Zhang Chaoyang: Weibo is taking off

By Jin Lin, Business Reporter

In the venture capital world, there is a saying: when faced with an internet project, investors will always ask first, "If Tencent enters your market, what strategies do you have to counter them?"

In the eyes of Charles Zhang, CEO of Sohu, this is the current state of China's internet industry. Everyone is expanding their diversified strategies, and in 2010, the industry entered an era akin to the "Warring States" period, where only time will tell who will dominate.

From the Warring States to the unification of all under heaven

In recent weeks, internet news has frequently occupied important sections of the media, one moment it's "Tencent vs 360", the next it's "Shanda challenging Baidu". Such intense collisions are unimaginable in traditional industries but are commonplace in the internet sector.

"The Chinese internet industry is becoming increasingly interesting. Wars are being fought every day. We are also preparing for battles in video, online games, and Sogou, and we will achieve great results. Everyone should not be afraid of war; competition within certain rules can drive progress." Before the interview, Charles Zhang gave a direct opening statement.

Zhang said, "Actually, such wars exist all over Silicon Valley. If you haven't experienced it, it might seem very terrifying, but in fact, this is the status quo of the industry - in the internet industry, there is no middle ground, and there can be no relaxation at all."

Tencent's predicament is a typical example. Such a huge company could feel as if it were about to be wiped out in just one week. In fact, similar crises have happened to Sohu and Sina.

"You must know that if Sina hadn't had the rise of Weibo, it would have been really tough. Our online games generate a large amount of cash flow for us, allowing us to do many things that Sina cannot. Moreover, our input method gives us control over the client side, which Sina does not have." Zhang believes that under the framework of full-service competition, every internet company must strengthen each business mutually and then collaborate to form a unified competitive advantage.

Recently, Zhang left a message on his Weibo saying that the biggest obstacle to his own progress was ignorance and freedom. In fact, this was also his reflection on his more than ten years of experience in the internet industry.

"We were one of the earliest internet companies in China, but we missed the good opportunity in the search market. In 2001 and 2002, people began to realize that the internet had everything, so they needed search navigation as a guide. But I lingered on my previous success, letting Baidu become the winner." The success in the search market allowed Baidu to become one of the most successful internet companies in China, and it also made Zhang see the unpredictability and changes in the market.

Some experts say that the Chinese internet market is a red ocean, with every major company attacking from all sides. So, what is the secret to ultimate success?

Regarding this, Zhang believed that the red ocean is precisely the characteristic of China's internet industry. The market will eventually be divided among a few major companies. It will be very difficult for innovative companies to survive, which is completely different from the American market. In Silicon Valley, small companies quickly grow large, and big companies dare not enter because the cost of poaching talent is very high, so innovation happens in Silicon Valley. As for the secret, he smiled and said, "Happy families are all alike; every unhappy family is unhappy in its own way. However, creativity and execution are always the most basic prerequisites."

As everyone knows, the State of Qin ultimately unified all under heaven. Will Sohu become the Qin?

In response, Zhang's words were decisive: "We have no choice. Either we are very great, or we are very failed. There is no middle ground."

Weibo becomes Sohu's strategic product

"I'm going to invite you to open a Weibo account on Sohu!" Even while taking phone calls during the interview break, Zhang didn't forget his main battle recently - Weibo. "The other party is Wang Lihong. Relying on my network of contacts, Sohu's Weibo is charting a distinctive path of celebrity Weibo." As soon as the topic of Weibo came up, Zhang's face lit up with excitement.

Opening Zhang's list of followers on Weibo reveals a lineup of celebrities including Zhao Benshan, Jet Li, Xiao Yang, Ann Yixuan, Zuo Xiaoqing, Hai Qing, Cui Yongyuan, Zhu Jun, Han Qiaosheng, Zhang Bin, Zhao Pu, and others from CCTV. "There's also Zhou Libo..." he enumerated these names while hurriedly adding more.

As an operator who has been immersed in the internet industry for over a decade, the reporter seemed to see the passion of an entrepreneur rekindled on Zhang's face.

"After a period of rest, why did you return to manage Sohu? Is this entrepreneurship different from your first startup?"

Zhang maintained his candid nature and said, "I've recently found a way to work hard while still focusing on health preservation. For two years, I was quite conflicted, wanting to let go but not fully letting go, which caused anxiety. Actually, on this battlefield of the internet, if the general goes off to relax, it's bound to lead to failure. So now I am fully committed to work and even find time to preserve my health while fully devoted to work."

