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How a Chinese LGBTQ dating platform blazed a trail to the US stock market

Written by Nikkei Asia Published on   7 mins read

With 6.4 million monthly active users, Blued is by far the most popular LGBTQ dating app in China.

Growing up homosexual in a small city in southern China, “J.L.” used to feel alone in the world. There were no gay bars in his hometown, Sanming, in a mountainous region in Fujian Province. Nor would anyone in his social circle discuss such a topic. Only in 2012, when J.L. came across a smartphone application called Blued, did he realize that there were others — millions — like him.

Then a middle schooler, he was surfing online when his eye caught an app offering gay dating. “I was so surprised,” J.L. recalled of his first encounter with Blued. He downloaded it and straightaway found another user 100 meters away.

“All of a sudden, I realized that I was not alone,” J.L. said. “That was a marvelous feeling.”

J.L., now 22, still logs onto Blued once a week. And he is one of many doing so. With 6.4 million monthly active users, Blued is by far the most popular gay dating app in China.

Out of this Blued’s founder, Ma Baoli, has built a business that runs from livestreaming to health care and family planning — and has made it all the way to the US stock market. In July, Blued’s parent company, Beijing-based BlueCity Holdings, raised USD 84.8 million from its initial public offering on Nasdaq.

When Ma — dressed in a blue suit with a rainbow boutonniere — rang the bell at the IPO ceremony, BlueCity showed that a gay-focused business can survive and thrive in a country where homosexuality has long been taboo.

“I broke down in tears,” the 43-year-old recalled in an interview with Nikkei Asia. “What excited me was not the company’s valuation, but the enormous support we received from the world’s gay people.”

For Ma, who founded BlueCity in a three-bedroom apartment in suburban Beijing, the journey to starting such a business was not entirely by choice. In the 2000s he lived a double life: by day, a married police officer; by night, the secret operator of an online forum for gay men. Although it is not illegal to be gay in China, homosexuality was considered a mental disorder until 2001, and social discrimination persists. Ma, like many others, relied on the internet to express his sexual orientation.

As the influence of his online forum grew, Ma’s secret eventually exploded and he resigned from the police in 2011. In search of a “sustainable way” to support the country’s lesbian, gay, bisexual, transgender, and queer (LGBTQ) community, Ma moved to Beijing with seven friends. BlueCity was born the same year.

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Ma and his team ran the online forum for years, but not until smartphones took China by storm did they unlock its commercial potential. Believing phones could pave the way for real-time interactions, Ma poured RMB 50,000 (USD 7,400) — almost all of his savings — into building a gay dating app.

The first version of Blued, developed by two college students between classes, was far from perfect. To ensure the app worked, the company had to have an employee sitting at a computer and restarting the system all day long, Ma recalled.

But despite its technical flaws, the app went viral. The following year, more than half a million users signed up — and Ma received an unexpected phone call.

“We’d like to offer you an investment of 3 million yuan in exchange for some shares,” Ma remembered a stranger saying.

Instead of getting excited, the policeman-turned-entrepreneur — who knew nothing of venture capitalism — was “scared,” he said.

“I thought that was a fraud,” Ma told Nikkei Asia during the interview in September. “I could not understand why someone would be willing to give me RMB 3 million… That was an unthinkable sum for me. I had never seen so much money.”

Fast-forwarding to 2020, Ma’s company has a market valuation of USD 335 million and counts Silicon Valley-based DCM Ventures, Xiaomi investment arm Shunwei Capital and Hong Kong property group New World Development as backers. Once struggling to recruit, Ma now employs more than 500 people worldwide.

As its success turns heads, many rivals have emerged. There were dozens of gay dating apps in China at the peak time, but many were short-lived.

Zank, Blued’s chief competitor, was shut down by Chinese regulators in 2017. A popular lesbian dating app, Rela, was temporarily removed from the Android and Apple app stores in 2017 to undergo an “important adjustment in services.”

China was rated a joint 66th out of 202 countries on Spartacus’ 2020 gay travel index, and regulators have an inconsistent attitude toward the LGBTQ community. In December, a body of the National People’s Congress, the country’s highest lawmaking institution, took a step toward accepting homosexuality by publicly acknowledging petitions to legalize same-sex marriage. But this year a court ruled in favor of a publisher who used homophobic terms in a textbook, arguing that its classification of homosexuality as a “psychosexual disorder” was due to “cognitive dissonance” rather than “factual error.”

