This week on Ginger River Radio, Jiang Jiang welcomes Ivy Yang, who writes an op-ed column called “Discourse Power” or 话语权时代 for FT China and has written for The China Project. Ivy shares her insights into the recent restructuring of Alibaba and TikTok's dilemma in the US. Ivy has worked in strategic communications and in corporate comms for more than a decade, including two years at Alibaba Group. She follows topics from TikTok to cross border e-commerce to the effects of the CHIPS Act and much more.
The recent restructuring of Alibaba has been met with enthusiasm from investors, who view the split as an opportunity for better planning, capital allocation, and eventual IPOs for individual business units.
As a mature company, at least in the eyes of investors, it requires a lot of recalibration for Alibaba, which is exactly the refocus on the priorities reflected from the restructuring. Alibaba has to make choices that will ensure its growth will be sustainable. The overseas business has become more strategically important for Alibaba.
Alibaba's restructuring may prompt other Chinese tech companies to consider similar moves, particularly as they observe the resulting plans and execution.
For the Biden administration, they are trying to avoid running into the same issues that the Trump administration did, which was a very sudden attack on TikTok. They're setting the stage to gain more of a negotiation advantage into how to deal with the TikTok issue.
For TikTok, the goal of the hearing was not to answer all of the questions or even make promises. It's about stalling, not a pure confrontational and to be collaborative. And in that sense, Ivy believes the goal was achieved. In addition, the internet falls in love with TikTok CEO Shou Chew, which is the cherry on top for TikTok.
For the Chinese audience, the U.S. Congressional hearing is a reflection of the absurdities and the grandstanding that is an inevitable part of the democratic process which involves these hearings.
Recommendations for Chinese companies expanding overseas:
In light of the challenges faced by TikTok and Alibaba, Ivy offers the following recommendations for Chinese companies seeking to expand into Western markets:
Understand product-market fit: Companies must take the time to learn about their target audience and be willing to pivot strategies based on on-the-ground experiences. She emphasized the importance of resisting the temptation to 死嗑 (tenaciously uphold) the original plan.
Adapt communication norms: Both internal and external communication must be tailored to the local market. This includes understanding media relations, disclosure, and compliance requirements in the US, as well as employer branding to attract top talent. Ivy pointed out that "the U.S. media way is VERY different from how China does PR, the relationship building and nurturing process is very different from China’s media relations strategy."
Despite the challenges and uncertainties surrounding Alibaba and TikTok, it's important to remember that these companies have different stakeholders, business models, and approaches. Alibaba is a public company with a longer history in the US, whereas ByteDance (TikTok's parent company) remains private.
The evolving landscape of Chinese tech in the US highlights the need for companies like TikTok and Alibaba to adapt and strategize. By learning from their experiences and incorporating insights, other Chinese companies can successfully navigate the complexities of expanding into Western markets.
Ivy Yang (Twitter: @ivylala)
4:56 - How the TikTok hearing has been received in the U.S. and China
10:03 - Factors on the way out of the TikTok dilemma
12:57 - The possible outcome of TikTok situation
17:28 - The generation gap among TikTok users
21:27 - The impact of TikTok hearing and the question about TikTok's identity
24:36 - How the Alibaba breakup has been received in the U.S. and China
27:40 - Winners and losers of the breakup
30:46 - Combat the "Big Company Syndrome"
33:51 - Alibaba's mid-platform strategy
35:41 - History of Alibaba and other Chinese tech companies' expansion in the US
39:40 - Ivy's recommendations for Chinese companies expanding overseas
45:29 - Blog recommendation: The Marginalian by Maria Popova
Ivy Yang: The Marginalian (formerly Brain Pickings)
Jiang Jiang: An op-ed by Ivy on Temu, Chinese e -commerce juggernaut Pinduoduo's overseas e-commerce platform, which can be found on Zichen Wang's Substack newsletter Pekingnology, now part of the portfolio of Center for China and Globalization (CCG).
Inside TikTok, Zhang Yiming's great voyage through the waves by Ms. 张珺 Zhang Jun
Subscribe GRR newsletter for free to get a glimpse into the priorities of both the leadership and the general public in China.
