Here we go with another China interview from our Geeks on a Plane Tour participants Adrian Bye. Adrian runs MeetInnovators, which features interviews with founders and CEOs of web-based companies.
The full transcript and mp3 files of this interview can be downloaded on Adrians CEO interview ressource http://www.MeetInnovators.com here.
Hobbies and Interests: Travel, Books and Ping Pong Tennis.
Favourite Books: Books by Lu You and Confucius.
Favourite Entrepreneurs: Jack Welch, Robin Li from Baidu, Charles Zhang from Sohu.
Personal blog: http://user.qzone.qq.com/622005602?ptlang=2052
Company website: http://www.ku6.com
Fast Track Interview
Adrian Bye: I am in Beijing and talking with Kevin Li who is the CEO of Ku6.com. Ku6 is one of the top video sites on the internet in China. Kevin, we’re here to learn about you so tell us who you are and take it away.
Kevin Li: I am from Northeast China and majored in mathematics at Nankai University in Tianjin. I used to work for Sohu.com as the Senior Vice President and the Editor in Chief for five to six years. Three years ago, I quit at Sohu, and I founded Ku6.com, which is a video sharing website. After we launched Ku6, I started to find venture capital. In early 2007, we got capital from two or three ventures companies.
Our operating model is a combination between YouTube with short videos and Hulu with long videos, movies, and television shows. We currently have more than 20 million unique visitors per day and 250 million page views a day. Our revenue was a little more than $10 million last year, and we have around 200 employees.
Adrian Bye: Where did the idea for Ku6 come from?
Kevin Li: While I worked in Sohu, I found that people uploaded their music on websites. I thought if people can upload music on a website, why don’t we encourage them to upload videos to a website. At Sohu, it was difficult to make this idea a reality, so I decided to quit Sohu and fund Ku6 by pulling 2 million RMB from my own pocket. Then I hired some staff to start this project.
Adrian Bye: You’ve never lived or studied in the US, right?
Kevin Li: I am 100 percent Chinese with zero U.S. education. I am "Tu Bie." In China, we call the people who study at the U.S. and come back to China "Hai Gui." The people like me who are 100 percent local, we call "Tu Bie." For example, Tudou’s founder, Gary, is Hai Gui because he studied in France. I am a totally pure Tu Bie.
Adrian Bye: That’s interesting. Are there a lot of guys like you who are Chinese with no outside experience? It seems like a lot of successful internet guys have studied outside of China.
Kevin Li: Most of the first generation of Chinese internet founders came from studying in the U.S. The second and the third generations are more local guys because we learned the internet directly from the U.S. For example, Sohu and Baidu came from the U.S., but the second generation has QQ. More and more, you’ll find local people are more suitable for start ups because we know more about local. We don’t need to live, study, and work in the U.S.
Adrian Bye: You said you raised money. Who did you raise money from?
Kevin Li: I had shared my business model called UGA - User Generated Advertising - with DFJ. The next month we had several meetings, and we got $10 million investment from DFJ. Besides DFJ, we have partnered with DP Capital, and Baidu is our investor also.
Adrian Bye: Can you explain your UGA business model?
Kevin Li: With the model, I can organize many people who are experts in online video creator and record them when they make online videos. I then ask them to invite our good customer advertising into their content. We call this model User Generated Advertising. The content is advertising, and I share revenue with those content providers. For example, I negotiated a deal with Coca Cola where I organized an advertisement video for Coca Cola.
Adrian Bye: But Coca Cola is very strict about controlling its brand, and I don’t believe that Coca Cola would want users making advertising for them.
Kevin Li: Normally, they organize a professional advertising company to make their professional advertising. They found that if they put this professional advertising online, nobody will look at it. If they make use of grassroots advertising, then people will watch this kind of video. Coca Cola, Microsoft, Intel, and all of these great brand companies let us organize this UGA campaign for them. Of course, they can control the content.
Adrian Bye: How is the advertisement selected? Does Coca Cola approve them or can anyone make and run it?
Kevin Li: No. We organize them, and they are selected by Coca-Cola. Only qualified videos can be uploaded online, so we can guarantee that the branding will not be a violation.
Adrian Bye: What are some of the popular examples of advertisements people are making?
Kevin Li: They make new short films or edit different movies and then re-edit the advertisement.
Adrian Bye: In China, there were over 200 video sites and now most of them are gone. What you are doing is very difficult. How are you making this work?
Kevin Li: In China if you run a successful video website, there are four challenges. First is government regulation. In early 2008, China had a law that only government-owned websites could run video websites. Finally, they changed this rule. Now, in China, to run a video website, you need government relations to know and understand the government and what you can and cannot do. Because I used to be the Editor in Chief of Sohu.com, I have rich experience in government relations. Formally, Ku6 is the first video sharing website to get the government license.
The second challenge is copyright, which is becoming more important in China. As I told you, we are a combination of Hulu and YouTube. Hulu’s model uses some movies and some TV. Those areas have copyright issues here. From 2008 until now, we have paid a lot of attention to copyright issues with DVDs. We buy the copyright or we share all the advertising revenue with the content provider, so the only motive is that we are making money together. In other words, I share revenue with the original content provider if I can make an advertisement. If they don’t want to put their movie on here, I just delete it.
