Why do Chinese tech companies scale so enormous, so quickly? Aside from the clear historical reasons — a vast market, loose regulation (at least until lately), and the advantage of being an early follower — there is one crucial strategic distinction among major Chinese firms: they are willing to test their core products aggressively. What stands out most about Chinese tech startups is not always their level of innovation, but their readiness to upend their strongest, most central assets and remake themselves.
I wish we saw more of that sort of confident risk-taking in Silicon Valley. But this forceful business approach is not just a sign of Chinese tech leaders’ ambition: it comes from the view that innovation is not only about solving the obvious inefficiencies in today’s market, but about playing a far more strategic and proactive role. Companies of every size have a lot to learn from the way Chinese firms actively shape supply and demand while pursuing innovation.
Most recently, this can be seen in two cases: live ecommerce and short video, both of which have expanded explosively in China over the last five years. Even though it is now more than 20 years old, Alibaba grew 34 percent last quarter. Competitor Pinduoduo now says it has the most active buyers, hitting 850 million in only six years. And ByteDance’s prize asset, TikTok, now has 1 billion users worldwide, and has recently surpassed YouTube’s average watch time in the U.S. and U.K.
U.S. tech companies have likewise shown strong interest in live ecommerce and short video, but so far they have been relatively cautious. Giants like YouTube, Instagram, and Amazon have sophisticated technology, abundant capital, and a dominant position — all of which should make it almost impossible for newcomers like ByteDance to break into the market. Yet when looking at how these new categories came about, the willingness to make major changes to core assets is, I’d argue, one of the most overlooked reasons Chinese internet companies are so powerful.
Behind China’s live ecommerce dominance
During the past five years, live commerce in China has totaled $171 billion in GMV, or 10 percent of all ecommerce. By contrast, that figure is under $1 billion in the U.S.
Is there something special about Chinese shoppers that makes them enjoy buying through livestreams? Not really. In fact, the trend got off to a faint and uncertain start. But Alibaba, the market leader, believed that content-driven commerce would be its next growth phase. And although Alibaba was not the first company to officially introduce livestreaming ecommerce on its platform, it was the biggest and most aggressive.
The company made livestreaming a core feature of its main apps early on and kept pouring resources into strengthening both supply and demand. On the supply side, Alibaba saw that talent was scarce and quickly started partnering with more than 200 multi-channel networks (MCNs) to recruit and train huge numbers of streamers, a practice that still continues — the company trained over 100,000 agricultural hosts in 2020 alone. Two figures from those early initiatives, Viya and Austin Li, still rank near the top and are well-known faces in the field; in 2020, their combined GMV was over $8 billion USD. In addition, Alibaba introduced 60 shopping-themed live shows within two years, many of them with famous celebrities, to create demand.
But the most important thing the company did to raise awareness of the feature was to make live commerce a major attraction of Singles’ Day, the world’s biggest shopping festival, in the first year after launch. Sixty-thousand livestreams were aired at almost every hour of the day and night. Sellers were given reasons to take part: Livestreaming merchants received substantial traffic, far above normal levels. Alibaba also put money into a series of promotional events, including livestreaming the annual gala (which was also co-hosted by a media channel) and an eight-hour fashion show at the start of the festivities, which set a record.
Lastly, even when livestreaming ecommerce still made up well under 1 percent of Alibaba’s total GMV, it was still placed in prime real estate on the app — the middle of the front page. Without these bold actions, it is difficult to imagine the industry would have grown even half as fast as it has in China.
In the American ecosystem, live commerce has been talked about for years as a possible “next big thing” by internet giants such as Amazon, YouTube, and Instagram. Clearly, all of these companies understand how important live content is to ecommerce. Yet most features are not yet woven into core products, are hidden in subpages, or are still awaiting launch.