A complete transcript of this podcast is available here:
JJ: Welcome to the Ginger River Radio podcast, a part of the GRR media outlet and your go-to podcast for anything about Chinese current events. I'm your host, Jiang Jiang, the founder of Ginger River Review (GRR), a newsletter that focuses on reporting the priorities of both the leadership and the general public in China and views you do not normally see from mainstream English language media. If you haven't subscribed to our newsletter, go to www.gingerriver.com and sign up to join our community of avid China-watchers. Now let's dive into our podcast show today.
In this episode, we'll be focusing on two companies that have been at the forefront of recent discussions among China watchers: TikTok and Alibaba. Just a few weeks ago, millions of people worldwide watched TikTok CEO Shou Chew face tough questions from US Congress members during a hearing at the U.S. Capitol. The session was convened to explore concerns over whether the Chinese government and employees of TikTok's parent company, ByteDance, could potentially exploit the app for surveillance or to promote content favorable to Chinese interests.
On March 28, China's technology giant Alibaba made headlines with its founder Jack Ma's return to China and an announcement of a major restructuring, splitting its business into six primary units - a landmark move in the company's 24-year history. These six divisions will focus on cloud intelligence, Taobao Tmall commerce, local services, Cainiao smart logistics, global digital commerce, and digital media and entertainment.
Joining me to talk about the recent news on these two companies today is Ivy Yang. She has worked in strategic communications and in corporate comms for more than a decade, including two years at Alibaba Group. She now writes an op-ed column called “Discourse Power” or 话语权时代 for FT China and has written for The China Project. She follows topics from TikTok to cross border e-commerce to the effects of the CHIPS Act and much more. Ivy was born in Wuhan and grew up in Los Angeles. She graduated from New York University and Columbia Business School and now lives and works in New York.
JJ: Hi Ivy, welcome to Ginger River Radio!
Ivy: Thanks so much for having me, JJ.
JJ: I’m so glad to have you. Your extensive experience in both China and the US, as well as your deep knowledge of the industry, makes you an ideal guest for this episode. I'm excited to hear your thoughts on these topics. Let's talk about TikTok first. There is no lack of stories in both the U.S. and China about the TikTok hearing, including a Wall Street Journal article titled "Why Chinese Apps Are the Favorites of Young Americans," in which you provided valuable insights. Based on your observations, how has the TikTok news been received by the public in both China and the US, particularly among young American TikTok users?
Ivy: Yeah, there really has been a flurry of stories in both countries like you said. But what I found really surprising is the intense interest in China for an app that most users can't even use in China, because TikTok is, you can't use it in China. From the line-to-line translation of exchanges between the CEO and lawmakers, it's really like all the deep dive on all the potential repercussions for TikTok in terms of a ban or divestiture. It's really interesting to me that Chinese people have really taken such an interest in this. I think the underlying reasons for why TikTok is faced with all these challenges in the U.S. is another thing that Chinese audience is also kind of having building their own kind of theories upon. And what I thought was really kind of important to know is also like, for the Chinese side, the level of sophistication about the issue. It's surprising and not surprising at the same time, given the kind of intense interest that China has about, kind of, all things that happen in the U.S..
But for the takeaway, I think, for the Chinese audience from the hearing is really the absurdities and the grandstanding that is an inevitable part of like the democratic process which involves these hearings. But there's a lot of kind of chitchat on the Chinese internet about the level of just pure ignorance, right? About the state of technology that these lawmakers have shown to really the world that they really understood very little and it's really about kind of attacking TikTok from their perspectives. So for them to properly regulate it and for them to even understand the issues at hand, I think for the Chinese audience, that was eye-opening.
In the U.S., I would say that there is a divergence between what the public sphere, what I would call like the mainstream media, that's reporting about what the hearing really meant. There is the use of the word like "grilling" of the TikTok CEO and a lot of media reporting also focused on the questions that Shou Chew couldn't give satisfactory answers to. And really, even after the hearing, a lot of concerns still remain. Basically, I guess the real issue is that TikTok is owned by a company that is based in Beijing and it's really, really hard to argue that TikTok is completely independent. And even when Shou Chew really tried to explain that, during the hearing, that they are completely separate, that they are an American company, it's very hard for him to guarantee that the Chinese government won't like, what they decide to do with ByteDance really is something that he cannot guarantee given that he is the CEO of TikTok.
