Tao Li, former Vice President of Qihoo 360, discusses his “overseas experiences”: find...
Tao Li
After the resignation of Tao Li, the former Vice President of Qihoo 360, the public has been wondering about his recent actions, until now. Recently a mobile Launcher called APUS has been “leaked” in connection with Tao’s entrepreneurial activities.
The Chinese name for APUS is “Swift bird.” The APUS Launcher application will primarily target the international markets outside of China. It’s well known that prior to his departure from Qihoo 360, Tao Li had served as the VP in charge of overseas markets. Therefore he is strategically well prepared to challenge overseas markets.
Since Li used to be an executive in Qihoo 360, his new startup is a mobile launcher, so things have been a bit tricky for him. Recently, news has leaked that 360 faked a cooperation with Sungy Mobile Limited in order to hire from and to build a brand new project—APUS—outside of 360. Li emphatically denied this. He said in a company statement: “As of June of this year, APSU received investment totaling over 100 million RMB from some of the world’s top investors. However, we have not accepted any investments from China’s domestic Internet companies, rejecting offers even from top executives within the Chinese Internet companies.”
As an expert of overseas business development, what were Tao Li’s motivations for beginning his own venture by challenging international markets? As compared to larger companies, what are the challenges that startups face in expanding overseas? What are the appropriate measures for assessing whether a particular market is worth entering? To these questions and more, Tao Li has provided some in-depth answers.
Just how large are overseas markets?
Tao Li had first expressed his desire to resign from Qihoo 360 in early May of this year, by notifying Chairman Hongyi Zhong. However, initially Zhong did not agree. It was only after Li repeatedly insisted on that, in late May, Zhong finally agreed to accept the resignation.
Tao Li explains that, in the two weeks following his official resignation, he thought long and hard about what to work on next. However, even from the very beginning, he knew that the venture’s focus would be on entering the international markets.
“I knew for sure that my new direction would represent two core traits: the first would be mobile Internet; the second would be international markets.”
Why does Li believe international markets hold such promise?
In Li’s view, the future of the global mobile Internet will develop in a similar pattern as that of the current international economic landscape: many of the new technological ideas originally developed in the United States will be developed and localized in China; thereafter, the entire world will be a potential addressable market.
However, the current state of Chinese Internet companies is that of immense competition for a relatively “small”, a pool of hundreds of millions of users. In contrast, over three billion smartphone users exist internationally. Especially in regions such as Latin America, India, Southeast Asia and the Middle East. The popularity of smartphones is still on the rise, but no companies have successfully risen to the challenge of providing for these users on a notable scale. Local Internet companies in these regions lag behind of those from China by about three to five years, and lack of ability to provide their users with quality services. As the same time, American companies are too aggressive to serve these regions.
This situation offers a massive opportunity for Chinese enterprises. A strong example of an established company is Cheetah Mobile, which has diverted domestic competition in China in order to conquer the international markets, armed with popular applications such as its Clean Master optimizer. By May of this year, Cheetah Mobile completed an IPO on the NYSE.
Competition is relatively less fierce for Chinese companies tackling international markets. By Tao Li’s estimate, roughly several hundred companies compete within each silo of opportunity in the Chinese Internet, for the same 800 million users. In contrast, markets outside of China collectively contain between 2 billion and 2.5 billion smartphone users, many of whose needs are not yet fully met through their domestic mobile Internet companies. Even if a similar company were to also decide to focus on international markets, explains Tao, “We would hardly even have a chance to meet.”
APUS’s accomplishments within the first three months of its establishment provides a unique window into the immense potential of overseas markets.
Following the release of APUS Launcher in July of this year, it had reached 1 million users within the first week; and within two weeks total users had exceeded 20 million; today, the number of total users hovers around 30 million, with about 8 million DAU.
Li Tao projects that the number of users is expected to reach 100 million by the end of this year; only when that threshold is reached, will the team more closely consider various strategies for monetization.
How should a team determine which countries to enter?
