iinnovate 6: Andy Fan, Founder & CEO of Mofile (Chinese Youtube)

transcript from http://iinnovate.blogspot.com

 Matt and Julio – Episode 6: Andy Fan, Founder of Mofile (Chinese Youtube) 

Hi and welcome to iinovate, a podcast about innovation and entrepreneurship with Julio Vasconcellos and Matt Wyndowe.   

Hello and welcome to the sixth episode of iinnovate.  Julio and I have returned from the summer, are back here at Stanford, and we’re really excited to bring you a great line up of interviews this season.  We’ve gotten some feedback from you and we’ve heard that you want to hear more early stage entrepreneurs and also some non-tech people, so I think we’ll have some interviews which will be pretty exciting for you.  And, uh yeah, if you have any other comments or questions, just send us an email or better yet, toss something up on the blog at iinovatecast.com.  Okay, so for this interview, we feature Andy Fan, who is the co-founder of Mofile, the Chinese Youtube.  I met with Andy while I was in Shanghai.  Andy has some interesting insights, not only into his own company and the video sharing space, but also into the habits of the Chinese Internet user.  We hope you enjoy the podcast and thanks very much for listening.   

Matt:  We’re here in Shanghai with Andy Fan, who is the founder and CEO of Mofile.  Andy, nĭ hăo, welcome to the podcast. 

Andy: Thank you 

Matt:  Andy, could you explain to the audience briefly what exactly Mofile is? 

Andy: Mofile right now is a video aggregation website, that’s from the use of experienced parties that looks pretty much like Youtube, but actually Mofile was started as a file sharing service.  Judging from the name, you maybe guess that Mofile is ‘my online file’ abbreviation.  We started that service because we found a major problem our users were facing, we are facing, is that we cannot send a large attachment to our friends, that’s back two years ago.  We designed this server to solve that problem.  By the single service, we got about, like about 400 million regular users and also covered about 12 million users in China.  But later we found out those active users are using the service mainly for distributing videos to their friends.  So we believe we need to give them a better way to share video.  At that time, earlier this year, we found, we realized that Youtube could be a great thing.  We picked up the user experience format and we implemented it on Mofile, and made it, we launched the Mofile video sharing service just this June, and made quite a good success.  Within two months we made it to the number one place in video sharing in China.  So right now Mofile is the number one video sharing website in China. 

Matt:  Now in the US market, Youtube dominates the market.  How would you describe the market in China for video sharing? 

Andy:  Here in the market it looks somehow different because in the video sharing it’s new, and most of the players are inspired by the US model.  So pretty much they start at a similar, from a similar start, and right now there are people, the number one, number two and number three players are quite close.  Given though Mofile is in the leading place, we are not the second and third and that far away from us, that’s the interesting part.  And the people are taking different approaches trying to grow their business.  Here, for example, we do not have a huge Myspace, we’ve got about over 600 thousand bulletin boards in China.  This online community is decentralized, not in a single place, so we’ll go after those online communities.  They are powering our gross, not from a single Myspace type of community. 

Matt:  Of course Myspace was a huge part of the success of Youtube, but talk a little bit more about the communities here.  You say there are bulletin boards all over the place? 

Andy:  Yeah.  The most popular type I would say is, by definition, a social network.  Those other formats are more popular.  Like bulletin boards, people are setting a lot of bulletin boards around their own community.  They prefer to have their own semi-closed community with a clear subject, some are cards and some are gaming, some are maybe some kind of serious sports like tennis or something.  They prefer to have this kind of format instead of a large community.  But, maybe it’s just not happened yet.  Later it could be a large community. 

Matt:  So, let’s say I’m an active 15-year-old Internet user.  Is it likely that I’m a member of many different bulletin board communities? 

Andy:  Yeah, typically you could be one part of like a hoop-China, which is a basketball community. 

Matt:  Big, big here in Shanghai. 

Andy:  You could also be an active member of 173 173, talking about online games.  These two are not together; you have friends in different circles.  Maybe you have your active buddy list on Qcube.  They’ve got a Qcube group.  They do instant communication.  So, this kind of decentralized network is a reality of what’s in China. 

Matt: And people have sort of these multiple identities on these different sites.  Interesting.  Who do you think are going to be the big players in China in terms of like the search and the portals, how do you see that shaping up? 

Andy:  The largest ones so far in terms of traffic are still the search engines.   

Matt:   Okay.  And is Vido leading the way? 