But I think like overall the goal of the hearing was not to answer all of the questions or even make promises. It's about stalling. It's about not a pure confrontational and to be collaborative. And in that sense, I think the goal was achieved. And I think the reached goal was if the internet falls in love with Shou Chew which is totally the case, I think, on both sides of the aisle. I think that is kind of like for TikTok, that's kind of the cherry on top. So that's kind of at least from my perspective what the U.S. and the China, kind of media landscape, how they're kind of reaction to the hearing.
JJ: Yeah, I also believe that actually, it's very interesting that many Chinese people are watching the congressional hearing ... at least the highlights of the congressional hearing from the Chinese versions of TikTok, the Douyin app.
You also have written for The China Project about TikTok and its many challenges in the US after the congressional hearing, and specifically on how much work TikTok has put in in order to be perceived as been “American enough.” Now, TikTok faces an uncertain future as it tries to calibrate between Chinese and American interests. You suggested at the end of the article that it is hard for TikTok to maintain allegiance to both Chinese and American interests simultaneously. In your opinion, what are the key factors for TikTok in addressing the current dilemma? We know that at the beginning of the hearing, actually, Shou Chew addressed four commitments to address the concerns of the American Congress members and the public. What do you think about the key factors for TikTok now in addressing this current dilemma?
Ivy: I think TikTok is really just stuck in between a rock and a hard place. And the issues are really beyond TikTok. It's really about the U.S.-China and how it's really in the midst of all the geopolitical tensions that TikTok has become this poster child for that tension. And I think the rhetoric and discussions about the national security, privacy, data security ... they're issues way bigger than TikTok.
And but at the same time, right, TikTok also, the way that it handles the discussion carries a lot of weight and represent not just TikTok, the subsidiary of ByteDance, but also the intent and the attitude of its parent company. I think that will always be analyzed together and no matter how hard TikTok tried to separate itself from ByteDance, I think at least in the West that is something that it's just not going to be the case. And also like TikTok, it's part of that trend with all these other Chinese companies who are looking to expand into the overseas market in the U.S. and in Europe. It is that poster child of Chinese tech and increasingly globalizing, but at the same time in a de-globalizing world.
So I don't think there's really the right answer for how TikTok can address the current dilemma. It's just kind of have to go with the flow with how it's currently handling, right? It is doing a lot of lobbying right now in D.C. and it is trying to kind of showcase a more proactive stance, right, to show the lawmakers that we are doing a lot, whether it's the Texas Project or it's all of the other things that it's trying to do. They're really trying to prove that they are making an effort. At the same time, I think their China DNA, it's very, very hard to separate itself from.
JJ: Yeah, you mentioned about the Texas project, which is also another, I believe, an effort that Shou Chew's trying to make sure that the American people can accept that because he said that the data is saved in America and is being monitored by Americans. But it is still hard. I saw lots of people expressed their ideas about how TikTok should act in the next step.
I recently came across a thought-provoking tweet by Neysun Mahboubi, a research scholar at the Center for the Study of Contemporary China at the University of Pennsylvania. He proposed a four-step strategy for TikTok: 1) stop fighting US ban, let it happen; 2) strictly adhere to world-leading data security practices; 3) regularly point out how US social media companies fall well short of same situation; 4) build up TikTok's presence in the rest of world, make Americans feel FOMO. I'm not sure that is like the plan they had ... TikTok will accept, but it seems a very realistic suggestion.
What are your thoughts on the eventual outcome of TikTok's situation? Some say it is unlikely that TikTok is going to be banned because Meta, Google and other big tech companies also have similar issues. And the congressional hearing, as you just mentioned, sometimes it is more about putting pressure on TikTok to make it make a concession in the negotiation in the future.
Ivy: I think that is the million-dollar question and I think how you framed it is exactly the case. Nobody knows what the ban will look like. I think there are a lot of people have pined about kind of the legality of a ban, right? And the lawyers definitely are more invested in the issue than I can attempt to explain.