What kind of product reignited the enthusiasm of this Sohu leader?

"Of course, it's Weibo. As a lightweight social network, Weibo will be our new breakout point."

"Weibo battles will be my top priority," Zhang indicated. Weibo will be the key to Sohu's showdown with Sina. Sohu will elevate the status of Weibo to the highest level and make unlimited investments in its development. In his view, Weibo is still in the early stages of explosion, and in the future, it will definitely be oriented towards the masses. Weibo is an explosive product, more frightening than games, but currently, no monopoly has formed, so Sohu must seize the opportunity.

Last week, Sina Weibo reached a strategic cooperation agreement with MSN, and Tencent CEO Pony Ma also expressed that he would make a large-scale strategic investment in Weibo. This means that the core focus of the top three portals' competition will revolve around Weibo.

In Zhang's view, the current competition between portals is not about how many users click, but about how much time users spend on the site. The high stickiness of Weibo determines that a portal platform must do well in this area.

At the beginning of 2009, Sohu's portal advertising started catching up with Sina, and in the first half of 2009, Sina's push into Weibo began to attract its advertisers back strongly.

"It's very regrettable that Sina got the chance to grab Weibo first," Zhang expressed. Neglecting for half a year allowed Sina Weibo to take off first. In the first half of last year, when he chatted with Sina CEO Charles Chao, Sina's exploration of community products like "Sina Friends" wasn't successful, which made Zhang very proud. But he didn't expect Sina to switch to Weibo, sweeping away the decline in search, online games, and social networking.

This summer, while traveling, Zhang began a deep reflection on himself and Sohu over the past five years. He believed that to change Sohu, he must first change his own mindset. "In these years, I have adjusted. After going through withdrawal, reflection, and re-engaging with the world, I am waiting for the second eruption."

Zhang said that until the beginning of this year, he was still somewhat confused, but now he is no longer confused. "Now it's just that my eyes don't open fully, I'm not confused at all, and I see everything clearly. We need to act fast and decisively." Zhang rubbed his eyes humorously and said.

[Q&A]

Shanghai Business Daily: What is the internet?

Zhang: This is a question I am often asked, and I often ask myself. In my view, it is a continuously deepening revolution for information consumers. Internet users show different needs at different stages, and those who can timely grasp these needs can gain a competitive edge and sustain success.

In the first stage of China's internet development, these needs manifested as the aggregation and navigation of information. People who were just starting to recognize the internet needed guidance, and in China, this more reflected a hunger for information, which led to the success of the first generation of internet companies characterized by portals, including Sohu. The second stage was keyword searches, where after an abundance of information, people needed more convenient ways to access it. In the current third stage, it's not just about acquiring information, but also about social networking.

Because the threshold for obtaining information keeps getting lower, and web technology continues to develop more thoroughly, the ways people interact with each other have greatly expanded, making it possible to replicate real-life groupings. To put it vividly, it’s an evolution from Yahoo to Google and then to Facebook.

Shanghai Business Daily: What is Sohu Weibo's market plan?

Zhang: Sohu Weibo must achieve a market share comparable to Sina Weibo, while also having characteristics unique to Sohu Weibo.

Shanghai Business Daily: How will Sohu Weibo profit?

Zhang: Where there are people, there are profit models. The internet has already explored clear models. They are mainly three kinds: brand advertising model, keyword advertisements, and various game fees as a platform. But currently, Sohu Weibo is not considering making money.

Shanghai Business Daily: How do you view the listing of several domestic video websites abroad?

Zhang: Video is a very core part of our media platform. We have led the action against online piracy, showing people that piracy cannot become the business model of the video industry. The listing of companies like Youku is a good thing, as it can push them further away from piracy and create a fair competitive atmosphere.

Shanghai Business Daily: In the fierce state of internet warfare, what form will Sohu adopt?

Zhang: In the Weibo war, we will still adopt a nuclear war form, competing fairly and civilly. People may think the competition is brutal, but as long as it stays within the bottom line, there's no need to fear competition. Without conflict, there is no progress. Actually, the business world requires competition, lawsuits, and all that. Therefore, fighting is beneficial to the healthy development of the industry. (Editor-in-Charge: Chen Zhong)