:51.240 --> 0:15:55.040 It gave Charles a lot more influence over the company, 0:15:55.480 --> 0:15:59.520 and then I sa big shareholder. I'm more I was 0:15:59.520 --> 0:16:04.400 sitting position to making to make long term decisions for 0:16:04.440 --> 0:16:08.520 the company. And that's the difference. I think. If you're 0:16:08.560 --> 0:16:12.760 not a pictureholder, part of you are not your interests 0:16:12.800 --> 0:16:16.120 not related to the company for long run. For CEO 0:16:16.240 --> 0:16:20.280 puppet company, you tend to make short decisions based on 0:16:20.440 --> 0:16:25.040 the profitability, based on stop price, based on the people's expectation. 0:16:26.080 --> 0:16:31.440 But for our business, if you cannot bet on something 0:16:31.600 --> 0:16:36.440 big for the future, you don't have future. Yeah, the 0:16:36.560 --> 0:16:39.440 people like Brendan the trader in New York, Charles's move 0:16:39.520 --> 0:16:41.480 made him sit up and pay attention to what was 0:16:41.560 --> 0:16:45.600 happening at CENA. When when have you seen a CEO 0:16:46.320 --> 0:16:51.120 put such a large bet monetarily m on on on 0:16:51.200 --> 0:16:53.800 his on their company. I think that's, you know, not 0:16:53.800 --> 0:16:58.120 not many comparisons come to mind. It was just such 0:16:58.160 --> 0:17:01.960 an unusually bold thing to do. For his part, Child insists, 0:17:02.040 --> 0:17:04.440 it's not a gamble when you're sure of the odds. 0:17:05.240 --> 0:17:08.000 I mean, my experience has also been quite unique in 0:17:08.040 --> 0:17:10.760 a way that not only I become that that that 0:17:10.880 --> 0:17:13.000 that's U and Cherm of the company. But also I've 0:17:13.000 --> 0:17:15.920 become an ages shareholder of that company, and a part 0:17:15.960 --> 0:17:19.960 of because I love the company, part of because I 0:17:20.080 --> 0:17:30.720 believe in the company's future. Back at the steakhouse, Child 0:17:30.800 --> 0:17:33.560 and I had a great view of Junctrol's hazy skyline. 0:17:34.040 --> 0:17:36.920 It's one of those countless Chinese cities that people from 0:17:36.920 --> 0:17:40.200 outside the country would really struggle to name, and yet 0:17:40.240 --> 0:17:44.359 it has a population around ten million people. Cities like 0:17:44.440 --> 0:17:48.040 this were essential to Charles plan. Yes, the idea was 0:17:48.080 --> 0:17:51.800 to go big on provincial cities like Jountrol. People had 0:17:51.840 --> 0:17:55.439 long ignored the slice of the market for very good reasons. Actually, 0:17:55.680 --> 0:17:58.520 salaries were very low and people frankly didn't have that 0:17:58.640 --> 0:18:06.199 much extra cash to spend. So David, how exactly does 0:18:06.280 --> 0:18:09.520 we bow make money? Essentially in much the same way 0:18:09.520 --> 0:18:13.240 that Twitter does, mostly through targeted online ads. From the 0:18:13.320 --> 0:18:16.480 moment you download the app, you're being tracked as an individual, 0:18:16.760 --> 0:18:19.320 and we Bore serves up ads based on the profile 0:18:19.359 --> 0:18:21.680 they collect about you. You know what your interests are, 0:18:21.760 --> 0:18:24.960 your gender, and your tasting clothes, whether you'd potentially be 0:18:25.040 --> 0:18:27.880 a buyer of designer brands, and this is why many 0:18:27.960 --> 0:18:31.280 Chinese companies have ignored lower tier cities, right, Well, yeah, 0:18:31.480 --> 0:18:34.439 the average Chinese person already makes just a fraction of 0:18:34.480 --> 0:18:37.440 your average American or European and the Gulf just gets 0:18:37.440 --> 0:18:40.240 even wider as you move away from the biggest cities 0:18:40.280 --> 0:18:44.399 like Beijing or Shanghai. But we bore pushed on and 0:18:44.440 --> 0:18:47.200 its smartest move is actually getting we bore pre installed 0:18:47.240 --> 0:18:50.480 on low cost smartphones. I see. So suddenly you have 0:18:50.560 --> 0:18:53.000 hundreds of millions of new smartphone users who have no 0:18:53.080 --> 0:18:55.399 idea what to do with them. They open their phone 0:18:55.440 --> 0:18:58.240 and what do you know, there's we bow Yeah, that's right. 