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Inside Li Xueling’s return to the helm at Bigo: The struggle to refloat a former TikTok challenger

Written by Terence Fong Published on     7 mins read

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Once billed as a challenger to TikTok, Bigo now lags behind despite its best efforts to catch up.

In February, Li Xueling, the CEO and founder of Nasdaq-listed Joyy Inc., took over the daily management of Bigo, which is the best-performing subsidiary of Joyy, people familiar with the matter told Chinese online media the LatePost. Heads of business units at Bigo started reporting to Li over Jason Hu, the subsidiary’s president, who has been on vacation since then.

Li has been doing “back-to-back meetings” since he took back the reins of Bigo, sources told LatePost. “He’s going all out to further Bigo’s global push.”

International ambition

One of the reasons that led to Li’s devotion to the subsidiary is that its flagship livestreaming app Bigo Live has been making good money globally and has the potential to go further. The app, which has a presence in over 150 countries and regions worldwide, contributed 90% of Joyy’s revenue in the fourth quarter of 2020. It is the second-highest-grossing non-game Chinese app in overseas markets, second only to ByteDance’s TikTok.

And Li is no stranger to livestreaming. In fact, he’s an early pioneer.

With the founding of Joyy more than a decade ago in 2005, Li is among the first batch of Chinese entrepreneurs to turn livestreaming into a profitable business. The company’s flagship products YY and Huya, now sold to Baidu and Tencent respectively, were both among the top-tier in their own genre. Though as TikTok, Kuaishou, and other apps inched into the domestic livestreaming market, YY and Huya started to face stiff competition.

As competition increases, Li first sold Huya to Tencent last April, then YY to Baidu in November. By the time of the YY sale, Bigo had become the top earner for Joyy. In the first three quarters of 2020, Bigo earned RMB 8.56 billion (USD 1.3 billion), RMB 300 million (USD 47 million) more than what YY raked in over the same period.

Bigo was founded in 2014 by Li as an independent entity. Since 2016, Bigo has actively targeted international markets. The company now has three main products: Bigo Live (livestreaming platform), Likee (short video platform), and imo (chat platform) for international users.

Jason Hu, Li’s co-founder of Bigo and one of the first engineers of Joyy, took over most of Bigo’s operations not long after it started its international expansion. In 2018, JOYY bought Bigo for USD 2.2 billion. Since then, Jason Hu has been Bigo’s president, overseeing Bigo’s operations.

In an interview last year with LatePost, Jason Hu shared that his forte is in execution while Li’s strength is in long-term thinking, and they both share complementary skills.

A broken duo

Li’s takeover of Bigo is unexpected but makes sense, a person familiar with the matter told LatePost. However, the person was surprised that it happened so soon.

Another source believed that the change in management was inevitable as the company was in a different stage of growth and faced different market conditions, which necessitated a different leadership style.

Both sources said that after the sale of both YY and Huya last year, Bigo became the core business of Joyy, which had an immediate priority of “restructuring its senior management team and planning long-term revenue distribution among executives.”

While Hu has been at the helm of Bigo for a long time, he has never been part of Joyy’s senior management team. Hu is known internally to be a highly skilled engineer but “with (upward) communication issues.”

Joyy’s strengths lie in its understanding of and ability to adapt to user needs, but it lacks the skills to develop and monetize its products. When Li first founded Bigo, he deliberately brought Hu in to fill the gap. Hu built a strong technological infrastructure for Bigo that reduced costs and laid the foundations for its international expansion.

On a separate note, Hu didn’t appear to be happy with Joyy’s acquisition of Bigo, which makes it part of a listed company. He said in an interview last year that Bigo was undervalued in the deal. And being part of a public company certainly adds difficulty for Bigo to raise and spend money on product expansion.

Turbulent markets

Another factor that moved the needle on Li’s takeover of Bigo is a turbulent global market over the past few years due to a combination of factors from geopolitical clashes, changing market dynamics, to the fact that Bigo is losing out in a race to global short video supremacy.

In Bigo’s early days, Li decided on its strategy to target international livestreaming markets. Then in early 2017, after some experiments, Li mapped out short videos as the company’s future direction, counting on Likee, and retreated behind the scenes to let his trusted lieutenants run the show.

In the same year, ByteDance released TikTok to global markets to wide popularity and, in just a few months, quickly rose to the top position in terms of downloads in Thailand, among other countries, in early 2018.

On the other hand, Bigo’s short video efforts, once aimed to compete with ByteDance’s TikTok with big spending on advertising—as much as RMB 1 billion (USD 156 million) in one quarter—have lagged behind.