But at the same time, I think it's all looking like it's kind of setting the stage, right? For some kind of negotiation that has to happen. It's there's the pressure from the Biden administration, whether it's a restrict act or the data act to try to kind of almost showcase what it could look like when they are going to kind of apply pressure to, not just like TikTok, but for all Chinese tech companies. But at the same time like they are also trying to figure out how to do it so that they don't run into the same issues that the Trump administration did, which was kind of a very sudden attack. And now they're kind of setting the stage and I think it is to gain more of a negotiation advantage into how to deal with the TikTok issue. But I don't think a ban is very realistic. But at the same time, I think right now anything could happen. But I think for the Biden administration TikTok is becoming this kind of political imperative. It's kind of what the Chinese call "势在必得" [meaning it's an inevitable situation].
They really want to figure out a way for them to manage this, to show that, at least show some a segment of the voters that they're doing something about it. So there's definitely going to be some kind of verdict served to TikTok, whether it's in the form of a ban, a forced divestiture or a forced sale or simply making things much harder for TikTok to operate in the US. I think those are kinds of degrees of options that I think can all happen to TikTok in the near future.
JJ: Do you think other than a complete ban, maybe a compulsory sale or forced sale or maybe a transference of technology is more possible than being banned in the U.S. for TikTok?
Ivy: I think the latter two options are more possible than a ban because when there is a ban, I don't think there's like nobody benefits from it.
And I think one of the arguments that TikTok has been making through its kind of media relations and in a lot of its kind of lobbying talk points is that TikTok is generating a lot of job opportunities. It is a content creation platform that is creating a lot of different options for creators. So I think from that point of view, it's going to be really, really hard to just completely ban the app. And also just like interestingly, when we were talking about the differences between how the traditional media and China is looking at the hearing and the issue of TikTok, I think there's also kind of like the third media outlet which is like actually on TikTok. I actually spent a lot of time after the hearing on TikTok and there is no shortage of like just the millennial and the Gen-Z creators, TikTokers, or just users, just completely like not okay with the potential that the app is banned.
And how the kind of means have blossomed since then ... it's very difficult for me to believe that's all kind of TikTok's teams or TikTok's creators doing all of that. I think that's also a reflection of a segment of the much younger demographic, which is also a voter demographic and that both sides are trying to win over. I think if they do decide to ban TikTok, I don't think that's a great look for Gen-Zs who are of the voting age.
JJ: Yeah, actually, I was going to ask you if you think that maybe the short-term effects of the congressional hearing might be like losing lots of users, but actually I believe according to what you have just said and observed, it is not likely, right？The next generation, I think, are going to stick to using this app because it's just really convenient and popular.
Ivy: Yeah, I think so. And I feel like there's gotta be a reason why a lot of these people are on TikTok versus like YouTube or all the other mediums. I think there's something about it. I am not an avid enough user on TikTok to fully understand the platform and like the whole culture of it. But I've begun using it enough to kind of understand the anger. But it's super fascinating to me. I guess it's because like you and I are ... but they keep on trying to convince us that there're like ... all their users are not just Gen-Zs, but I feel like it's definitely not my choice of social media app that I constantly use and really addicted to compared to some of the other apps. I don't know, maybe we are still like outside of their age range for the app. I don't know. Do you use TikTok a lot？
JJ: I use, but not that often. I use the Chinese version of TikTok, Douyin, like a lot because there are just lots of interesting things on that. I think the logic, we say, the "底层逻辑" [meaning "underlying logic"] of these two apps are almost the same, right? It just keeps feeding you the things that you like to watch. But I believe TikTok, in terms of the, as you just mentioned, the core users of it, maybe we are not like the most targeted ones.
Ivy: I don't think we are, but I think Douyin also ... I think like at least anecdotally, I feel like a lot of like my family members in China, they would use Douyin versus ... I don't feel like people in their 40s+, 42 kind of age, kind of 60s age segment would use TikTok. That's something I've always wondered, but I'm sure they have a lot of stats proving me wrong.