0:18:58.480 --> 0:19:01.360 Boredom ultimately was one of the biggest drivers of weyboards 0:19:01.359 --> 0:19:05.080 adoption out in these regional areas. You know, there's a 0:19:05.080 --> 0:19:07.359 lot of Tier four cities that don't have shopping models 0:19:07.440 --> 0:19:10.080 or movie theaters. Right, So what do people do when 0:19:10.119 --> 0:19:12.720 they get off work? This is Kirk Bowdrey and analysts 0:19:12.720 --> 0:19:16.280 who track Scena for New Street Research. He's based in Singapore. 0:19:16.760 --> 0:19:20.800 It's actually, you know, engaging on on you know, social 0:19:20.800 --> 0:19:28.000 platforms has become a very popular UM activity and monetization 0:19:28.080 --> 0:19:30.320 on the back of that actually shouldn't be too surprising, 0:19:30.440 --> 0:19:36.480 especially um you know, if if you're brand advertising, David 0:19:36.560 --> 0:19:39.920 was we Bow alone and targeting these regional areas. Other 0:19:40.000 --> 0:19:43.919 services tried the same strategy, but Charles understood the power 0:19:44.000 --> 0:19:47.119 of media. Sites like Twitter and we board depend on 0:19:47.320 --> 0:19:50.359 user generated content. But they soon learned that while big 0:19:50.400 --> 0:19:53.320 city dwellers like the sound of their own tweets, uses 0:19:53.359 --> 0:19:56.800 out in the provincial cities they prefer to watch, So 0:19:56.880 --> 0:19:59.880 we Bore targeted local TV stations and signed up journalists 0:20:00.119 --> 0:20:03.280 around the country. In the first half of two thousand 0:20:03.280 --> 0:20:06.400 and fifteen, we Bore apartment with a hundred different TV 0:20:06.560 --> 0:20:10.200 shows and eighty six movies. It worked directly with TV 0:20:10.280 --> 0:20:13.840 shows like The Voice of China to boost interaction. Even 0:20:13.880 --> 0:20:17.760 police departments were signing up, producing low cost content that 0:20:17.840 --> 0:20:22.639 was relevant to the new rule users. Charles realized that 0:20:22.760 --> 0:20:25.520 some users just had no idea how to use the app, 0:20:25.600 --> 0:20:28.159 so it also launched a service that offers news and 0:20:28.200 --> 0:20:30.760 feeds based on your interests. The more you use it, 0:20:30.840 --> 0:20:33.280 the better it gets guessing what you want to see. 0:20:33.760 --> 0:20:37.040 All the while, China's mobile internet speeds were improving, so 0:20:37.119 --> 0:20:40.320 we Bo integrated pictures and video into its feed faster 0:20:40.359 --> 0:20:45.600 than Twitter. Charles turnaround strategy was working the monthly active 0:20:45.720 --> 0:20:49.199 US account has been up by at least for quarter 0:20:49.359 --> 0:20:51.960 after quarter, but did it actually make any money. We 0:20:52.119 --> 0:20:56.119 board did manage to win over advertisers. Revenue growth soon recovered, 0:20:56.480 --> 0:20:59.320 and so did profits. For one thing, expenses are also 0:20:59.400 --> 0:21:01.600 lower outs out of the main city, so it turned 0:21:01.640 --> 0:21:04.920 out that many Chinese customers had more disposable income than 0:21:05.080 --> 0:21:13.400 people had initially expected, but not everyone. As a fan. 0:21:14.119 --> 0:21:16.320 To survive in this market, we boar had to clap 0:21:16.359 --> 0:21:18.959 down hard on any comments or posts seemed to be 0:21:19.200 --> 0:21:22.520 against the wishes of the government. In Beijing, thousands of 0:21:22.600 --> 0:21:26.560 people are employed just to delete posts on sensitive topics. 