Kuaishou | Ex-Googler turns virtual gifts into a $61 billion business

The app Kuaishou, or Kwai, is arranged for a photograph on a smartphone

In China’s popular online-streaming industry, virtual gift-giving is big. You can send your favorite live performer anything from a rose for 5 yuan (80 cents) to a space rocket for 500 yuan.
The present is just a symbol, but the money is real – and that’s what’s made Kuaishou Technology so successful.
The ByteDance Ltd. rival has become the biggest live-streaming platform for virtual gifts, with more paying monthly users than any other in the world. The firm, which takes a cut of the tips fans give to performers, raised $5.4 billion in Hong Kong in the biggest internet initial public offering since Uber Technologies Inc. in 2019, terms for the deal obtained by Bloomberg show.
That’s poised to create at least four billionaires with a combined fortune valued at $15 billion, based on the ownership disclosed in Kuaishou’s prospectus. Co-founders Su Hua and Cheng Yixiao will each be worth more than $5.5 billion, according to the Bloomberg Billionaires Index.
Kuaishou, which means “fast hand,” is one of China’s biggest internet success stories of the past decade, part of a generation of startups that thrived with backing from Tencent Holdings Ltd. Along with TikTok parent ByteDance, the outfit pioneered the live-streaming and bite-sized video format that’s since been adopted around the world by the likes of Facebook Inc.
“The key resource of the internet is attention,” Su wrote in Kuaishou’s official biography in 2019. “It can be focused on large numbers of people like the sunlight, rather than a spotlight just on a certain group of people. That’s the simple logic behind Kuaishou.”
Su, a native of China’s central Hunan province, studied computer programming at the prestigious Tsinghua University before joining Google in Beijing in 2006. There, he earned about $23,000 annually, eight times the country’s average salary back then. While he said he was “extremely happy,” a stay in Silicon Valley inspired him to start his own business, according to Kuaishou’s biography.

The 38-year-old quit Google during the global financial crisis to start his own video-advertising venture, which didn’t come to fruition. After a short stint with Baidu Inc., he got acquainted with Cheng in 2011 and they soon decided to pair up. In 2013, the duo transformed the Kuaishou app from a GIF-maker to the social-video platform it is today, initially gaining popularity with its videos of life in rural China.
With the rise of ByteDance’s Douyin, the Chinese twin app of TikTok, Kuaishou broadened its appeal, luring influencers backed by talent agencies and pop stars like Taiwan’s Jay Chou. Along the way, it sped up monetization by creating ad slots and in-app stores for brands and merchants.
While virtual gift purchases are still its bread and butter – they make up almost two-thirds of its revenue – the company is delving deeper into higher-margin businesses like e-commerce and online gaming. Its sales rose almost 50% to 40.7 billion yuan in the first nine months of last year, according to the IPO prospectus.
Viewers spend an average of almost 90 minutes on Kuaishou every day, and about a quarter of monthly users churn out content as well. While that robust engagement differentiates Kuaishou from rival live-streaming platforms such as Joyy Inc. and Momo Inc., the recent launch of a short-video feed by Tencent’s super-app WeChat has brought competition to another level.
Kuaishou’s debut could also be overshadowed by the potential IPO of its far larger rival, ByteDance, whose 600 million Douyin daily users are more than double Kuaishou’s. Last valued at $180 billion, the world’s largest startup was said to be exploring a listing of some of its businesses in Hong Kong as the U.S. last year attempted to ban TikTok and force a sale of the app on national-security concerns.
“Kuaishou has overhauled its product and become more similar to Douyin,” said Citic Securities Co. analyst Wang Guanran in a Jan. 26 note. “The two will face direct competition with each other in the future.”
Kuaishou isn’t immune to geo-political tensions either. While Su told investors on a Jan. 25 call that non-Chinese markets have the potential to become a big earnings driver, its platforms including Kwai and Snack Video are banned in India along with hundreds of Chinese apps as New Delhi and Beijing clash over border disputes. In the U.S., its TikTok-style Zynn service has gained little traction since launching last May.
The company will also have to deal with a recent crackdown on live-streaming. China said in November it would require performers and gift givers to register with their real names, banned minors from tipping and asked the platforms to limit the value of virtual presents.
Still, investors have been rushing to get a piece of the first short-video platform that will start trading Feb. 5. The IPO priced at the top end of its marketed range, and the retail portion was the most subscribed ever, according to IFR, as the city’s market for new listings has been on fire lately. The enthusiasm last year boosted the fortunes of top executives including those at Nongfu Spring Co.’s Zhong Shanshan – now Asia’s richest person – and Blue Moon Group Holdings Ltd.’s Pan Dong.
The Kuaishou founder is cautious about the power he’s amassed. In the company’s biography, Su compared his platform’s ability to control internet attention and traffic with the One Ring from J.R.R. Tolkien’s “The Lord of the Rings” trilogy.
“When you put on the ring, you’ll feel extremely powerful,” he wrote. “But in fact, it’s the ring and the power that are controlling you.” MDT/Bloomberg