Most Chinese internet firms face a common problem known as the ‘Tencent ceiling’ – or more specifically, the question of what to do if Tencent comes onto their turf and offers direct competition.
This is a riddle Renren – once hyped as China’s Facebook – failed to solve. The Nasdaq-listed firm began to lose its appeal after Tencent launched its networking and messaging app WeChat. Since 2011 it has lost 90% of its market value. But Zhou Yahui, a former Renren staffer, found a way to burst through the Tencent ceiling. And he is now being dubbed as China’s richest man under 40.
Zhou was born in 1977 in the scenic city of Lijiang in Yunnan, the son of junior government officials. In 1999 he was admitted to the postgraduate school at Tsinghua University, although he decided to suspend his studies as part of a trial scheme that saw the university grant seed capital to some of its students.
With a grant of Rmb500,000, Zhou created a website that claimed to be China’s biggest provider of original online comics. The business survived for four years (the other 19 startups funded by Tsingua all failed too).
In 2004 Zhou returned to Tsinghua to finish his studies. But a year later he left to join Renren, learning how to run an internet firm from his new boss Chen Yizhou.
In 2008 Zhou moved again, leaving Renren to establish Kunlun Tech, his second startup.
Kunlun initially distributed online games in China, specialising in free, browser-based role-playing games. “I also had to face the Tencent ceiling,” Zhou later recalled, given Tencent’s dominance of online gaming. With Tencent focused on the Chinese market, Zhou looked for less contested turf in other Asian countries. The company started exporting titles to portals in Japan and Korea and Southeast Asia. “In China we can never defeat Tencent,” Zhou told Sina Tech. “But it took four years for us to be the second largest web-based gaming firm in Korea, and the biggest in Japan.”
Kunlun went public on Shenzhen’s ChiNext stock market in January 2015. The company’s stock price surged more than 75% in two days, helping to raise Kunlun’s profile. The company now partners with the likes of Rovia, makers of the Angry Birds series, and Supercell, best known for the popular title Clash of Clans. In March the Hurun rich list estimated Zhou’s net worth at Rmb23 billion ($4 billion).
Need to know
“Chen Yizhou is always my master,” Zhou claims of his former boss. In fact, Zhou has followed Chen’s example and has himself become an active investor in other internet startups. His profile was raised internationally too when in March Kunlun acquired a 60% stake in Grindr, valuing the world’s most popular gay dating app at $155 million.
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