Lillian Li Profile picture
Feb 17 13 tweets 3 min read
1) Why is every sizable Chinese consumer app a super-app? Why are western tech giants like Facebook, Shopify and Google also following suit?

A theory on 'owning the funnel':
2) Every player is always working on owning the awareness-to-fulfilment funnel (or customer journey). This is a descriptive product strategy that builds on a foundational ethos of "owning the user".

Because there's one thing that matters in consumer internet: internet traffic
3) Relative to western consumer tech companies, which tend to focus on “serving a function” as their core mission, Chinese companies tend to focus on “owning the user” as their core mission (though the initial wedge into the consumer is always through a function.
4) Owning the end-user and their attention (essentially lowered CAC) is what led to the rise of the super apps. Put another way; they want to own the user's attention and time through providing a comprehensive service rather than be the platform that caters for a specific need.
5) Chinese tech companies struggle with internationalisation and so can't build a best-of-breed for different geographies (unlike western tech firms). They have to go deeper.
Copying being prevalent in Chinese tech, owning the funnel becomes the closest thing to a moat
6) Inorganic traffic is also very pricey in China since Tencent (the biggest DAU app) doesn't rely on advertising to monetise and have a relatively limited ad inventory.
Every player then has to focus on cultivating their own organic traffic sources and own their own funnels.
7) As such, the funnel/user journey flow reflects the core capabilities they need to capture at every stage. It has become a defacto product roadmap and monetisation strategy.
This framework also extends to Chinese B2B companies, which help their customers own the entire stack.
8) Chinese consumer tech giants are pursuing owning the funnel through a combination of buy, build or partnerships (investments). Each starts from their domain of expertise (Tencent's is traffic, Alibaba's is conversion, and Bytedance is also traffic), before moving up or down.
9) Generally, it is easier to move down the funnel than up since traffic players already control the users’ attention. Users move from low intent browsing to high intent buying rather than the other way round.
10) This is also why Alibaba's acquisitions tend to struggle. Aside from the difficulties of integration, Alibaba is more often than not trying to obtain traffic from its acquisitions, whereas Tencent is giving traffic to their partners. The differing dynamic is stark.
11) This pattern is playing out across the new generation of short-video platforms. As the war for the user’s attention and wallet rages, the funnel will be a good predictor of the capabilities each player will be looking to build.
12) If you want to read the more fleshed-out version
lillianli.substack.com/p/owning-the-f…
Writing more regular threads these days about Chinese tech and the Chinese economy. Follow along here or on my newsletter. Thannnnnks
lillianli.substack.com/?r=1xnab

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More from @lillianmli

Feb 15
1) Meituan co-founder Wang Huiwen was with Meituan from inception to IPO. He retired at age 41 a billionaire.

Wang thought deeply about creating a category winning company. I found his insights on how needs evolve and how that relates to markets to be one of the best framing:
2)
- The number of human needs that can be satisfied is fewer than needs that can't be satisfied
- Within the set of needs that can be satisfied under our current state of technology, ROI-positive conditions are far less than ROI-negative needs
3) - Needs that can support a commercial operation are far less than needs that can't
- Lastly, the number of needs that can allow a company to survive competitively is the smallest bucket

Visually, it can be seen as
Read 12 tweets
Feb 13
1) Let's talk about how to think about applying a successful Chinese tech trend to your tech ecosystem.

Let's deconstruct go through the following:
- What makes a trend take off in China
- What is easily replicable
- What isn't
2) A trend takes off in Chinese tech and stays relevant because it can get internet traffic and can make money.

Historically, only getting internet traffic mattered. But as new users dwindled, having a viable commercial model (with eventual break-even unit economics) matters.
3) But how things can make money also requires many Chinese tech ecosystems enabling factors that may not be present in your ecosystem.

So you have to understand whether it was only the Chinese context that meant it would make money.

Let's go with an example - livestreaming
Read 22 tweets
Feb 10
1) Let's talk about Baidu's fall from grace - from being synonymous with Chinese tech in the form of BAT with a market cap of $110bn to now - a punchline for when a tech trend has ended.

Why did Baidu fall behind?
2) Baidu hustled hard in its early days, it was facing off Yahoo and Google who had first movers advantage in the Chinese market.

They did well in localising search and offering a suite of products such as music and forums to woo the information-hungry Chinese consumer
3) When Google fully pulled out of the Chinese market in 2009, Baidu was on top of the world. It went from owning 66% market share to 100% overnight in the biggest consumer market in the world.

Money basically printed itself through advertising. Everyone could just chill.
Read 16 tweets
Feb 8
1) I was a SaaS-focused VC in Europe for ~5 years, and then left for China to explore the SaaS ecosystem here.

Initially, I was highly disappointed. But after 18 months I've coming out of the trough of disillusionment.

Here's why:
2) Answer: Chinese SaaS aka ToB ( To Business) lags behind that of the Western SaaS ecosystem by estimates of 5 to 10 years due to a combination of unwillingness to pay and high adoption barriers. However Cov-19, labour shortage and regulations have accelerated adoption.
3) In 2020 when I just got back, I took stock of the B2B ecosystem in China and found
- Chinese SMBs ( ~60% of GDP) used cheap labour rather than software
- SMBs don't have cash reserves to invest in upgrades
- Historical software piracy led to lack of desire to pay for software
Read 24 tweets
Feb 4
1) Was confused about why China was even hosting the Winter Olympics since they are notoriously unprofitable.

Also, Chinese people don't ski, right? Right? Why we getting involved in something that's not entertaining or lucrative?

So I went digging.
2) The answer: China's using Winter Olympics as a focal point to drive domestic interest and spending in winter sport tourism and commerce.

So the aim is that while not much of the population is interested in winter sports before, they gonna be after the Olympics.
3) Chinese consumers do not have winter leisure sporting traditions.

Lack of demand also diminished supply, there's no supporting ice rinks, ski lodge or slope in terms of infrastructure.

But Chinese consumers do have something going for them. They love new things.
Read 12 tweets
Jan 26
1) To give a clear example of how I researched, framed and synthesised.

Here's a breakdown of how I put one of my pieces together - specifically on Chinese agriculture tech.

A topic I had little knowledge about beforehand but was able to write a 1,500+ piece in a week.
2) To refresh, my process is:
- Start off with tree trunk knowledge / primers
- Have key questions you are asking
- Background mental models / similar examples
- The finding additional info
- Talk to people and then talk some more

3) For the agricultural piece, I started to look for primers by googling, scanning documents quickly to see what keywords arose.
Turns out the keywords was 'Digital Agriculture' in Chinese, and once I found the particular lexicon for the field, going further was easier.
Read 12 tweets

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