JJ: Yeah, my mom, I think she preferred to use Kuaishou rather than Douyin, maybe they do have a generation focus in terms of the different apps. And I think another interesting thing is that because now more and more enterprises are paying more attention to entering into the U.S. market. You also touched a little bit on that just now. Do you think the current situation with TikTok in the U.S. will have a negative impact on the technology industry as well as the openness of the market in the U.S. as a whole, or it will only impact Chinese companies or companies whose parent company is a Chinese company that either plans to enter the U.S. market or is already operating there?
Ivy: I think that's a huge "if". And I think the whole dozen notions of what is a Chinese company, what makes a Chinese company a U.S. company, I think these are very these are very fluid concepts now. There's a legal way of defining if you're, like for example, TikTok is based in the U.S. but also in Singapore, right？But we still think of it as a Chinese company because it is a subsidiary of ByteDance.
And also I keep on thinking about like TSMC, right? TSMC is really kind of building its presence in the U.S. in Arizona to start. But when you think about TSMC, a lot of their talent is from Taiwan. A lot of their equipment is from Europe. Their know-how is kind of in the US and in Taiwan. And globally, they have talent that kind of contribute to that process from all over the world. But in the case of TSMC, because it is based in Arizona, it makes it an American entity versus TikTok -- it is an American entity, but we still kind of relate it back to it's a Beijing-based entity.
So I don't know. I think this question is a huge question, but I just think that, from my perspective, and I think about this a lot from the perspective of like communicating and corporate affairs and from how do you adapt to the local market that you're in. And I think that is something that is in constant motion. And I think we have to think it beyond just the physical location and think about more like its DNA and how it wants to be kind of perceived as American or as Chinese or none of it. I just think that the idea of a global company in this day and age has to evolve, and I think it hasn't fully gone through the process yet.
JJ: Yeah, sure. I hope they can figure out a way to get it work because many enterprises are watching. And speaking of enterprises, let's now switch to Alibaba. The same question I would like to ask first is how has the Alibaba's breakup plan been received by the public in both China and the US according to your observation?
Ivy: I actually think you might be more ... you probably are watching this from kind of both sides a lot more than I am. Because I think from my perspective, there are the investors' opinion and I think it's great. Everybody is super happy because the sum of its parts, sometimes it just means that it's a lot more complicated and it's for the investors, it's a lot harder to analyze. So now that they are kind of in its own kind of businesses, it's much more clear to see what their transfer prices of internal management are, what are some of the challenges and who is actually subsidizing whom. Because in the old system where it's kind of like the group and then the subsidiaries, it's very hard to fully see that and to analyze that. So I think at least for the investors in the US at least I think they're really happy and all the shareholders are really happy. But in China, I think I haven't seen a lot of negative pieces about it, have you？
JJ: I don't think I see much negative comment on that. And I actually, I feel that it's more about enterprise strategic plans that maybe the public don't care that much, and Daniel Zhang, he mentioned that he hoped the whole group or the units could be more agile, reactive to the market situations.
So it will benefit them. At least Alibaba group believe that it will benefit each of the groups so they can react more quickly to the things happening in the market. But, of course, in the short term, maybe they have to ... they need some time to adapt to that situation. I think it's more about how the other enterprises, especially the competitors of Alibaba see these changes. According to the latest plan, Alibaba will establish six independent business groups, each responsible for their own profit and loss. Each business group will form its own board of directors, implementing a CEO responsibility system under the leadership of the respective boards. Under this model, Alibaba will act as a holding company, managing each business group, while allowing individual business groups the opportunity to go public independently.
Besides the e-commerce segment (because we know the domestic e-commerce business accounted for about two-thirds of Alibaba Group's revenue), who will be the winners and losers, and what could be the potential outcomes of some of the BUs in your opinion?
Ivy: I personally think that the domestic e-commerce business will continue to do really, really well just because now that it doesn't have to subsidize all of the losing BUs. It probably has a much better chance of focusing its efforts just doing what it does best.
So I think that will kind of refocus like you were saying, refocus the effort and become more agile and it is also an intensely competitive segment, right? In China, there's like JD.com and Pinduoduo, and I think they are definitely in need of some kind of ... not a full pivot but definitely to kind of refocus their efforts so that they could really kind of run the business without having to fully fulfill a kind of group level strategy.
