Luo gets a reality check

Luo Yonghao: can’t keep him down

After announcing that he was stepping away from social media in June to focus on his next venture, entrepreneur-turned-livestreamer Luo Yonghao surprised his fans by returning to screens on Monday. Also notable: he has ditched Douyin, with whom he had enjoyed an exclusive relationship since he started livestreaming in 2020, for rival platform Taobao Live.

More than 26 million people tuned in to witness Luo’s debut on Taobao Live, which marked the first day of Singles’ Day presales. During the broadcast, he focused mainly on consumer electronics, a category he knows well from his time as founder of Smartisan, a smartphone maker.

However, in terms of gross merchandise value (GMV), Luo’s first outing on Taobao was underwhelming, analysts said, generating just Rmb210 million ($29.4 million). While that is no small sum, it didn’t bear much comparison with the efforts of rival livestream host Li Jiaqi, who reportedly raked in Rmb21.5 billion on Taobao Live on the same day (although he later denied the figure).

But no matter, Luo has made it clear from the start that e-commerce livestreaming is a sideline to his day job. Last week, 36Kr reported that his latest start-up Thin Red Line has completed its seed round, raising nearly Rmb400 million from investors that include China’s biggest delivery provider app Meituan and the US venture capital firm Matrix Partners. Thin Red Line is already being valued between Rmb1 billion to Rmb1.5 billion, 36Kr claims.

In his new business Luo seems to have taken a lesson from the disappointments of his previous start-up Smartisan, choosing to start with software instead of hardware. Thin Red Line is being described as a company that designs the operating systems that power applications of augmented reality (AR), although it hasn’t quashed speculation that it could start to make hardware at a later stage.

“In choosing to focus on the development of an operating system over hardware, Luo understood from his experience at Smartisan that hardware is a tough area to crack. Prior to founding TRL, he visited companies across the supply chain of the AR/VR industry and the conclusion was that the hardware barriers are too high at this stage and it is too difficult to do,” 36Kr reckoned.

The fact that he has raised capital at a time when investment sentiment is weak seems to speak to Luo’s personal charisma, although 36Kr believes that the company’s valuation has probably declined from an earlier peak of Rmb2 billion, citing an industry insider.

Others are sceptical about the prospects for Luo’s firm. “Although there are many players [in AR], there is not one leading hardware product in the sector so far, unlike Apple’s iPhone in 2007,” says Zijing Finance. “The AR operating system envisaged by Luo Yonghao is very abstract because, after all, an OS is the soul of a product. But without its own mature hardware products, the OS risks becoming a castle in the air [i.e. unrealistic].”

Other tech giants have been investigating operating systems in the AR/VR space too. Qualcomm has launched the Snapdragon Spaces XR platform for app and games developers. Apple is rumoured to be developing the realityOS for an AR headset of its own. Google has also announced that it is working on a new augmented reality operating system.

The fact that Luo still wants to star on Taobao Live suggests that he isn’t ready to give up his livestreaming career either. “He still wants to use his clout as one of the biggest livestreamers in China to make as much money as possible. This is perhaps the biggest difference between Old Luo [his nickname] in 2022 from the man who founded Smartisan 10 years ago,” Zijing Finance claimed. “He knows that while it’s good to have dreams and ambitions, without real money, they are all just fantasies.”

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