That is not to say there has been no progress. So far, Amazon has made some of the greatest strides in the live shopping space in the U.S., including creating a tiered influencer model where streamers with different levels of fame can earn commission from items bought through their live feeds. In fact, the company ran a small home shopping pilot two months before Alibaba launched live commerce. Likewise, Instagram recently ran a “10 Days of Live Shopping” series featuring stars such as Selena Gomez and Kacey Musgraves. And earlier this year, YouTube said it would begin paying creators for posting “Shorts” content — videos of a minute or less — as well as paying for production and other benefits. But despite these recent advances, together these efforts amount to much less than the resources and promotion we have seen from Chinese tech giants so far.
China’s tech playbook: Flood the zone
Chinese companies have used a similar approach with short video. The current industry leader is TikTok maker ByteDance. ByteDance’s first major hit was actually an algorithmic news product called Toutiao. In 2015, Toutiao made up almost all of ByteDance’s revenue and users were growing at double-digit rates every year. Also, at that point the short video market was already full of moderate successes. Even so, ByteDance’s leadership was sure that falling data costs and fast advances in camera technology would make video the future.
In May 2015, Toutiao started testing video on its front page. In a little over a year, video clicks began to outnumber article clicks. Seeing an opening, ByteDance had several teams develop different video concepts. The idea that won eventually became TikTok.
Known as Douyin in China, the app followed a similar playbook to Alibaba — signing up hundreds of MCNs, building new, easy-to-use tools for brands, and launching a wave of campaign partnerships with celebrities, artists, comedians, influencers, and famous shows, while aggressively expanding both demand and supply. In China, this kind of work is usually handled by the operations team, which combines reactive customer service with proactive marketing and engagement.
When it became clear a year after Douyin’s debut that livestreaming was another video use case gaining traction in the market, ByteDance made it a core feature in the app, right on the front page. In this case, the choice may not have been especially hard, but the speed and commitment behind it are notable. While most companies at the time knew short video and livestreaming had potential, the most ambitious brands quickly placed those features in the highest-traffic spots on their best apps.
The takeaway for U.S. tech: Disrupt thyself
Put as simply as possible, the central question is: Do these companies view their biggest, most successful platform as a place to test disruptive new ideas in a major way, or as a place to make only gradual adjustments so as not to disturb the golden goose?
I would argue that in China, there is hardly any alternative but to choose the former path. The home market is intensely competitive and foreign markets have so far been fairly hard to access. Chinese companies battle for every market opening, and there is so much FOMO around every new innovation that everyone is all in, all the time.
Silicon Valley giants, by contrast, are global companies facing less competition, particularly overseas. So in a way, the opportunity cost is higher for U.S. companies when they pursue disruptive innovation. While there is value in a more hands-off, measured approach, where the risks are more contained, I’d personally love to see more daring from U.S. giants, especially when it comes to trends such as live commerce and short video.
Of course, that is not to say there are no major flaws in the Chinese approach. Major apps often go through sweeping redesigns, and not all of them are well thought out or clearly explained. The user experience can become confusing, or even worse, worse than before, as we saw in the backlash over “too many ads“ on Baidu, for example. Sometimes too much direct tinkering with supply and demand conceals business models that cannot last, as in recent setbacks around community group buying, creating more pain later on. Regulators, too, have recognized the distortions these practices can create in the market and have punished behaviors that unfairly hurt other players.
And there is certainly a FOMO-driven tendency for everyone to test every new innovation. Does every product need livestreaming? If you lived in China, you would see that every product, whether travel (Trip.com) or food (Meituan) or dating (Yidui), would have it regardless.
In China, experimentation is frequent and forceful; new markets are created by adjusting supply and demand. As my friend Andy Tian, who grew up in Brooklyn, worked for Google, and later founded a unicorn startup in China likes to say: as Chinese tech companies get bigger, they make more changes, and they get faster.
One thing is certain: wherever the next big shift comes from, the leader may not be the first to innovate, but the company least afraid to disrupt itself internally over time.