But I think the biggest losers probably are the BUs that do require a lot of investments and it's a lot of kind of zero-sum competition in China. The one that comes to mind is local services, right? I think that is the BU that has been bleeding a lot of money and they are also the kind of business ... because the switching cost - we both lived in China - we know that for consumers at least, to get delivery from one platform versus the other, the switching card is so low that there's really very little kind of customer stickiness. So it requires the business to really continuously investing in acquiring customers and just ensuring that there is that scale for the business to make sense. But I think you'll be really interested to see how local services will operate in the near future. And especially in the next, I guess, quarter, after this change, because without the kind of subsidies, how will it kind of fully survive and thrive the way that I'm sure the business will want to.
But there's also a lot of competition like Meituan, for example. Compared to Alibaba, Meituan [works] similarly, right? like the e-commerce and even like international e-commerce. Meituan, it's really focused on this local services model versus to Alibaba, this is like a big part of it, but it's also not everything. So that laser-focused on the business itself, I think that is the intent of this whole restructuring but whether it will survive long enough for this or for it to take effect, I'm a little skeptical.
JJ: What are the new opportunities and challenges for Alibaba Group after the restructuring? I have heard some of my friends who are former employees saying that Alibaba has developed a Big Company Syndrome, which is not unusual, but will the reconstructing help that and maybe lead to a new era of Alibaba?
Ivy: I think the whole purpose of this it is to cure the big company syndrome, right？I think that is a huge part of it. And theoretically, we were just literally speaking about kind of refocusing and giving the power back to the businesses and it can lead to better planning and they could do better capital allocation because they don't have to support money losing ones. They could redirect and really build according to their own needs. But I think it's going to be difficult even on an individual BU (business unit) level if the whole 大公司病 Dagongsibing (big company syndrome) which I think a lot of people have written about ... It's not even the growing pains anymore. Alibaba is at a scale large enough. Still I think to investors, they expect Alibaba to be a growth company, but I think Alibaba is at a mature stage which will be analyzed very differently and judge differently by investors and by its own employees to try to understand its kind of way forward. So I think Dagongsibing is a huge part of it. So I totally agree with you on that.
JJ: Yeah, I think the big company syndrome is a common issue that lots of big companies have to face and want to figure out a way to solve. And you mentioned about Meituan, do you expect any other internet companies like Tencent to split up like Alibaba? Will Alibaba's competitors, including JD.com and Pinduoduo, take advantage of the opportunity to expand market share through the restructuring, or are those competitors going to face an even stronger Alibaba, as each of the six business divisions may have the flexibility and freedom to develop their own growth strategies and approaches based on their unique business characteristics and organizational structures? As you said, they are going to be more focused and maybe they can have a more customized strategy against their competitors.
Ivy: I think they all have different challenges, but it's a really interesting question because I think for Alibaba the split is really significant. I think for the past I would say 5 years Alibaba has been really focused on integration and facilitating coordination and really kind of centralizing the power, right？And really kind of all aggravating that into the group versus I don't think any of Alibaba's competitor has been this intentional about doing that. For example, Alibaba has been talking about the 中台战略 Zhongtai Zhanlue, the mid-platform strategy (a leading digital business innovation practice in China, is made to enable modularity, composability and thus composable business), for a really long time and that was kind of Daniel Zhang's big plan and strategy. It's really all about kind of how to mobilize internal capabilities and rally the troops, and how to incentive all the BUs to help one another at least kind of on the surface. I think that was the intention of the Zhongtai Zhanlue.
But the idea that everything is in supportive of the group is very, very idealistic and I think it disregards corporate behavior, and assumes that employees will just march the same beat of the drum and really just being okay having their fate decided for them with very little discretion and consideration for their career trajectory, because I think Zhongtai is all about being very, very coordinated and having all of the small pieces in service of kind of the bigger grander goal. I think this is also significant as it points to my own opinion Dagongsibing -- big company syndrome that you think that you could use this kind of strategy to manage behavior.
I don't know whether or not all the other companies will follow through, but I do believe that this is a watershed moment and have no doubt that all of the technology companies are watching it to see exactly what Alibaba plan is and how it is executed. I think that will determine whether or not they do something similar or know that this is not the way to go.
JJ: How will Alibaba's restructuring affect its overseas strategy and development? Will what TikTok experienced in the US affect Alibaba's overseas strategic layout?
