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Su Hua’s surprising resignation from the CEO position of Kuaishou Technology reflects the struggle for China’s No. 2 biggest short video operator amid an ever-changing regulatory and market landscape, analysts said.
Su, a 39-year-old self-made Chinese billionaire who has been the CEO of Kuaishou from day one, stepped down from the frontline role on Friday, leaving the day-to-day operation of his short video business empire to his long-term partner Cheng Yixiao.
By doing so, Su has joined a growing list of Chinese tech billionaires who have chosen to remove themselves from the limelight this year after becoming super-rich at a relatively young age. Zhang Yiming, the founder of TikTok operator ByteDance, stepped down as CEO at the age of 38, while Pinduoduo founder and former CEO Colin Huang Zheng stepped aside at 41 from his e-commerce empire.
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Although Su will remain as the chairman of Kuaishou to focus on strategic planning and new initiatives, his departure from the CEO role comes at a time when the short video industry in China is facing a regulatory storm.
China imposed regulations on live-streaming in its 10-year national guidelines on children’s development published in September, saying that operators who provide online services – including games, live streaming, audio and video streaming, as well as social networks – should limit the time and money minors spend online.
The Chinese government has also drafted rules to regulate algorithms to filter out content that the state deems inappropriate. Kuaishou, which remains popular among Chinese grassroots users, has been blamed by its critics for spreading lowbrow and vulgar content.
“[Increased] regulation of the tech industry as a whole, and the influencer industry – which Kuaishou is heavily dependent on – will provide challenges ahead,” said Mark Tanner, managing director at Shanghai-based research firm China Skinny.
Su, a former Google engineer, has lived a typical rags-to-riches story in China. He grew up in a poor village where the only electrical device in his community was a flashlight, but Su nevertheless managed to get into China’s prestigious Tsinghua University in Beijing, joining Kuaishou in 2013 when it was a jut a tool for making animated pictures.
Helped by the heavy use of smartphones in China, Su and Cheng were able to transform the app into the country’s second-largest short video platform, behind ByteDance’s Douyin, the domestic sister app of TikTok. Su has stated that his startup must “benefit others”, according to an interview with Su Hua and Kuaishou’s early investor Fisher Zhang Fei, published on the official WeChat account of venture firm 5Y Capital in February.
Kuaishou, which caught the short-video train before ByteDance created Douyin, has changed how many Chinese people spend their leisure time and interact with each other – even the term Lao Tie, a term of endearment coined on the platform for the fans of live-stream hosts, has become an everyday expression.
Kuaishou’s February initial public offering in Hong Kong saw its shares hit a high of HK$345 (US$54) on their debut, or nearly triple its offering price. But since then, the share price hit a low of HK$64.5 in August, as sentiment towards Chinese tech stocks soured amid Beijing’s regulatory crackdown.
The shares dropped 3.5 per cent to HK$99.9 on Monday after the company announced news of Su’s step-back over the weekend. But not all analysts see the news as a huge overhang for the stock.
“There have been plenty of organisational changes internally at Kuaishou throughout this year and this top-level change could be a signal that the reorganisation is nearing an end,” said Carlton Lai, an equity research director at Daiwa Capital Markets.
China Skinny’s Tanner said he expected Kuaishou to be “well set up to ride the transition, particularly with Cheng slipping into the CEO role”.
While Kuaishou is still firmly in second place in China’s short video market, by numbers, its growth rate appears to have hit a glass ceiling. The Beijing-based company’s monthly active users (MAU) grew only 5 per cent year-on-year, while Douyin’s MAU year-on-year growth is running at 62 per cent, according to research firm YipitData. As of September, Douyin had over 800 million MAUs compared with over 400 million for Kuaishou, according to the research firm.
Daiwa’s Lai noted that “it is increasingly difficult to generate user growth given [Kuaishou’s] massive scale already” but ”the company is making good progress in diversifying its revenue streams”.
“Our overseas business continued its rapid development, demonstrated by MAUs exceeding 180 million by the end of the second quarter, further solidifying our resolve to capture the significant opportunities for future growth and development in overseas markets,” Su said in a statement in August along with the company’s second-quarter financial report.
Su took up mountain climbing back in 2019 along with investor Zhang Fei when he was facing huge pressure at work, climbing an obscure and relatively unexplored mountain.
“Building a start-up was more difficult and complex, but it didn’t contain life and death risks,” said Su in the interview published by 5Y Capital. “But I think starting a business is a bit like exploring a no man’s land, only those places with fewer people around have a beautiful view.”