Andy:  Yeah Vido leading the way. 

Matt:  Who are the other big, is Google also very big? 

Andy:  Google and Yahoo. 

Matt:  Okay.  So Vido, Google and Yahoo. 

Andy: So Vido, Google and Yahoo are pretty much ranked in this. 

Matt:  How about Cina? 

Andy: Cina is, they are recognized as the best news source, news source, yeah.  The other people are recognized as either gaming or wireless news service.  So each portal has their own unique positioning.  They can survive very well. 

Matt:  Are people accessing the Internet more and more over mobile phones; has 3G really permeated at all or is not an issue? 

Andy:  Not really. 

Matt: In Japan it’s huge. 

Andy: Here it’s still, the network is not ready; the device is not ready yet.  But we see great potential because here that culture is not driving.  People are stuck in public transportation.  That’s a huge market for people while they are in public transportation or when they are walking, they can do a lot of stuff.  Different from the US, but driving they cannot use mobile phones to do stuff. 

Matt: It’s true, just being here for about a month, you know, and if I’m on the bus or something like that, I always take out my video I-pod and I’m looking at that. 

Andy: People’s typical transportation every day is about one-and-a-half or two hours.  So basically they are either walking on the street or in some transportation vehicle.  So, that time for them, you see a lot of people are using SMS.  If 3G were ready, they could be browsing web pages, they could be watching digital broadcasting. 

Matt:  There is this notion of, you know, 80/20.  Pareto principle: 20% of your people are going to make 80% of your quality content.  There’s also the new mem 80/19/1 where the critical thing is that one percent of people.  What do you think about that? 

Andy:  Well I believe in the new type of media; it’s maybe even less than one percent.   

Matt:  Really? 

Andy:  We see in the general, our music group, people who upload video daily, I mean to the video streaming section, could be, I would say, just are somewhere around one percent. They are, actually the content within those really get a lot of attention; it is definitely less than one percent.  So that’s something critical gonna take you, or put you on a cross train.  I think that’s the interesting part of the business.  You cannot precisely tell what’s going to take off. 

Matt:  Who knows? 

Andy:  So we need some sort of a model to capture this type of user to bet they are generating something.  

Matt:  So Andy, back to Mofile, let’s talk a little bit about user-generated content.  There’s a lot of talk going right now around whether or not users should be paid for their contributions to user-generated content sites.  So on one side you have, sort of a Netscape, Rever, a couple of other players who are taking the line that users should be paid for the content, and the other side you have, let’s say Dig and Youtube who are not paying users for the content.  What are your thoughts on whether users who are providing the content should reap some of the benefits? 

Andy:  I agree with those people who are saying to pay people for their content.  They are right about, they understand it’s the content geared to audience, and if the audience is well encouraged, they can donate more content.  They are right about this part.  What could not be that helpful, is at least our results shows, by rounding first group, their inspiration for them to give content to website is not just by some type of a money issue, it’s more about they need to get recognition, they want to get that a community feeling from their donation of the content.  So as our research results show, it’s the fourth or fifth reason to motivate them.  But anyway, it’s one of the reasons they will consider to give the content to whom.  By doing that has also changed the way people perceive the content.  If they are, they know, they may love somebody because it is grassroots, homegrown stuff – they love it.  Once it becomes company-sponsored stuff they will change their perception around it.  So it could be a, you need to do it really cautiously.  We agree that you need to share the financial benefit you get.  Our way of doing that is, we all have had a plan that we just threw out about one week ago.  We are, since Mofile is one of the largest publishers of AdSense in China, we did a, we jointly announced a profit sharing program, with Google AdSense team in China.  So everybody, not just selected people, everybody can get revenue share from Mofile video sharing.  We rotated that publishing time with the user.  If you’ve got a AdSense account, it will rotate.  So, we believe, that a decent… 

Matt:  So that, is that on the user’s home page? 

Andy:  Yeah, on the user’s video page. 

Matt:  I see; so they are already able to put their, to monetize it some way. 

Andy:  Yeah in some way, we believe that’s a descent incentive to give them.  Not too much because too much can change the name of the game, it’s not about moneymaking; it’s about having more fun.  You see the numbers growing, maybe just several cents a day, but still very interesting. 

Matt:  How does government regulation affect Mofile? Is there some tension between the free flow of information that is just on user-generated sites, and some of the policies of the government?  For example, I’m here in China, I can’t access Wikipedia, which drives me nuts because I love Wikipedia.  Whereas Wikipedia’s free user-generated content, you can put anything up, presumably on Mofile people can put anything up as well.  Is there a tension there?  Do you foresee future problems in regulation in that respect? 