Ivy: I think one thing that we've been talking about TikTok and we think about the reason of winners or companies are winning in the U.S. market, right? Shein and Temu, and all these companies, but we cannot overlook how long a lot of these OG Chinese companies have already been in the U.S. So, some stats, right？Baidu opened its first R&D center in the U.S. in 2011. Alibaba's B2B commerce business was first launched in the U.S. in 2019. And same with Dji, Tencent and the rest of the crew, they've all been in the U.S. for much longer than I think we remember. AliExpress (an online retail service based in China and owned by the Alibaba Group), for example, has been in the U.S. for more than a decade.
I think with the whole revamp that the consolidating of the international commerce business under Jiang Fan. When he took the helm in 2022 I think the overseas business has become more strategically important and that hasn't really been the case because Alibaba core commerce was just so successful that for the overseas business, it's great to have that, but it's also in some ways an afterthought
I think Alibaba has also been one of the first and the earliest trumpeting globalization. Its IPO in the US and it has been loud and kind of strong in talking about globalization. They really want to do more in that space. I've written about that idea too in one of my FT pieces. The whole idea that Alibaba is a mature company now as we were just talking about a moment ago, and given all the signals and organizational strategies and even some of the challenges it's been facing, it is at a mature stage. And right now for Alibaba, its transitions from a growth company to a mature company, at least in the eyes of investors, requires a lot of recalibration and that will also take a lot of convincing because I think this is exactly what they're trying to do to kind of refocus on the priorities and costs, and cutting redundancies and starting to make choices that will ensure that its growth will continue to be sustainable.
So, I think for the overseas market share, in the recent earning calls they've tried to really emphasize that it is increasingly important. It is a huge part of the puzzle. But it's also definitely a work in progress. In the recent earnings report, the core e-commerce, Alibaba's cash cow, like you said earlier, was 2/3 of the business, and the international commerce is merely 8 percent of the revenue. It's clear what the priority is given revenue contribution as core commerce growth slows down and it really has been, international commerce has become much more important. It will be really interesting to see after this whole restructuring how it's going to play out.
JJ: Yeah, I think it's interesting that you mentioned that actually lots of Chinese companies have existed in the U.S. years ago which might be ignored by some people. What suggestions do you have for Chinese companies to expand overseas, especially in the Western markets, in the future?
Ivy: I think one of the biggest challenges is for larger Chinese tech companies or even smaller consumer brands, hardware or other Chinese businesses is that they have to accept that there is a huge learning curve to adapt to the norms and rules of the country.
And I think having respect, or 敬畏之心 Jingweizhixin, in early stages is really, really important. I think in the U.S. I have observed that companies really take a page when they're launching in the U.S. like how they are operating in China. They try to replicate some of that here. Sometimes that is the secret sauce that kind of gives them an advantage over their U.S. competitors. But a lot of times this involves like flying this special force team from China to run the U.S. Business. They hire some local talent but try to really make them learn the ways of their Chinese counterparts and expect full allegiance and how they follow the strategies and execute their strategies, just trying to replicate how things are done in China and culturally to the U.S. And the result is that there's literally always a lot of tension between the corporate level and then also the overseas departments or businesses.
At the same time though, I think this time around compared to the previous rounds of Chinese companies going overseas, they're also under a lot more pressure to succeed and to really prove that there is business case to operate and to be in the U.S. versus before a lot of the Chinese tech companies open up R&D centers in the U.S., and really want to hire U.S.-based talent. And when they're launching businesses in the U.S., it's more like a trial and error. Let's see if this sticks. Let's see if it works out. But I think for this crop of kind of newcomers, new companies in the U.S., they are really keen on diversifying their markets and succeeding in the U.S. and in other Western countries.
I think at least from my vantage point, there's the basic things of trying to understand the product market fits, spending time about learning the target audience and pivot strategy when on the ground learning and experiences demand, so I keep on thinking back to the idea of 不要死磕 Buyaosike (tenaciously upholding the original plan). For a lot of Chinese companies that's also really important and pivot when they need to, but I think it's much easier said than done. But definitely the temptation to 死磕 Sike, or tenaciously upholding the original plan. I think resisting it is half the battle.
