Promising profits

A platform with 300 million users

Unlike most entrepreneurs, Yang Bo was not a commercially driven individual. In 2005, the former IBM consultant, often known as Ah Bei, founded Douban after returning to Beijing from the United States. He created an arts-focused social network that allowed fans to critique books and films, much like Rotten Tomatoes.

The platform quickly took off – to Yang’s surprise – morphing into what tech blog TechNode called a “hipster utopia”.

Ah Bei is known for his relaxed temperament, which is reflected in the company culture. Douban was slow to release new products to tap new trends (like social media) and it was slow to raise funds even as its popularity grew. Its last funding round was a $50 million Series C in September 2011, says Sohu, a portal.

In an interview with CYZone, another portal, Yang admits that Douban was a product of his own idealism. At first he merely wanted to create a place for like-minded people to gather. That was why he didn’t court investors more aggressively – he wanted to maintain Douban’s independence.

In its most basic form Douban is a platform where users can review everything from films to TV series to books. With about 300 million active users, its audience is hugely loyal to the platform because the discussions on the site are completely independent from the content providers.

Still, even idealists have to eat and Yang revealed early this month that he plans to take Douban public overseas in an effort to bring in cash for product development.

The news only emerged, mind you, after an insider leaked an email that Yang had sent to staff. “Douban has arrived at a pragmatic stage,” he wrote in the memo. “Understanding market demand and channels helps us grow the user base, while understanding revenues and costs help us grow our business. These two simple matters are in fact the pillars of any internet company.”

In the email the tech entrepreneur also warned that “waning and profit-losing” products including Dongxi, a product review site, and Douban Moment will be terminated. Meanwhile, he revealed the launch of his first paid-content feature Douban Time to focus on generating revenue.

Industry observers detect a change in attitude: “After 12 years of operations, it is finally time for Douban to grow up and make some money,” one commentator wrote.

Douban has made similar efforts in the past. AlphaTown, a virtual city developed with the aim of making money from e-commerce and online gaming, was shut down in 2015 after just five years of operation. Similarly, the platform has expanded into ticketing services and paid-music streaming in a bid to boost its earnings. But most of the initiatives have failed to deliver meaningful revenues.

The online review platform has also missed several opportunities, such as converting its users to mobile, one insider lamented on Sohu. According to China Internet Network Information Centre, Douban’s mobile usage rate (the percentage of users who used the mobile app in the last six months) in 2017 stood at 8.6%, compared to Sina Weibo’s 38.7% and Tencent WeChat’s 84.3%.

At the moment, the review site relies on online advertising to make ends meet but even the ads are few and far between because the company doesn’t want to overcrowd the site’s minimalistic design.

Another revenue stream is Douban Read, which allows writers to self-publish on the platform. More recently, Douban has dabbled in filmmaking, hoping to incubate original film and television projects.

With its limited revenue growth, it shouldn’t come as a surprise that Douban has long been considered an acquisition target. Search giant Baidu, for instance, was one of the rumoured buyers.

But although its road to IPO looks challenging, another online literature platform seems likely to have a stronger showing. China Literature, the e-book publishing company controlled by Tencent, has filed for an IPO in Hong Kong, expecting to raise around $800 million. Similar to Amazon’s Kindle Store, China Literature is the country’s largest e-book publisher, carrying 8.4 million literary works from 5.3 million writers. And in welcome news for investors it is now making money. The platform posted a net profit of Rmb30.4 million ($4.55 million) last year, compared with a loss of Rmb354.2 million a year earlier.

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