The third challenge is bandwidth. I pay a lot of money for bandwidth. I cannot tell you the exact number, but the good thing is that this year our annual bandwidth cost was reduced to one-third, which reduced a huge bandwidth cost.
Adrian Bye: And how did you reduce it?
Kevin Li: Through our new P2P technology and our advanced CDN technology. Also through our business partnerships with a commission deal; if you cannot control that bandwidth cost, you’re dead because it costs a lot of money.
The fourth challenge is the business model. The first year at Ku6, I didn’t even break even. The fourth year, I broke even. Compared to our competitors, our advertising revenue is relatively higher than theirs. If you ask me why I beat so many competitors, it’s because I met these four challenges better than they did.
Adrian Bye: I’ve talked with people who make websites in China. They have found that if they make simple western-style websites, nobody in China uses them. If they make noisy Chinese style websites with lots of noise and advertising, Chinese people love them and use them. You’re a Chinese guy. Can you explain why?
Kevin Li: I don’t know why people like this. Maybe the reason is that in the U.S. you have many channels to find new media and new information. In the U.S, Yahoo is not the only channel for you to find information. You can find information with other news writers and TV stations. Over here in China, it’s difficult to find information and news. People in China lack information, so they look for more information in one page. In China, Sohu and Sina are the main media information channels for us, so people need information more here than in the U.S.
Adrian Bye: Yes, give people what they want, right? How do you see that you compete with PPLive?
Kevin Li: We have different models. We are all P2P and use a method for people to look at videos faster. If you are watching videos in PPLive, you’ll have to upload PPLive P2P. If you look at a video in Ku6, you don’t need to download our client end. With PPLive, if the people don’t download the client, they cannot watch PPLive video. But here, even if you don’t download the client, you can watch it.
Adrian Bye: When you got started, where did your traffic come from?
Kevin Li: As I mentioned earlier, Baidu is one of our investors. When YouTube was acquired by Google, Baidu thought about their video strategy. They decided to invest in one company instead of doing it by themselves or buying one. They chose Ku6, and they gave us a lot of resources. Our first traffic mainly came from Baidu.
Adrian Bye: How did that happen that you got the investment from Baidu?
Kevin Li: Baidu talked with almost every good video website in China and they chose me because they trusted me. Since I used to be at Sohu.com, I have some reputation in this internet area, and they trusted me.
Adrian Bye: I’m interested to understand how you manage your relations with the Chinese government. In the reading that I have been doing about China, when you do something like a video site in China, you have a partner which is the Chinese government. It is not a business partner, but the content you display must be generally in line with what the Chinese government wants, and there are things you can’t run on your site.
If you have users uploading videos, there must be a lot of uploaded content that the Chinese government doesn’t want. How is that handled?
Kevin Li: There are two kinds of ways to manage a video website over here. One model is that no matter what people upload, you let them look and share with each other. By doing so, a lot of sexy videos or videos of political figures are uploaded. In fact, several of our main competitors do it this way. But I did a different thing.
In the first period of our website, I set up a big video monitor team in Xian in central China. I have 80 people there who monitor every video before it is uploaded to our website. We have a very detailed standard for our internal monitor.
Adrian Bye: How long does the review process take?
Kevin Li: Anywhere from 1 minute to 7 minutes because we have new technology. For example, we have a pool with bad videos. If you upload a new video to our site with a scene from another bad video in the pool, you will be cancelled.
Adrian Bye: What happens when a user uploads something bad? Do you report it to the Chinese government? Is there any process or do you just delete it?
Kevin Li: We put the bad video into our internal pool and delete it from the site.
Adrian Bye: That helps control what goes onto the site, but there’re still regulations you have to follow with the Beijing government. What kinds of relations do you maintain with the government?
Kevin Li: In China, government management of media websites is not very strict. They just care about some of the bad videos. For example, you better not upload any sexy videos or political videos on our website. Besides this, you can do anything you want. That’s the only regulation from the government.
Adrian Bye: From the West, we know how to reach the U.S. government. How do things work with the Chinese government? Who do you talk to?
Kevin Li: They have one department in charge of video websites that also has meetings with us. At these meetings, we get clear initiatives and general principles to follow.
Adrian Bye: One of the things I’ve been learning about China is that people are very individual, and often times they don’t want to work for someone else. They want to be independent or run their own business. They’re very entrepreneurial. How do you keep 200 people all focused on building Ku6?
Kevin Li: The number of people who want to be entrepreneurs is very little. It’s too hard to be a successful entrepreneur here. Most of the people want to work in a company and people here like working in a group or a team, so it is not difficult for us to manage our staff.
Adrian Bye: You don’t have any problems?
Kevin Li: Yes, we have problems. Every company has problems. I don’t always have problems because people want to be entrepreneurs. That’s not my first problem with employees.
This interview was led by Adrian Bye from the exclusive CEO interview online magazine MeetInnovators.com.