Following Elon Musk’s personal “endorsement” of Clubhouse, use of the international audio social apps exploded in China in February. During that time, a Clubhouse “invitation” code sold for nearly RMB1000 on a Chinese second-hand market platform. At the same time, Roblox, a social gaming platform, and Tiya, an audio-based social networking product, are becoming popular in overseas markets, along with Clubhouse.
When Roblox listed on the New York Stock Exchange (NYSE: RBLX) on March 10, its closing price on the first day ended up by 54.4% increase. The company’s valuation had exceeded US$45 billion. Seizing on this opportunity, investors looked for similar stocks to Roblox and the share price of LIZHI INC. (NASDAQ: LIZI), an online user-generated audio platform from China, also rose 15.5%.
Tiya is an audio-based social networking product launched by LIZHI in October last year. Market analysts believe that Tiya, which is in the same sector as Clubhouse, is mostly positioned for young social media users. At the same time, it meets the social needs of all types of users for real-time audio chat and “play with friends” for gaming. Many users also use Tiya as an audio tool to chat with friends while playing Roblox.
The popularity of overseas audio social platforms has encouraged many Chinese players to enter this sector. Where will the market go next? LIZHI CEO and Founder Marco Lai said in a recent live broadcast that young people make up the main market for audio-based social networking. Tiya’s design builds on its youth appeal, incorporating cartoon elements and similar design themes.
In terms of global geographical demand, the Middle East and Japan markets have strong demands on audio-based social networking. Therefore, Tiya chose to test its product in the Middle East and Japan markets first. The U.S. market, meanwhile, is broader and has a greater impact on global users which means it is easier for a popular product in the U.S. to become part of the global mainstream. Hence, Tiya chose to enter the U.S. market after its initial success.
The rapid user growth of Tiya today also confirms Lai’s comments on demand. As seen from LIZHI’s success, Chinese internet and game apps need to have deep insight into overseas markets and find its unique positioning in order to have differentiated competitiveness.
Tiya was able to soar to the top 10 in social networking ranking shortly after its launch in the U.S., ending as high as 4th place. This success is due to LIZHI’s insights into the audio social needs of young people in overseas market. And it’s also because LIZHI has differentiated competitiveness on its product.
Tiya and Clubhouse are currently competing in the same market but differentiate themselves in terms of product positioning. Instead of the live conferences and live panel discussions mode of Clubhouse, Tiya focuses on audio-based social networking for scenarios like playing games, singing karaoke together, animation, etc. Tiya has a broader appeal to mass market and younger users. Most of the users on Tiya are Generation Z.
This is why the public listing of Roblox has attracted the market’s attention to Tiya. According to the data, among Tiya’s many topics, users who enter Roblox-related rooms/topic interactions account for a relatively high proportion. Secondly, from the perspective of product evolution, any Internet product has periodicity. Social products are no exception.
There seems to be a paradox in the evolution of social media products: they are dominated by efficiency, and products follow the simple and effective “Occam razor” principle, but the most long-lasting and mature social products are often the most complex.
WeChat, which is ubiquitous in China, is a good example. In the early years, the functions of WeChat were simple, but with the rapid growth of its userbase, WeChat is no longer a purely social platform. It has become a comprehensive platform integrating text, video content and various services.
In overseas markets, Facebook is becoming more like the Chinese version of WeChat, adding shopping, fund transfers and other functions. After reaching a certain number of users, old social products often stop innovating. Users then look to find new social applications to meet their needs.
In the U.S. market, there is still demand from young users for audio-based social media. Tiya not only meets the personalized social needs of Generation Z, but also has simple product design, social efficiency and high capacity for interaction.
From this point of view, Clubhouse, Roblox, and Tiya are popular with users and to some extent, they also conform to the minimalist principle guaranteeing the success of the early generation of social media products. Their success seems to prove one thing. Overseas social media and social content products are undergoing the next phase of transition, which also creates an opportunity for Chinese companies.
However, most Chinese enterprises still need to be cautious about expanding overseas. The success of LIZHI is inseparable from a deep cultivation and understanding of overseas markets. Before enterprises decide whether they want to expand abroad, they need to be fully prepared.
During his live broadcast, Lai shared, “In fact, early in the release of Tiya, I tried to change the product design many times. Because I couldn’t see the growth of data, I was also very confused: am I right? At that time, we didn’t face the most difficult of times, only more difficult times. At that time, LIZHI didn’t have overseas business experiences before.”
When asked how to get out of the predicament, Marco replied that the LIZHI team has a slogan: “All because of love!” With the enthusiasm and deep understanding of our app, we are able to meet the needs of users. This is how we have Tiya.
Capital markets provide dynamic feedback, while the technical achievement of an app can also determine its value. Judging from the feedback from the capital market, and the popularity of overseas audio-based apps, third-party institutions have also given positive feedback.
