The Story of Kuaishou: From Beginnings to IPO

Kuaishou

How Kuaishou grew from a humble startup to a US$159 billion empire in the video-sharing industry

Roughly translated as “fast-hand,” Kuaishou is a leading video-sharing and livestreaming app. As of the first quarter of 2021, the Kuaishou app has garnered 295.3 million daily active users (DAU) who spent 99.3 minutes on the app daily.

The year before, content on Kuaishou amassed 1.5 trillion likes, 122 billion comments, and 6 billion shares, according to the company’s prospectus.

This year, on February 5, Kuaishou became the first short-video company to be listed on the Hong Kong Stock Exchange. It debuted as one of the biggest internet IPOs, priced at HK$115 (US$14.8) per share. Three months later, Kuaishou shares continue to perform well, trading at an average price of HK$220 (US$28.3).

Kuaishou was founded by Chinese software engineer Cheng Yixiao in 2011 as a GIF-sharing app. In its first year alone, the app accumulated 900,000 users per day. Later, it transitioned to a short-video sharing platform in 2013 under programmer Su Hua’s leadership.

Here’s a look at how Kuaishou, a startup with humble beginnings, became the video-sharing app giant that it is today.

Humble beginnings: How Su Hua turned the tide

Born in 1982, Su was only twelve years old when he learnt coding on the Cassidy Learning Machine. In 2004, Su graduated from the School of Software of Tsinghua University and later worked at Google as a software engineer in 2006, before switching to Baidu in 2009.

Su pursued his first entrepreneurial venture in online video advertising in 2008. However, his undertaking failed due to the global financial crisis at the time. His 33 other projects met the same fate.

The research engine One Box, another project he worked on, gained traction and was later acquired by UCWeb and Alibaba. One Box became the basis for their new research engine Shenma Inc in 2014.

In late 2013, Su became acquainted with Cheng, who created GIF-sharing app GIF Kuaishou. It was the same year that Kuaishou launched its first short-video social media platform — Kuaishou Flagship. The duo established an instant rapport over their common interest in technology and startups.

After overseeing One Box’s merger with Alibaba and UCWeb’s research engine Shenma Inc., Su officially joined Kuaishou as the CEO in 2014. While he was in charge of streamlining user experience and functions, Cheng was in charge of client computing services.

Su stressed simplicity, easy navigation, and commonality as Kuaishou’s selling points. Flagship’s interface was simplified from ten functions to just four – follow, explore, nearby, and record – in hopes of helping beginners “pick up the app within 3 minutes.”

When Flagship struggled to gain traction, Su dismissed hiring celebrities to boost viewership. He put his trust in his targeted userbase – the humble everyday citizens – to expand the app at their own pace. His vision turned fruitful when Flagship’s DAU exceeded 100 million in January 2018.

The four features of Kuaishou

In the Rebuild 2017 seminar held in Geek Park, Beijing, Su described the four features of Kuaishou as “record,” “young,” “universal,” and “tech-oriented.”

“My mission is to create a social platform where everyone can record and share their daily lives, capture both the beauty and imperfections of the world,” he said. “Sharing plays an important role in all social media platforms: without it, the record is dead. Unanimated. Static. Sharing facilitates the clash of ideas and brings people together.”

“Young” refers to the demographic traits of users on the platform. More than 70% of Kuaishou users are under 30. On Kuaishou, everyone has the liberty to be a content creator, making the app “universal.” The goal is to “embrace all lifestyles” with an open mind.

Meanwhile, while algorithms are an integral part of Kuaishou as a “tech-oriented” platform, Su said, the platform also has a human element.

“While we hope to solve most of our problems with few algorithms as possible, our system is far from fully automized. For issues concerning inappropriate content or massive reports, we would conduct an investigation and make decisions together,” Su added.

Continued success through livestreaming and ecommerce

To increase interaction between users and content creators, Kuaishou launched livestreaming services in 2016. Soon, it became the second most lucrative source of revenue (42.6%) for Kuaishou, earning US$1.1 billion in 2021.

Strong interactive features, high conversion rates, and large cash flows made Kuaishou livestreaming an attractive platform for ecommerce and branded events. According to one analysis, product sales and recommendations are Kuaishou’s most popular livestreaming category, followed by gaming and performance skits.

