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• Will Chinese Internet open up?

• Innovations from China - a tale of two podcast apps

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This week is the reader's question time, Wiktoria at @vikivojcik asked: 

Do you think China will open its internet more with time, or will it be a closed ecosystem with some adaptations?

While I think control and censorship played a part in the creation of the great Chinese firewall, my interpretation of why it was created is based on trade protectionism. Alexander Hamilton would agree with me because he invented it. The infant industry argument was first fully articulated by the first US Secretary of the Treasury in his 1790 Report on Manufactures, where he said (quoting Wikipedia here): 'developing an industrial base in a country was impossible without protectionism because import duties are necessary to shelter domestic "infant industries" until they could achieve economies of scale'.* It's the policy equivalent of keeping your 10-year-old in school rather than sending them out to a factory to compete with grown-ups for a job. Western countries like the US, Germany, Britain as well as Korea, Japan and Taiwan all used some variant of protectionism on their way to riches before doing away with them once when their industries became more mature.

China has also been playing this game (sometimes more successfully than others), most recently with the solar panel industry. With internet businesses, the dynamics of zero distribution costs mean subsidies and tariffs make little difference. A drastic measure like a national firewall makes sense. If my interpretation is correct, then CCP will gradually open up the Chinese internet to allow them to face stronger competition once they’ve developed. I'm very intrigued by the recent experiment where the CCP allowed millions to access the western internet through the Tuber browser. Not to make another snowclone about crossing rivers and stones in Chinese policies, but I am hoping there'll be slow progress there.

Do you think that once Chinese internet companies start expanding more into the West, we will see a dramatic change in how "our" internet works?

A tale of two podcast apps

I had a tweet this week on the features of the Chinese podcast app Ximalaya.

Lillian Li @lillianmli

After listening to @a16z’s podcast on ‘The Present Future of Audio’ I got curious about Chinese podcast apps and went digging. A look at the cool features in the Ximalaya app. 🧵

October 17th 2020

22 Retweets125 Likes

Followers also suggested that I check out a new app called Xiaoyuzhou (小宇宙 or Small Universe). Taken together, I think these provide an illustration of where the Chinese consumer landscape has been and where it's going, and some potential implications for the Western internet.

I've written in the past about how I think China's tech companies have an 'owning the user' mentality:

"Relative to western consumer tech companies, who tend to focus on "serving a function" as their core mission, Chinese companies tend to focus on "owning the user" as their core mission (though the initial wedge into the consumer is always through a function - Meituan through food delivery, Ofo through bike-sharing, etc.). Owning the end-user and their attention is what led to the rise of the super apps ." - Bilibili deep-dive

"Companies think about what users are doing on their phones and what else they can do to get more of users' time." - Interview with Rui Ma

Ximalaya, an app launched in 2013, is a prime example where it tries to do all the things. In its sections, you can find not only audiobooks and podcasts but also financial products, a mini-game (where I feed a cat girl food, I can't even...why?) and e-commerce stores for things audio related and beyond.

Tech companies didn’t want users to leave the app for other functionalities. However every Chinese consumer app that got big thought and acted like this, so this design philosophy has gotten old. I don't want my bike lending app, my podcast app and my food delivery app to all sell me financial products. The market for super apps has reached saturation, long live the super apps.

Interactivity-enabled social

I believe another manifestation for 'owning the user' in Chinese consumer companies is through building communities and owning that social engagement (this move also lowers the CAC and increases user retention). We've seen examples of this with both Bilibili and Kuaishuo. Ximalaya has features that allow for interaction between users such as enabling them to make and send snippets of audio or to listen together.

There's also more interactivity between creators and users, including a comment section and the ability to reward creators on a per-episode basis with 'making a call'.

This trend becomes more apparent when we look at Xiaoyuzhou—released in March 2020 by the Jike Group. Xiaoyuzhou was trending on Weibo as soon as it was released since it required an invite code for new users. After the scarcity marketing died down, Xiaoyuzhou has become popular in China's tech circles for being a purist podcast app. There’s only three tabs, my recommendation, my feed and my profile. No additional add-ons (as of yet at least).

Each podcast episode is taken as its topic, and there is an enormous amount of discussion around them (on a timestamp basis sometimes). As each episode plays, you can also see where other users have hit the 'like' button. Similar to danmu, the additional layers of feedback becomes another form of content for the end-user. I now can listen to a podcast, find out the hot talking points and participate in the discussions straight away. I didn’t just access a podcast, I instantly accessed a community.

I believe this type of interactivity-enabled social will be coming to the west as well (SoundCloud already has these timestamp commentary features), more in the trend of 'Copy from China' that we’ve seen in recent years. Interesting, Ximalaya's western version Himalaya seems like a very vanilla podcast app by comparison. As mentioned in the audio essay by Matthew Ball, this is probably because western podcasts are all on RSS which restrict the western podcasts' base format (though Xiaoyuzhou is also on RSS, what’s your thoughts?).

Algorithm first and meritocracy of content

With both TikTok and Xiaoyuzhou, the algorithm is at the forefront of the user experience since it curates your content lane. Similar to how TikTok's algorithm suggests content to the user, Xiaoyuzhou's algorithm presents three new and different podcast episodes to the user a day. The algorithm would treat each piece of content on their merit, decoupled from the following of its creators or views of their prior creations, and then promoted to the relevant users.

As Eugene Wei puts it well in "Seeing like an algorithm":

"TikTok fascinates me because it is an example of a modern app whose design, whether by accident or, uhh, design, is optimized to feed its algorithm as much useful signal as possible. It is an exemplar of what I call algorithm-friendly design...When a product manager, designer, and engineer meet to design an app, the algorithm isn't in attendance. Yet its training needs must be represented."

Viewed through this lens, the interactivity elements in Xiaoyuzhou now takes on another purpose as additional training data for the algorithm. Did most listeners finish the episode? How many likes did it get? Who liked it, and how does that match with their listening history? How many listeners jumped straight to a section based on the timestamps in the show notes?

Can this form of product design come to the west? Of course. Though the dirty secret to algorithm first design is how much is spent on cleaning and labelling the data then hosting it in the cloud. With my VC hat on, I would worry about the margins for a consumer product.

Livestreaming everwhere

Ximalaya has a livestreaming function. Though in 2020, everything has a livestreaming function. As we move to higher levels of information transmission through the internet, livestreaming will become the default channel to do so. This is not new to the west, it’s just called Zoom calls there.

In China we’ve already seen video acquire contextual intention through their integration in shopping, entertainment, and education. The big thing will be figuring out the viable monetisation model and how to frictionless integrate the experience.

This is a long ramble to answer your question - are these dramatic changes? I don't think so. In a mature ecosystem like that of the West, it’s extremely hard to overturn the status quo overnight. TikTok did it because they were willing to spend Softbank’s billions on advertising, that’s not a strategy that’s open to most start-ups.

I call them what I think they are: innovations.

Appendix

*This approach also has backing from economic theory since free trade only works optimally under certain assumptions. When optimal conditions (such as information symmetry or perfect competition) are not met, the theory of second-best states that introducing additional imperfections (such as the deadweight loss from a tariff) could increase overall efficiency. I'm a development nerd, and I approve this message.

Reply to this email to let me know what you think and ask more reader questions. Or find me @lillianmli where I write about what didn't make it into the post throughout the week. Tell your friends about me and stay cool!