Ma said government scrutiny is a challenge facing LGBT-focused businesses. But instead of confronting Chinese regulators, he has chosen to embrace them.

“It’s full of uncertainties when it comes to running a [LGBT-focused] company under the current circumstances of China,” Ma said. “It requires wisdom to operate such a business and cope with regulators.”

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To gain allies, Ma told regulators about his struggle as a closeted cop trying to come to terms with his sexuality. He has also invited government officials from all levels to visit the company’s headquarters in downtown Beijing, where a photo of Ma shaking hands with Premier Li Keqiang hangs on the wall.

BlueCity has teamed up with public health officials to promote sexual education for gay men, and Ma is recognized for helping control and prevent sexually transmitted diseases and HIV transmission.

But coping with Chinese regulators also means imposing a heavy hand on the flow of information. The company has deployed artificial intelligence technology to monitor user-uploaded content and filter out anything related to politics, pornography or other sensitive topics. Some 100 in-house censors — one-fifth of its workforce — review the filtered content item by item.

Under-18s are not allowed to register for the app, and Blued runs AI on users’ conversations to detect rule breakers. But the fact that J.L., the middle-schooler in Sanming, used the app shows that there are workarounds.

Some users complained about Blued’s tight control over content, saying it hampers free expression. But Ma has defended his policy. “Even if some subcultures are widely accepted by the LGBTQ community, they may not be suitable to circulate online,” he said. “No matter if you are homosexual or heterosexual, you have to comply with regulations set for all Internet users.”

Disputes aside, Blued has attracted 54 million registered users. While the app made its name with location-based dating, it has evolved into a do-it-all platform, offering services ranging from arranging HIV testing to finding surrogates for same-sex couples who hope to have children.

Its reward is a slice of a multibillion-dollar market. The global LGBTQ community spent $261.5 billion online in 2018, and this is expected to more than double by 2023, according to market intelligence firm Frost & Sullivan.

For now, BlueCity remains unprofitable. It reported a net loss of 3.3 million yuan during the second quarter of 2020 and its shares now trade more than 40% below their IPO price.

Ma dismissed concerns over the plunge and urged investors to focus on the long-term prospects. He also attributed the company’s loss largely to his decision to prioritize market expansion. “If we want to make a profit, we are able to do so anytime,” he said, adding that BlueCity has already turned profitable in the domestic market since 2018.

Like many social networking platforms in China, BlueCity has piggybacked on the rise of online celebrities. Whenever a viewer purchases a digital gift on Blued for his favorite streamer, the platform operator takes a cut. The company generated 210.2 million yuan — 85% of its revenue — from such transactions in the second quarter of 2020.

Compared to other Chinese social networking platforms, BlueCity has to work less hard for viewers’ attention. “For many gay people in small cities of China, watching livestreaming on Blued might be their only way of entertainment,” said Matthew, an LGBTQ activist in Chengdu. “If using the app could help meet their needs for self-expression and friendship, of course they will be happy to pay for it.”

As its business model has been proved at home, BlueCity aims to replicate its success elsewhere. The company has eight operations outside mainland China, and international users make up half of its 6.4 million monthly active users. In developing Asia — defined as excluding Japan, South Korea, Singapore, Hong Kong, and Taiwan — Blued’s popularity has eclipsed even that of American counterpart Grindr.

In India, Blued’s all-time downloads are nearly triple those of Grindr, according to app tracker Sensor Tower. In Vietnam, Blued has been installed 2.2 million times, versus Grindr’s 800,000.

“There is still plenty of low-hanging fruit in emerging economies such as developing Asia and Latin America,” all of which are Blued’s targeted markets, said Pei Bo, director of internet equity research at New York-based brokerage firm Oppenheimer.

But Blued is also at risk of becoming a victim of its own success. In India, for instance, hundreds of Chinese apps have been banned on national security grounds as tensions between Beijing and Delhi have intensified following a military clash on a disputed border.

For apps like Blued with access to sensitive user information, “geopolitical tensions pose a major challenge,” Pei warned.

Indeed, this year Chinese gaming company Beijing Kunlun Tech was forced to divest Grindr because Washington feared that American users would be exposed to potential blackmail from Beijing.

Ken, a 26-year-old office worker in Hong Kong, shares that fear. He surfs Grindr while staying in the former British colony, but whenever he travels to mainland China, he cannot help but browse on Blued.

“The app is the most popular one among locals,” Ken explained. “It is always better to go for a bigger pool to increase the likelihood of success.”

This article first appeared on Nikkei Asia. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei.


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