Recently, the well-known financial institution Citron published a report offering to buy LIZHI shares with a target price of US$30. When the report was released, LIZHI’s stock price rose by 5.5% and triggered a surge. As of the close of March 16, LIZHI’s share price rose by 29.51%.
In the US capital market, the rise of audio social app stocks have brought positive feedback to some companies focusing on this sector. On the other hand, according to financial information previously released by LIZI, its financial and business conditions are generally better than market expectations. This has also contributed to the rise of its share price.
According to the fourth quarter of 2020 and the annual financial report released by LIZHI on March 9, net revenues in Q4 for last year reached RMB420 million, and the annual net revenues were RMB1.5 billion. In addition, the company achieved Non-GAAP net income for two consecutive quarters.
According to LIZHI’s financial filings, Tiya now has users in more than 200 countries, which has a great growth potential in the future.
Lai said that audio-based social media were only a product feature on LIZHI App at first. In 2019, he began to develop independent products and continuously test them. After three years of accumulation and eight years of experiences in audio sector, he achieved success with the explosive user growth of Tiya.
The quality of technology determines its value. The accumulation of technology is fundamental for the long-term development of Internet companies.
The leading edge in audio technology is an opportunity for Chinese enterprises to develop audio-based social media products for overseas markets. In the audio-based social field, the level of technology determines the user experience and ultimately the value.
What is unknown to the public is that the smooth sound quality of Clubhouse primarily depends on the networks of a Chinese technical service provider. In terms of audio technology, Chinese providers have many years of technology experiences and accumulation. US-listed Chinese company LIZHI has also been developing voice and sound effects, real-time audio and audio recognition technologies for many years, which explains why Tiya is so competitive in overseas markets.
From the perspective of the future of the industry, the social field is the field that follows Metcalfe’s law. The so-called Metcalfe’s Law refers to the value of the network V=K x N2; (K is the value coefficient, and N is the number of users). Generally speaking, the larger the number of users, the greater the final value.
In terms of the number of users, audio-based social media is widely loved by young people in overseas markets, and the user groups of social applications such as Tiya, Roblox, and Clubhouse are also growing rapidly. This means that Generation Z’s enthusiasm for audio-based social networking and gaming social networking will make the sector very valuable over time.
From the perspective of potential monetization, purchasing power and willingness to pay of overseas Generation Z users are generally high. According to the third-party agency DeepFocus’s “Cassandra Report” and IBM’s survey data, Generation Z in the US market has a direct purchasing power of US$200 billion and an indirect purchasing power of US $1 trillion.
Barclay bank also predicts that the Generation Z consumer group will occupy 40% of the consumer market in the United States, Europe and the BRIC nations, becoming the largest consumer group in the world. These statistics show a trend that in the future, with the iterative upgrading of mainstream consumers, the whole audio social industry will have great potential.
In the age of AI, audio-based social networking may become part of the Internet’s infrastructure. Ray Kurzweil, founder and president of Singularity University and Google’s chief technology officer, once said in his book The Singularity Is Near: most people tend to overestimate goals that can be achieved in the short term but tend to underestimate goals that will take a long time to achieve.
In the capital markets, people tend to overestimate the short-term value of a company and ignore the long-term value in some industries.
Objectively speaking, the current value of audio communication is really brought by its short-term popularity. Although it is accidental that Clubhouse and Roblox have been widely popular in the short term, it cannot cover up the long-term value of this sector.
In the long run, the era of intelligent economy driven by the AI technology in the future will be the era in which audio-based social networking will truly release value.
Some investors are not optimistic about audio-based social networking. A part of the reason is that on the Internet, text is still an important medium for people’s social communications, such as email, WeChat and Facebook. The era of intelligent economy has not yet arrived, and people have not fully formed the habit of audio interaction.
However, with the widespread application of AI audio technology, IoT technology, audio interaction will be ubiquitous. Under the ratcheting effect of product use, people will become accustomed to using audio-based social apps to communicate anytime and anywhere. As the phone was used in the past, but now it has been replaced with WeChat and Facebook, audio-based social networking is likely to become one of the key infrastructures of the Internet in the future.
Next, with the expansion of audio-based social networking in application scenarios, such long-term value will be further revealed. However, for now, in overseas markets, more investors should be paying attention to this area.
As Lai said during the broadcast, it is difficult for many investors to understand the business model of LIZHI because there are no comparable business models in the United States yet. The emergence of information barriers indicates that investors may miss some high-quality enterprises, which cause that some enterprises may miss development opportunities.
However, it can be predicted that audio-based social networking will receive more attention from the market along with the continuous development of it. The value of some global audio-based social networking businesses in the capital market is expected to continue to be unleashed.