Meili United CEO Qi Chen: The Difference Between Mules and Unicorns Is Focus | 2017 Ma Hui

On April 22, at Source Code Capital's 2017 Ma Hui, Meili United CEO Chen Qi shared his thoughts on breaking through strategic impasses, tracing the company's journey to focus its business around "combining great content with great products."

After last year's frenzy, livestreaming has cooled in 2017. But MOGU's livestreaming business has only grown stronger — precisely because it integrates with e-commerce, "combining great content with great products."

MOGU also moved into short video last year and has since become China's largest producer of short video content in the fashion space, consistently topping third-party rankings. Through short video, the company delivers quality content to users while saving roughly 100 million yuan in advertising costs.

Every company hits growth plateaus or boundaries when expanding. Chen Qi believes the key to breaking through lies in focus: building strong cash flow from core business is what raises the probability of success for broader initiatives.

Below is the full transcript of Chen Qi's speech at Source Code Capital's 2017 Ma Hui:

Hello everyone, and thank you to Yi Cao for the invitation. Today I want to talk about focus. Ms. Wang Jingbo just mentioned three-year phases — I completely agree. I'm now in my sixth year, having just completed two three-year cycles. My experience in those two cycles mirrors almost exactly what Ms. Wang described. In our first three years, we basically got our foundational product right, made users love us, and accumulated our first tens of millions of customers.

The past three years we've focused on building the company itself — our entire business model — and now we're channeling energy into our core business, making it generate cash flow to support faster growth.

One thing that constantly challenges me: when should we stick with what we've been doing, and when should we break through and try something new?

1

"Focus" has nothing to do with product form,

and everything to do with core capability

I'm someone with intense curiosity, with a strong urge to try anything new. Friends who know me know I used to be a designer — I'm more of a感性 thinker, with very strong impulses toward anything感性.

Looking at past media coverage, a common description of our company was "a company focused on transformation," as if we'd changed form many times. I've always considered this a misunderstanding. If we'd undergone massive transformation, we probably wouldn't have survived.

What we've consistently done is combine great content with great products, because we believe this approach delivers a better experience to consumers — that's our core capability.

You all know livestreaming was huge early last year. Though it's cooled now, our livestreaming business has only grown stronger.

We started livestreaming in March last year. At the time our team and engineers didn't understand — we're an e-commerce company, why do livestreaming? Sure, we have lots of female users, but that doesn't mean livestreaming would work for us.

We'd accumulated lots of model and influencer resources, so our operations team pushed these influencers onto livestreaming and let them do whatever they wanted. But problems emerged quickly. Our platform's daily active users are all women, and women watching women livestream never send gifts.

We made a decision: first, stop the gift-giving entirely; second, eliminate all performers and pretty faces, keep only sellers. It was basically starting over. And you'll find things started changing from that day — the business gradually transformed.

Now, the girl who made the most selling clothes on our platform last month earned 6 million yuan — just her alone, 6 million, and very stably. We only sell clothes. This connects to our core capability. Our core capability, as I said, is combining great content with great products. Livestreaming was merely a different product form. Once connected, this part of our business grew very fast.

Another business is short video. Today everyone thinks it's hot; we started a year ago.

Our initial reason for short video was actually the opposite of livestreaming. With livestreaming, we didn't intend to do e-commerce at first. But with short video, we wanted to sell things from the start. The videos they shot introduced cosmetics or products, trying to sell them. Short video also went through that early phase where nobody watched, nothing sold, conversion rates were extremely low.

Because for consumers, short video isn't as interactive as live video, nor as fast to browse as images. A user buying something browses roughly 3,000 images — short video couldn't meet her shopping needs.

Later we set a new direction: create substantive content, focused on cosmetics and styling. We should now be China's largest producer of short video content in the fashion space, consistently topping third-party rankings, with daily plays across the entire network already at the tens of millions level. Our existing short video library allows us to publish 7-10 videos daily.

For us this replaced brand advertising that we'd previously spent heavily on. Through short video, we provide users with good content while saving the company roughly 100 million yuan in advertising costs.

These two businesses seem opposite: one started horizontally with content and failed, succeeded with e-commerce. The other started horizontally with e-commerce and failed, succeeded when shifted to content. This has everything to do with what we call focus.

As we grow, we often encounter businesses where it's hard to judge — have we lost focus, or are we actually very focused?

From these two cases I discovered one thing: focus isn't related to product form, but to core capability. As long as we're still using our core capability, we consider it focused.

What do I mean? I just said our company's core capability is creating better content on top of products, helping consumers discover products. So when the shopping guide business took this form, it could also grow fast. When video became connected to our core capability, it also grew fast.

2

Focusing on native content capability produces obvious results

In our company's first three years accumulating early users, we relied heavily on channels like Weibo and Tencent Qzone, doing lots of entertainment-oriented work.

For example, early on we created lots of horoscope quizzes and relationship tests. Why did we do this? Because when first acquiring customers, we didn't want men. If you run ordinary ads, half your ad budget is wasted.

And we discovered that both men and women prefer ads with men in them, but if the creative features a woman, men click even more than women. So early on we had a huge challenge with advertising: how to filter out all these men.

So at that time we'd do lots of horoscope tests and relationship tests. For example, "How many boyfriends do you need to go through before finding your true love?" No man is interested in this question — only women click. Efficiency shot straight up.

This shows our team has always had very strong capabilities in social network operations and traffic attraction.

As the company expanded rapidly with strong urgency requirements, this team increasingly shifted toward doing things with money — spending on online or TV advertising, etc. At this point you'll find the methods used became increasingly conventional, increasingly uncreative.

This year I made one very simple move: I cut my marketing department's budget. Basically, I told them to stop spending money.

This team suffered immensely — every trick they'd used before was now unavailable. At this point the only thing I did was: whatever method they proposed, I said NO, until they proposed something connected to our native capability.

This is what I just mentioned — we have very strong native capabilities in social networks and entertainment content. If you've looked recently, our splash screens basically feature celebrities every day. Starting next week, seven consecutive days of A-list celebrities collaborating with us. We're starting cover interviews, interacting on Weibo, the entire process not costing a cent. Give them money, and you actually can't produce this kind of thing. Very interesting.

These three cases are really meant to express that in our own growth process, all kinds of things can cause a team to lose focus, and losing focus brings huge costs.

As Ms. Wang Jingbo also said, development bottlenecks or boundaries in business expansion — many teams encounter this. And we've found the breakthrough method isn't finding something new to do, but cutting away many things, filtering everything you do, eliminating everything that can be eliminated — the effect of focus is very obvious.

3

When core business becomes cash flow,

making more money means higher probability of success

In helping companies break through, focus — the core idea is making that core business your own cash flow. This is also something discovered in many recent cases. The hottest example in Hangzhou recently is NetEase.

NetEase's marketing has also been excellent recently, including Kaola, Yanxuan, NetEase Cloud Music, games. Many of our company colleagues ask me: why can't we do as many businesses as NetEase, why can't we be like them? Especially product managers and engineers — they have tremendous interest and motivation to develop all kinds of products.

Later I used just one reason to make everyone understand: only when our own core business becomes consistently very profitable do we have the possibility of leveraging our capabilities to find new businesses to expand into.

My requirement for the entire team is now very clear: what we want is to make our core business profitable. Our mindset has shifted to a very good state. Our self-perception is also very clear — our revenue scale is already quite high, and we'll continue expanding. This way, new growth profits and the success rate of multi-directional layout will become higher.

These are some small stories about focus and the psychological changes it brought me. There are many CEOs here today, so I'm sharing this mental journey and this point with everyone. Thank you.