Andy:  I think we do in terms of content following the same set of rules that applies to the context or whatever content’s already online.  So already ours is an Internet company that also follows the same rules to help to make sure that video online on our site is in line with all the laws and rules in China.  For example, we have a team manually screening every video incoming to our system.  Then we make sure anything is correct, because it involves manual screening. 

Matt:  How many people do you have screening? 

Andy:  We have eight people. 

Matt: Eight people. 

Andy:  Eight rotating about 18 hours a day. 

Matt:  Really?  Interesting.  What a strange job that must be. 

Andy:  Actually it’s an interesting job.  They get to see the funnest videos and the first burst, and also we make use of that step, that additional step.  That’s our response to the content. 

Matt:  So let me ask you a related question.  Talk to me a little bit about IP protection and how do you deal and manage IP issues? 

Andy:  Okay, protecting copyrights and material actually is one of our most important jobs.  We do what we can do.  First we prevent content longer than ten minutes uploading to our system  unless it’s from our content partner.  And another step is that we remove anything that’s clearly been identified as a copyrighted material, at the request of the clear owner of that content.  That’s pretty much stated in the DMCA, or DMAC – Digital Millennium Act or something.  In China, similar laws require us to do the same thing.  In the manual screening part, it’s quite difficult to judge whether the people hold the rights or not. 

Matt: I see. 

Andy:  We do not accept content obviously the same.  People cut movies into segments and we’ll stop that.  The rest is very difficult for us to identify. 

Matt:  To know 

Andy:  If you follow the same rule that, like the other company operating, Youtube, after March they implemented a ten-minute rule.  It seems everybody, every other company in the world is following a similar rule – ten minutes. 

Matt:  Interesting.  Ten minutes, that’s the number.  Let’s talk a little bit about the funding environment for a startup in China.  How were you funded and what’s the venture capital market like here?   

Andy:  My personal experience is that we found that the really early stage is very difficult because here seed money is very difficult.  Actually we spent our own money on the really early stage.  But later, actually if you demonstrate a clear, clear direction what you are doing, actually people looking for serious funding will find it much easier.  Because venture capitalists here operate with a less adventurous mindset.  They take less risks. 

Matt:  Interesting. 

Andy:  So in the really early stage you need to do it on your own.  And I would advise my friends to do it on their own.  But for the later stage, you have pretty good opportunity.  We see a lot of venture capitalists have entered China, they have been here either for several years or they entered with kind of an aggressive approach, but still have problems in the early stage. 

Matt:  A lot of the US firms moved here, DFJ I think was one of the first.  Now Sequoia’s here and a number of the firms. 

Andy:  NEA, New Enterprise Association, is a very large firm. 

Matt:  Who are sort of the big names in China?  Is it mostly the US firms or are there also merging Chinese firms? 

Andy:  I mean the largest name, in terms of early stage, is a local, not local actually, IDG could be the most famous one.  For later stage, I believe is, the name like Sequoia is very popular because everybody knows it.   

Matt:  The Sequoia just recently got Neil Send, the founder of Seatrip. 

Andy:  Yeah, I think they are doing something quite successful here. 

Matt:  What’s the talent pool like in China?  Maybe specifically first to engineering talent and then also to managerial talent? 

Andy:  Right now we see the talent pool is really good.  They have a, but most of the best people are concentrated in either very good enterprises like Telecom, those kind of companies.  The other is like, I’m talking about technology, the others go to famous international technical companies like Microsoft, Google.  They’re brand names and they attract a lot of people.  So for starting up entrepreneurs who are looking for people willing to take the spirit as a, even as an employee, you need to have some kind of an entrepreneur spirit otherwise you will not choose to join a company like, starting up.  But in general, we do have very good quality.  I myself see the growth of the local talent pool, maybe back six years ago, we saw the localization; really, back five or eight years ago because I work in an international company, we know the boss always will be someone from somewhere else.  But we see right now, a lot of companies headed by local people. 

Matt:  I see.  That’s great.  Well Andy thank you so much for the talk.  I really enjoyed the chat and thank you very much for coming to the podcast. 

Andy:  Yeah, thank you for coming over. 

Thanks for listening.  A transcript of this interview as well as bios and comments are available at iinovatecast.com.