A UCWeb stand promotes its mobile game distribution platform 9game at an exhibition in Guangzhou.
Yu Yongfu has his eyes on a billion users, and overseas ventures are vital to realize that goal
Starting as an entrepreneur, then becoming a successful business owner before becoming an angel investor is a well-trodden career path in the corporate world.
But investor-turned-entrepreneur Yu Yongfu is an exception.
Yu, who quit as vice-president of China’s leading venture capital investment firm Legend Capital Management LLC and joined startup mobile browser company UCWeb Inc in 2006, said that being an investor is like sitting in the passenger seat of a car, while being a chief executive officer means you are in the driver’s seat.
“Being a passenger is comfy, but without having the fun of a driver who controls the wheel of the car,” said the 38-year-old.
Yu, who agreed to sell UCWeb to Alibaba Group Holding Ltd in June in China’s largest Internet takeover, is determined to steer his Guangzhou-based company through a global expansion plan, especially after teaming up with the deep-pocketed e-commerce giant.
“Our goal is to rapidly double the number of people using the UC browser to 1 billion. If you look at Internet companies around the world, only Google Inc and Facebook Inc have established user groups that are as large as 1 billion.
“I think UCWeb and Tencent Holdings Ltd’s WeChat are the two companies in China that have the potential to grow their user bases to that size,” he told China Daily.
The goal cannot be reached without expanding to overseas markets, said Yu, who admitted that one of the main reasons he agreed to sell UCWeb to Alibaba is that the extremely profitable e-commerce giant can give his company’s globalization plan a strong push.
UCWeb, the second-largest mobile browser in China after Tencent’s QQ browser, is known for reducing data usage for those who surf the Internet through mobile devices.
The company saw its market share by active users in China drop 3.2 percentage points quarter-on-quarter to 31.6 percent in the first quarter of 2014, according to Analysys International. But its globalization strategy, launched in 2010, seems to be going well.
The company claims that its mobile browser has a market share of more than 10 percent in 10 countries. The UC Mobile browser even became the leading mobile browser in India earlier this year, accounting for 35 percent of the market.
But Yu wants UCWeb to have 1 billion users in three to five years and 50 percent from countries outside China.
“Being part of the Alibaba Group means that UCWeb is able to invest more in its overseas expansion. Alibaba is a very profitable company, which allows us to focus on long-term development rather than make short-term money,” he said, adding that Alibaba’s rich experience in tapping into e-commerce markets in other countries can also be valuable to UCWeb.
Yu said that 2014 is the year for UCWeb to gear up its globalization plan with a strong focus on developing countries.
When testing the waters in a new market, UCWeb tends to fly its engineers there and introduce its product to local tech fans. It will set up offices only when the number of users in a particular country reaches 20 million.
It has local offices in India, Indonesia and the United States, and it is expected to set up offices in Russia and Vietnam later this year.
“The Internet is the industry that is most suitable for global expansion. Users usually don’t care which country the service provider comes from as long as the product is good,” he said.
Unlike the personal computer-based Internet sector, which was pioneered by Western companies (US companies in particular), Yu said that Chinese firms can be leaders instead of followers in the mobile Internet industry.
“The mobile Internet has a lot to do with lifestyle. For example, people in the US and Europe spend a lot of time driving to work, while the majority of Asian people use public transportation to commute. That means that Asian smartphone users on average spend more than two hours every day on the mobile Internet.”
The strong reliance on the mobile Internet leads to innovation. What’s more, the PC-based Internet is an industry with a unified world standard, while the mobile Internet industry varies among regions, he said.
Wang Jian, an analyst with the Beijing-based Internet consultancy Analysys International, said that as one of the earliest mobile browser companies in China, UCWeb has strong advantages in going abroad as China has the most complex market in the world.
“Chinese users are very demanding and they are not used to paying, even if your product is good. So for those companies that have already established themselves in China, it is safe to say that they are ready to conquer other markets,” said Wang.
Yu agreed, saying that entering a new market is like doing subtraction. “Sometimes we simply remove some features from the Chinese version of our product and it can become a hit in other countries,” he said, adding that the most important thing to do when going abroad is choosing the right market.
He has divided the global market into four areas: China, developing countries, Japan and South Korea, and Europe and the US.
The top priority for global expansion is developing countries, because Chinese mobile Internet technologies are usually two years ahead of what is available in those countries. He said UCWeb has no plans to move into Japan or South Korea at this stage because it is very difficult to break into their industrial chains.
“The US and Europe are not easy markets, either. But we will keep looking for opportunities in those markets,” he said.
Neil Flynn, head equity analyst at Shanghai-based website Chineseinvestors, which provides financial analysis of US-listed Chinese companies, said the most important aspect of Chinese companies’ development strategies should be to expand into emerging economies.
“Consumer trends are similar to those in China, and these firms will have the experience and knowledge to profit,” said Flynn, who has followed Chinese Internet companies for years.
“In the Western developed economies, we see the likes of Google and Amazon being dominant players for the same reason. These countries have similar consumer trends, so it’s relatively easy for them to adapt their business models.”
It might seem that UCWeb has chosen the right path, but Jane Zhang, principal research analyst at technology research Gartner Inc, begged to differ, saying that a mobile browser cannot serve as a powerhouse that will ensure sustainable growth for Yu’s company.
She argued UCWeb’s core selling point in China is saving money through reduced data usage. That alone, she said, is not enough to attract users in other countries.
“Most importantly, a browser itself is not badly needed by users in the mobile Internet era. If they want search facilities, or social media or shopping, they can directly go to apps with the necessary functions without going through browsers like they used to do in the PC Internet era,” Zhang said.
It seems that UCWeb is aware of the challenges. But Yu said that the odds of success are usually higher when most people don’t recognize an opportunity.
UCWeb has already launched a mobile game distribution platform called 9game and a mobile search engine known as Shenma, aiming to use a multiproduct strategy to hook more users on its way to becoming an information service gateway.