Some of the popular influencers on the platform include “Lipstick King” Li Jiaqi, and “Sales King of Kuaishou” Xinba. The latter sold products worth over US$57 million at the single-day Kuaishou Shopping Festival on November 6, 2019. Another popular influencer, Cree Electric Appliances Chairwoman Dong Mingzhu, drove air purifier sales up to US$44 million during her debut three-hour live stream in May 2020.

Kuaishou charges commissions on products sold on connected ecommerce platforms, such as Taobao, Pinduoduo, and JD. On May 27, 2020, Kuaishou and JD announced a strategic partnership on creating an ecommerce ecosystem. Under this, Kuaishou would provide marketing solutions and JD was in charge of supply chains. This means that Kuaishou users could purchase JD products without leaving the app, and enjoy after-sales services and free delivery by JD.

Riding high on the success of livestreaming and ecommerce, Kuaishou kept expanding. Its international version “Kwai” became the most downloaded short-video social app in South Korea, the Philippines, Indonesia, and Brazil. In 2017, Kwai exceeded 10 million users per month in South Korea and gained 12 million users in Brazil.

In 2020, the average DAUs of Kuaishou’s apps in China exceeded 300 million and Kuaishou became the world’s second-largest livestreaming ecommerce platform by gross market value, rivaling TikTok.

Gaining a foothold in rural areas

According to Kuaishou’s internal data, 140 million of its 200 million DAU are from tier-three and tier-four Chinese cities. Kuaishou is more popular with non-urban audiences due to its ease of accessibility.

Furthermore, Kuaishou is a lucrative source of income for struggling farmers in rural China. In Guangxi, pig farmer Wu Nengji earned US$1,550 monthly by becoming a videographer at Kuaishou, making 3X to 6X more than the average income of a Chinese factory worker.

Using only his smartphone, rudimentary video-editing skills, and an obsolete computer, Nengji captured the daily lives of farmers and the beauty of pastoral landscapes. As of 2019, Wu’s 2000 videos had amassed 5.6 million followers, reaching 6 million this year. Many of his fans sent him virtual gifts such as a rose and beer worth US$0.16-US$0.31 (these can be converted to real money).

Some farmers also advertise their products through Kuaishou’s livestreaming platform. Cattle rancher Wu Yunbom, from a village in East Salagacha, Inner Mongolia, revitalized his ailing beef cooperatives by livestreaming his beef products and farming assets.

Challenges along the way

For years, rising production costs have been an obstacle for Kuaishou. According to Kuaishou data, it suffered a net loss of US$1.2 billion in 2020 due to an increase in sales and marketing expenses.

Despite losses, Su dismissed the idea of overusing advertisements, stating, “commercialization is not our main goal. Instead, their aim is “to provide a short-video platform for the ordinary and communities of large.”

In 2018, Kuaishou received backlash for failing to regulate videos featuring self-harm and inappropriate content. One Chinese livestreamer chugged 49 pond loaches alive in hopes of views, while another influencer nearly lost his eyesight in an attempt to catch a cobra on a live stream.

Amid the backlash, Su issued an apology on the app’s front page on April 3, 2018. All inappropriate content was removed and over ten thousand accounts were banned. Su promised to bolster regulations and monitoring with more sophisticated algorithms and efficient reporting systems. He also agreed to cooperate with authorities.

Under rivalry with Tiktok, Bilibili, and other emerging short-video platforms, Kuaishou’s monthly active users grew only 5% from 495 million in 2020 to 520 million in 2021. Coupled with economic slowdown from COVID-19, the growth of online advertising sales was reduced to 161%. Meanwhile, livestreaming revenue fell 20%.

Despite the challenges, on February 5 this year, Kuaishou’s stock closed at HK$300 (US$46.3) and the “10-year-old unprofitable” company was valued at US$159 billion.

Kuaishou’s rise from a struggling GIF startup to one of the most formidable corporate empires in the short-video and live streaming industry, all in a span of 10 years, is no small feat. Under the leadership of Su, and the cooperation and vision that he and Cheng shared, Kuaishou successfully outshone other competitors and gained a foothold internationally.

However, as its main competitor Bytedance prepares to go public in the coming months, Kuaishou has much more work to do, in order to stay in the game.

Header Image by Omar Prestwich on Unsplash

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Alice Chuck

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