From the communications side, it's all about relearning the communication norms and the ways to do it properly, both internally and to an external audience. They're actually very much connected. I think for Chinese companies in the U.S., the first thing to understand is that the U.S. media way is very, very different from how China does PR in terms of the relationship building and the nurturing process. It's very different from China's media relations strategy. I think in the U.S. definitely reporters have a lot more autonomy and there's of course always a chance for negative press that is not a part of the plan.
And I think this is a big one in the U.S. that sometimes you cannot "PR" your way out of things in the U.S. and that's something I cannot stress enough, but it's also very difficult sometimes to set the context on helping Chinese companies understand that is the norm and the way that things are done in the U.S.
And the internal communication side is also really important because employer branding really is very, very important and affects the company's access to the best and the brightest talent pool. And that's often overlooked and I think also really important for Chinese companies that are looking to expand overseas to start caring about that. How you are perceived in the hiring process and in the talent pool will affect really kind of your team and how you do in the U.S., so that those are a couple points that come to my mind.
JJ: Yeah, fantastic. I think years ago that Chinese companies are talking about 出海 Chuhai, or expand their market overseas, and I believe through the years of their expansion, they have much more experience and they can become more adaptive to the scenarios in other countries. And there are still lots of things to learn. Let’s move on to recommendations. We invite every guest of our podcast to recommend something to ou r listeners. It can be a book, a movie, a TV series, a podcast, or even a video game. Ivy, what do you have for us today?
Ivy: One of my favorite things to read and I feel like it's the best kept secret because it started before the "Substack era" and it's called The Marginalian and it was originally named Brain Pickings. It's really like a book review plus analysis and just musings and thoughts and insights written by this one person and she's been doing it for more than a decade. And I started following it a long, long time ago. It's almost like the kind of things you read to escape, for you to also find book recommendations. So the way that the blog or the post works is that the writer condenses books into insights and then kind of bring other books and insights and then just kind of threads it in the most perfect way. And the goal of it really is to just kind of inspire you on all these new ideas that you just had no idea that it existed. It's like this quest to search for meaning and to find joy in the mundane and the profound and the way that Maria (the writer) kind of threads all these ideas together. It's really really hard to explain. You have to read it to fully, fully understand. And I shared it with you, Jiang Jiang. Did you take a look？What do you think of it？
JJ: I would say it's 脑洞很大 Naodonghenda, or mind-blowing and creative. It has lots of different thinking patterns in terms of how you view a books or a some certain type of write writings. I think that's a great recommendation. And I like the name Brain Pickings. It's just very to the point.
Ivy: That's exactly what I mean. It's really like picking her incredible brain and learn something new. And it's amazing.
JJ: Yeah, and for our listeners, I'd also like to recommend an insightful Op-Ed by Ivy on Temu, Chinese e -commerce juggernaut Pinduoduo's overseas e-commerce platform. You can find this piece on my friend and former colleague Zichen Wang's Substack newsletter Pekingnology, which now part of the portfolio of Center for China and Globalization (CCG). In the article, Ivy analyzed Temu's Super Bowl strategy, which include a jingle that sings the lyrics "Shop Like a Billionaire,” and Temu’s logic in spending big bucks on conversion and the unintended consequences of Temu’s marketing strategies in the U.S.
Thank you once more, Ivy. Thank you so much for taking the time. And I look forward to having you back on the show, there’s just lots more to talk about tech, e-commence, chips and more other things around China and U.S.
Ivy: Yeah, this was really, really fun. Thanks so much for having me, Jiang Jiang.
JJ: Thank you Ivy.
JJ: The Ginger River Radio podcast is a part of the GRR media outlet. Our show is produced and edited by me, Jiang Jiang, Yu Liaojie from Shanghai International Studies University, and Jia Yuxuan from Beijing Foreign Studies University. For cooperation, investing or feedback, email me directly at email@example.com, or just give us a rating and a review on Apple Podcasts. We would be delighted if you would recommend our podcast or newsletter to others if you find it helpful. Thank you for listening and see you next time. Take care.
The guests' views of this podcast don't necessarily represent the views of Ginger River Radio.