Context: At the time of this interview, 2016, Josh Elman, was a General Partner at Greylock and Board Observer of Musical.ly. Josh is interviewing Alex Zhu, the co-founder and co-CEO of Musical.ly. Almost a year after this interview was uploaded, ByteDance acquired Musical.ly and merged it into TikTok. This eventually led to TikTok being introduced to the United States market. Alex became the Head of TikTok after the Musical.ly acquisition and is now the VP of Product at ByteDance.
These are my abbreviated notes from Josh Elman's interview with Alex Zhu. Everything is from the perspective of Alex Zhu.
0:35 Josh Elman reached out to Alex Zhu in September of 2015. He was shocked to learn that Alex and Musical.ly were based in Shanghai, China.
1:45 Before working on Musical.ly, Alex spent most of his career in enterprise software (SAP). Alex's passion was always in consumer businesses: using the consumer approach to deal with enterprise design.
2:15 In 2013, Alex was a futurist for education in SAP. Tried to do some research on how the education industry was going to transform with new technology. This prompted Alex to start a company in the education space. Alex and his co-founder came up with a "billion dollar" startup idea to transform education by combining Coursera + Twitter into a new product. The vision was to make educational content mobile-first and bite-sized. This turned out to be a "complete failure."
3:35 What were the lessons from this failure? And how did Alex ultimately decide to make Musical.ly?
Major lessons from the failure:
- If you want to build a new user-generated content platform or social network then the content has to be extremely light. The content creation AND consumption need to happen within seconds, not minutes.
- Education is a little bit against human nature. If you look at how people use their phone, the majority of people are using their phone to communicate and entertain (play games, using social media, or messaging).
- It's pretty hard for a new startup to try to change human nature. It's better to follow the human nature than to fight against it.
- For a new social platform to take off, your early adopters need to be young. Especially teenagers in the U.S. — why? They have a lot of time and they are creative. They are already digitally native. If your product can attract a small group of these users, they will talk about it in school and on social media — you won't need to spend as much for distribution. Zero cost distribution.
6:00 How did you go from zero users to today? How did you start to grow your community?
Musical.ly launched with "a lot of hacks." — App Store used to let you make your App Store name really long. The search engine on the App Store used to give more weight to the application name vs. keywords defined. So...they put a really long app name with all keywords. This led to them initially growing organically on the App Store.
Initially, Musical.ly focused on utility at first. Before you have the critical mass of users, you have to focus on utility. And then once you have enough users, you can start building a community around it.
Initial users of Instagram 1.0 didn't use Instagram for the feeds or likes or comments. They used Instagram for the amazing filters that they would post on other social medias.
Come for the utility, stay for the community.
7:37 You are talking to your users constantly (high schoolers and teenagers). How are you able to stay so close to them? This has been critical to your growth.
We have to stay really close to our users. We call it participatory design. We talk to hundreds of users on WeChat constantly. We have daily conversations. Not only about product, but also to understand what they think and what they like in pop culture. We need to be immersed into the American teen culture. We always share our wireframes with these users before we do any coding.
10:15 Musical.ly Influencer Community
Building an influencer community is very similar to building a new country (economy) from the ground up. In the early stage, building community from scratch is a lot like discovering new land.
Imagine you just discover new land. Let's call it America. Now you want to build an economy. You want to grow the population and you want people to migrate to your country.
Let use an analogy: Musical.ly will be America in this analogy, and YouTube/Instagram will be Europe. How do you convince creators from other regions (social platforms) to move to America (Musical.ly)?
- The problem with Europe (YouTube & Instagram) is that the social class is already well-established. The average citizen of Europe has almost zero opportunity to move upward in the social class. We saw an opportunity to leverage this. We will build for the average citizen in Europe.
- In this new land, you have to build a centralized economy in the early days. This means that wealth distribution is accruing to a small percentage of people in your land. You make sure they successfully build an audience and wealth. This makes them role models for the country (and platform). You effectively create the American dream. People in Europe (Instagram) will start to realize that this "normal" person went to America (Musical.ly) and became super rich. Maybe I can do the same? This will lead to a lot of people migrating to your country (platform).
Baby Ariel was the example referenced in the initial question
- However, you have to decentralize the economy at the same time. Having an American dream is good, but if it's only a dream — people will wake up eventually. You need to give the opportunity to the average person. You have to decentralize your traffic model. Give all users satisfaction in creating content and create a middle class.
14:00 What interesting things are you seeing in the Chinese mobile ecosystem?
The technology ecosystem is China is really interesting. Most innovation in China is around service and commercial, not technology.
During the Chinese Spring Festival, there is a tradition to send red envelope with money as a gift. So...they do this online game on WeChat where users can send the red envelope with small amounts of money through the messenger. It became a super popular game during that time, so people started to associate their bank accounts with their messaging account. This made it much easier for retail support to be adopted for WeChat.
They have done such an amazing job with monetization. Virtual gifting. Over $1bn are spent on virtual gifts per year.
17:05 How does Musical.ly think about monetization? Advertising based?
Ads business is a great business. Once you have the critical mass of users integrating ads based on user preference data — is the best model.
The key power of Musical.ly (and now TikTok) is the influence that we have over culture. We need to build out a monetization ecosystem to reward our creators and influencers. YouTube became so successful because of their partnership program. A lot of our users still produce content on YouTube because they make money there.
The first thing that users seek when they join a social media platform is fame. However, once they have the fame — it's not enough. They need to monetize. If the platform is a platform that can generate the most revenue for influencers, then they will stick around.
19:20 How does Musical.ly (TikTok) think about the music industry as partners?
There is something unique about Musical.ly (TikTok) in comparison to other streaming platforms like Spotify.
Musical.ly uses music as a raw material. Music is not the end product. It's a raw material. In contrast, the end product on Spotify, Pandora, etc. is music.
The good thing about using music as a raw material is that we aren't compete with other revenue streams for the labels or publishers. People will still continue to stream. We aren't hurting other revenue streams for artists.
Having music on Musical.ly (TikTok) actually helps them generate more revenue. As an example, Jason Derulo published his music on Musical.ly — we ran a campaign for him. Within 4 days, there was more than 1M videos created by our users for that sound clip. Before that song is even released, we have already generated millions of impressions for that song. That song ended up becoming very popular.
Another example, we have an influencer on the platform named Jacob Sartorius. He released his first song on Musical.ly, that song peaked at #7 on iTunes. That is the power of the distribution from Musical.ly — we are doing more and more of this distribution not just for music, but also for brands.