The Next Mega-Internet Company You Haven't Heard of
WHY YOU SHOULD CARE
Because American unicorns aren’t the only ones seeking to expand their empire.
By Sanjena Sathian
For a former philosophy major with an appetite for the big picture, Alex Yao has a dream job: to survey the world, estimate its desires and buy a whole bunch of companies that cater to its appetites.
It helps that the job places Yao on a top rung of China’s tech ladder, 6-year-old mobile Internet company Cheetah Mobile, which pulled in more than $568 million last year. The public company, which is listed on the New York Stock Exchange, boasts a $2.4 billion market cap. And it’s making some interesting moves. Last year, it partnered with Yahoo to integrate its mobile ad technology; now, the goal is to roll out more popular apps (its big wins so far have been utility apps and games). But the company, little known outside China, has ambitions to go truly global like its older cousins Baidu and Alibaba, and like Xiaomi, a device-maker that has just entered India. Tasked to make all of this happen is Yao, recently hired from JPMorgan Chase & Co. to run Cheetah’s acquisitions and investments.
At 37, Yao, an amiable, intellectual presence, has decided how he will play the game: by touring the market to discover the quirks of each locality. So far, he says, the company hasn’t had to do much except ship the same products out into the world. But for Cheetah to grow, Yao will have to figure out consumer behaviors outside of China — and bet money on those companies. Yao cites Facebook’s acquisitions of WhatsApp, Oculus Rift and Instagram. The stodgy phrase “mergers and acquisitions,” in other words, is billion-dollar sexy, and those who get on this mobile train early “will be the ones who end up building the macroeconomic wave,” says Radha Kizhanattam, principal at Unitus Seed Fund. Gunning for mobile, she adds, puts them “definitely on the right side of history.”
As for virtual reality, “you won’t need to go to a museum anymore! Or a stadium!” Yao cries. Which will upend advertising and our daily habits.
So in that attempt to lead a global empire, Yao is turning to India, where, according to the Internet and Mobile Association of India, more folks will be online by the end of 2016 than the entire population of the U.S., with the vast majority using mobile phones. Yao sees the Indian market as akin to China’s 10 to 15 years ago. Tarun Davda, managing director at Mumbai-based fund Matrix Partners, says the country is seeing a spike in acquisitions that will only continue to grow — expect Google to start its gobbling (it was reportedly hungering after Bangalore’s mobile ad company InMobi). Already, Twitter has bought mobile marketing whiz ZipDial.
Yao’s industry lens has him focusing on two buzzy phrases: content consumption and virtual and artificial reality. For the first, take China, where Internet addiction is officially a diagnosable psychiatric condition, and people play games as “massive time-suckers.” Teens are broadcasting their lives on the Web in real time, Yao says, in a freaky, quasi-reality-TV move … and people might be willing to pay to watch. As for virtual reality, “you won’t need to go to a museum anymore! Or a stadium!” he cries. Which will upend advertising and our daily habits.
Before venturing into the “uncharted territory” at Cheetah Mobile in September, Yao, a chartered accountant trained in Australia, toiled away in banking. He felt the magnetic pull of the Chinese Internet boom, though. Finance offers a “static way to look at things,” he says. It asks how big the market is and tells you to quantify your insights into a stock price; it teaches trends. Yao watched companies like Tencent “constantly innovating,” winning the hearts of teenagers with its cute avatars and, of course, gaming. Accounting, his previous life, was even less thrilling and involved looking backward — “I love looking forward,” he says. He decided to “do something real” and headed to Deutsche Bank and then JPMorgan.
But behind the suit is an even bigger thinker — that humanities major is apparent. (Yao loves Heidegger, whom he calls “just very cool!”) Those trained in philosophy, he says, think differently: Having been trained to ask overarching questions — What is this world? What is beauty? What is moral? Why am I alive? — “I look at things more fundamentally,” he explains. Despite the stereotype of Asian parents pushing kids into pure practicality, Yao says that his family, from the Yunnan province, near Laos, was down with his decisions. His mother was an English professor and his father worked in the government. Their biggest lesson: “Do what you want to do.”
Which has brought him to this enviable gig where the next big challenge will be figuring out the uniqueness of new, local cultures in the U.S. and India. Yao is based in Beijing, where he can see his two kids, but this year he’s slated to travel extensively and build an investment team in India. He’s already fascinated by the musical landscape in India, where Bollywood reigns and apps to deliver soundtracks to your cellphone are ubiquitous.
The biggest mistake he might make? “Buying the wrong company,” he says. Experts reinforce this concern. It’s difficult to buy early-stage companies — just loving the product is never enough. It’s a reminder, of course, that Yao is not just another corporate tourist with a million-dollar wallet. There is much to lose, and many are running the same race.