In deciding which international markets to enter, many mobile application companies employ two basic determinants: the first is distance from China, and the second is the target market’s relative linguistic and cultural similarities with China.
In the past year alone, Tao Li has traveled to dozens of countries around the world. Although his English abilities were not strong and he did not bring an interpreter, Li was able to traverse Europe armed with only a basic repertoire of English phrases. He visited countries including Italy, France, and Spain and discovered that language ability was of less importance than other factors: “All of the core points are rooted in the ability to successfully adapt psychologically, not in the ability to master the language: the problem of language can be resolved through interpretation.”
After completing the process of psychological adaptation, the most important factor in determining whether to enter a new country overseas should be, in Tao Li’s opinion is the local market’s degree of maturity. In contrast with cultural and linguistic factors, market maturity cannot be easily influenced or determined purely by human will.
“In venturing overseas, the most important factor to consider is the degree of market maturity: one should seek first to enter mature markets.”
Indisputably, the United States is currently the world’s most mature market; India is the prototypical contender.
Views regarding India tend to fall into two major camps: the first is that on the basis of the market potential of its large population alone, India is poised to become the next China; the second is that due to poor market infrastructure, India’s market is not matured.
India’s Internet faces obvious challenges. The market is subject to influences such as heavy government regulation (large enterprises in India all operate at a loss), the insularity of payment systems (credit cards from other countries are not accepted within India), and the economic effects of the caste system (only about 100 million citizens possess true spending power). India does not boast the true equivalent of Internet portals such as Tencent and Sina. In fact, the country’s top-ranking websites in terms of traffic flow are Facebook, Google, and other foreign sites; no homegrown website is to be found in the Top 10. Within the top domestic Indian tech companies, three are e-commerce sites. Since the Indian market has not experienced the maturation process undergone by Internet companies from the U.S. or China, already-mature frameworks have been directly transplanted into India.
How should mobile Internet companies conquer international markets?
How should products be designed for international markets?
Tao Li summarizes his product strategy as that of “three points, two principles.” The first point is that of a ‘pain’ point, the second point is that of a ‘sweet’ point (or “dessert” in the Chinese language), and the third point is that of a ‘bright’ point. The “two principles” are extremity and delicacy.
Addressing customer pain points should serve as a primary focus, with delivering delightful customer experiences as the end goal. For example, WeChat is an example of a product that really focused on addressing users’ pain points. In the case of APUS, the product’s small file size (1 MB as compared with over 10 MB in similar Launcher products), smart automatic folder classifications, and other similar features serve as resolutions for customer pain points.
“Sweet,” or pleasure points, refer to the positive feeling a user derives after using the product. It is the same feeling that inspires him or her to continue using the product, and to evangelize to new users. The ability to use the application with one hand counts as a sweet point. “Bright” points are features that stand out and capture users’ attention. For example, the Launcher application’s automatic recommendations feature and applications radar would classify as “bright functionalities.”
For large companies looking to expand internationally, in addition to the foundational challenges of localization and psychological adaptation, an even greater challenge will be that of approaching new markets with a true desire to learn and to do things in a local manner. Oftentimes, staff members sent abroad do not claim true decision-making power.
This reality presents small companies with plenty of opportunities. The same companies that face challenges growing domestically are the ones that choose to go international. When a founder or executive personally makes trips overseas, decision-making becomes fast, the company reacts quickly, and execution is strong. These are some of the ways in which companies such as Cheetah Mobile have grown so quickly overseas. For small companies, the challenge is often a lack of structure and process, as well as the inclination to pursue short-term profit over long-term gains. If strategized poorly, it may be difficult for these companies to commit to more structured processes.
When each party has its own strengths and weaknesses, collaboration becomes a possibility.
Tao Li describes himself as an explorer. His in-depth consideration of every dimension of the topic of reaching international makes it far easier for other companies to follow suit in the future.
“We have become a bridge and a platform: other companies can simply build on what we have created in order to enter these new markets. The first to develop in international markets will certainly face greater challenges than those who come after, these markets need a company like us.”
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