Though ByteDance and Joyy both targeted global short video markets at around the same time in 2017, three years after, by October 2020, Bigo’s monthly active users across all its apps dropped to 350 million from 2019’s 400 million, or less than half of TikTok’s MAUs in the same period. The change in MAUs reflects that while TikTok was making great strides globally, Bigo’s business was shrinking in comparison.

In addition to the competition, geopolitical tussles also contributed to Bigo’s losing streak and hastened the change of the rein.

In June 2020, the Indian government banned 59 Chinese apps in India. These apps include ByteDance’s TikTok and Bigo’s Bigo Live and Likee. India is one of Bigo’s key markets, and Bigo has invested around USD 300 million in the world’s second-most populous country at the time of the ban.

Indians do not spend a lot of money on online apps, and as such, the ban on Bigo’s apps in India did not significantly impact Bigo’s revenue. The issue, however, is that Bigo was enjoying high user numbers across Bigo Live and Likee in India, and the ban on its apps affected Bigo’s growth potential in the South Asian nation—one of its key markets.

Shortly after India’s ban, various members of Likee’s management team left the company. In September 2020, Likee’s CEO Wei Wen resigned. In the subsequent months, Likee’s regional heads for the Middle East, North America, and Eastern Europe also left the team.

Faced with these challenges, Bigo has tried to pivot by experimenting with new products and new business models. These new experiments include launching new platforms for short videos and various cross-border e-commerce platforms. These new projects have not brought much revenue to Bigo.

Internal reshuffle

Apart from its livestreaming arm, all of Bigo’s business units have undergone management changes in the past year.

Since returning to Bigo, Li has been actively cutting costs at Bigo, especially with Likee and imo, which has not yielded favorable results over the years.

imo’s project director Jeff Hu left the company in March 2021, and imo’s team has been reduced by one-third. imo is currently being led by Bigo’s senior vice president James. Insiders have commented that imo has never made money, nor has it met its targets. Internally, the imo project is an uphill battle that nobody is willing to fight.

imo started in 2007 as an instant messaging platform. When Bigo acquired imo in 2019, imo had 200 million MAUs globally. Li had plans for imo when it was first acquired. Li wanted to grow it into a WeChat competitor, but after testing various ideas without much success, Li handed imo over to Jeff Hu to manage.

Sources close to Bigo said that the company will not give up on imo, the company is now experimenting on something similar to Clubhouse.

Likee has gone through the same process of cost-cutting and profit-maximizing. It downsized 20-30% of its workforce, with the algorithm team taking the biggest hit.

In Q4 2020, when Li held his financial reporting meeting, he shared that Likee is shifting from a growth-centric model to a profit-centric model to unlock monetization, with more changes to come in the future.

While cost-cutting measures are being put in place, Joyy has not forgotten to develop new products. JOYY recently launched a new social medial app—CrushMe on Google Play and iOS App Store. According to App Growing Global, CrushMe has been advertising on various international platforms, including Facebook, since March 2021.

Livestreaming e-commerce opportunity

In the second-quarter earnings call of last year, Li told analysts that e-commerce is a long-term goal of his company. Eventually, Joyy’s monetization structure will be three-pronged, with e-commerce being the top revenue generator followed by livestreaming and advertising.

Li believes that merging elements of livestreaming and e-commerce has huge potential in international markets. His hypothesis may prove to be true based on the fact that e-commerce integrated with livestreaming has become very popular in China over the past few years.

Last August, Li made a strategic investment in Shopline, an e-commerce player with a presence in both China and Vietnam.

Joyy is not alone in entering the e-commerce space as a livestreaming player. According to multiple media reports, Kuaishou has incubated Zynn, and ByteDance is also looking at the international e-commerce space with its secretive “Project Magellan XYZ.”

After a year of divestments and reorganization, Joyy looks vastly different today. In Q4 2019, JOYY derived half of its revenues from China and half from international markets. Today, almost all of Joyy’s revenues are derived from its international users through Bigo.

The challenges that Joyy faces today seemed unfathomable not too long ago. These challenges include rapidly deteriorating political relationships between China and the world and the COVID-19 pandemic, which has changed the way people interact online.

As Li Xueling returns to the helm of Bigo, the company is much different than the one he founded, and in the years since, it is also an entirely different world filled with new challenges.

 

This piece originally appears in the LatePost, and was written by Li Shiyun and Chen Xiaoyi.

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