0:21:27.040 --> 0:21:29.240 Users are always trying to game the system and get 0:21:29.280 --> 0:21:33.640 around censorship rules. The Tenement Square demonstrations happened on June four, 0:21:33.760 --> 0:21:36.040 which is a blocked search term on we bow, so 0:21:36.119 --> 0:21:39.359 people started using May thirty five instead, and this worked 0:21:39.359 --> 0:21:42.760 for a while until the sensors caught on. More recently, 0:21:42.800 --> 0:21:46.480 things have become much more serious. The Chinese government pointedly 0:21:46.560 --> 0:21:49.239 threatened people who posted defamatory room is on we bol 0:21:49.320 --> 0:21:52.840 with jail time, but Chat was unapologetic and even points 0:21:52.880 --> 0:21:55.439 to seen his ability to adapt to the government's wishes 0:21:55.680 --> 0:21:58.200 as a key reason it will thrive as other players 0:21:58.240 --> 0:22:02.840 might fall. China is different. You had to put things 0:22:02.920 --> 0:22:06.000 in Chinese perspective. But look at I was a generous before, 0:22:06.200 --> 0:22:10.200 like like in eighties in China at that time, there 0:22:10.240 --> 0:22:13.520 was nothing right. There was no media. It was only 0:22:13.600 --> 0:22:20.040 like propaganda right, even with censorship on weyboard. Ordinary people 0:22:20.240 --> 0:22:23.600 can complain about some things that may seem small to 0:22:23.720 --> 0:22:26.840 Western audience, but in China it's actually really big deal, 0:22:27.240 --> 0:22:30.600 and Charles is quite proud of that. I think it's 0:22:30.640 --> 0:22:36.960 a it's a huge sense of success for us to 0:22:37.440 --> 0:22:41.280 say we have this platform that allow people to freely 0:22:41.320 --> 0:22:45.840 talk and to discuss and to make the society much 0:22:45.840 --> 0:22:52.280 more transparent. Basically, it's a huge I think progress. For now, 0:22:52.480 --> 0:22:55.080 Cinia gets to take a moment to enjoy its success 0:22:55.119 --> 0:22:58.040 against the odds. At the very least, it's proven to 0:22:58.080 --> 0:23:02.200 be more than just a Twitter knockoff. Twitter would love 0:23:02.280 --> 0:23:05.120 to be wi Bo, not the other way around. Here's 0:23:05.119 --> 0:23:08.359 bending again. You're going and look at Wibo for the 0:23:08.400 --> 0:23:12.760 first time, and this is not Twitter. This is this 0:23:12.840 --> 0:23:20.080 is much further along. And the utilization video technology uh 0:23:20.400 --> 0:23:26.400 mobile is huge, and then the monetization of ad revenue. 0:23:27.920 --> 0:23:30.639 We Boars investment in video is a great case in point. 0:23:30.960 --> 0:23:34.320 It owns a substantial stake in Yeesha Technology, which is 0:23:34.359 --> 0:23:37.199 valued at three billion dollars and has a service for 0:23:37.280 --> 0:23:40.960 short web videos called meal Pack. But unlike Vine, which 0:23:40.960 --> 0:23:45.360 had fifteen second videos, these companies aren't religious about enforcing 0:23:45.400 --> 0:23:48.840 the short lengths, and so they both work symbiotically to 0:23:49.000 --> 0:23:56.520 build users. So Churnles has managed to pull off this 0:23:56.640 --> 0:24:00.280 incredibly daring turnaround. We both plans to keep going burnt 0:24:00.280 --> 0:24:03.359 into increasingly rural parts of China, the fourth and fifth 0:24:03.440 --> 0:24:06.959 tier cities. But will this be enough to keep growing 0:24:06.960 --> 0:24:10.000 the company, particularly as we chat becomes more and more dominant. 0:24:11.760 --> 0:24:15.720 But fundamentally the answer is no. China's smartphone market is 0:24:15.760 --> 0:24:18.600 becoming mature and it needs to find new ways to grow. 0:24:19.520 --> 0:24:22.240 We Boor has thought about offering a Netflix style streaming 0:24:22.320 --> 0:24:24.679 video service, but it really got bullied out of the 0:24:24.720 --> 0:24:27.520 market years ago by bigger players like bay Do and 0:24:27.560 --> 0:24:30.800 Ali Baba with bigger budgets. So instead it's banking on 0:24:30.880 --> 0:24:34.280 things like live streaming and short video services to generate 0:24:34.320 --> 0:24:38.680 more traffic. It's also getting into financial services like online loans. 0:24:39.200 --> 0:24:42.400 That's right, Charles is a little reticent on the details 0:24:42.440 --> 0:24:45.199 in light of fierce competition, and the program is not 0:24:45.359 --> 0:24:48.359 going as quickly as Scena would like. You know, licenses 0:24:48.400 --> 0:24:51.159 are taking longer than expected to get but there's a 0:24:51.200 --> 0:24:55.640 separate subsidiary company dedicated to making it work. David. That's 0:24:55.640 --> 0:24:58.240