We chatted with the founder of Yalla: “open wasteland” in the most mysterious market
Deserts, camels, and oil are the first impressions of most people in the Middle East. Many people will describe this land that connects Asia, Europe and Africa as strange, mysterious, and ancient, but it is more complicated. For the definition of the Middle East, there are multiple statistical calibers for population, area, and number of countries.
In the business world, some people think that the Middle East is a hot spot for gold nuggets , with oil everywhere, high per capita consumption, and full Internet penetration. In short, the future can be expected; some people stay away and feel that the climate is bad, the infrastructure is backward, and the culture is difficult to integrate.
However, for some companies from China, this complexity and mystery adds a bit of attraction to the infinite potential of the Middle East. At the moment, from communication and logistics as infrastructure to social and entertainment for adjusting life, a group of Chinese companies have cut into every aspect of the Middle East business world.
The Yalla Group, which has been rooted in the Middle East since its birth, is one of them. The Yalla Group, established in 2016, is well-known for its “voice social” and its ability to monetize far beyond its peers five years after its launch. Today’s Yalla Group is already a New York Stock Exchange listed company with a total monthly life of more than 25.94 million.
Since going public in 2020, Yalla Group’s quarterly financial reports have shown to the outside world that it is a company that continues to grow. At the beginning of this year, due to Clubhouse’s popularity, Yalla Group’s stock price once soared to more than US$40, about 5.5 times the issue price six months ago.
Young companies, mysterious markets, and soaring stock prices have given the outside world a lot of analysis and speculation on Yalla Group, from product forms, to profit models, and to financial report data. This also attracted the attention of short sellers. In May of this year, a short seller issued a report accusing Yalla Group of exaggerating various indicators including revenue and cash flow.
Regarding the market analysis and the accusations of short-selling institutions, how will this company, which seldom make a public appearance in the domestic media, respond? Rooted in the Middle East market since its establishment, what is the business experience of Yalla Group, the first company listed on the New York Stock Exchange in the UAE?
Recently, Yang Tao, the founder, chairman and CEO of Yalla Group, accepted a 36kr overseas interview and chatted with us about the Middle East market, voice social networking, product thinking and views on the secondary market.
Before founding the Yalla Group, Yang Tao worked in the UAE branch of ZTE Corporation . He has worked and lived in the Middle East for nearly 7 years, and he is cherished by the customs of the Middle East. From state-owned enterprises in the Middle East market, “vanguard”, the founder of Internet companies, he experienced an Internet network company in the whole Middle East from scratch.
The following is an excerpt from the interview and dialogue, the content has been edited without changing the original intent.
It can only show that the social needs are very strong
Q: Why choose the Middle East market?
A: The establishment of Yalla Group is actually a continuation of the work experience of the founder team. I went to the Middle East in 2006 and lived and worked in the Middle East for nearly 7 years. Now the company’s president Saifi Ismail, CFO Hu Yang, COO Xu Jianfeng, etc. are all my former working partners in the Middle East.
Entrepreneurship must be based on our own experience and advantages. The core team of Yalla Group met in Abu Dhabi. The best time is in Abu Dhabi. One of our advantages is that we have lived and worked in the Middle East. Understand this market.
Q: The first product selected voice social networking, just because this product form is safe in the Middle East?
A: When planning to confirm the product direction in 2016, the team just took an investment of about RMB 2 million. I am extremely sensitive to cash flow. With this capital scale, the cash flow of live video streaming will be cut off in about three months. The cost of bandwidth is only one-ninth of that of video, and the cost is relatively controllable.
When looking for a new direction, our three founders found out all the audio and video live broadcast products in China at that time and compared them. Based on our understanding of the locals, the first instinct is to try the voice direction. People in the Middle East have a lot of free time. For example, local civil servants leave work at 2 pm and have a lot of time for entertainment and entertainment. Local people naturally like to chat. Many people drive, go shopping, and eat while wearing headphones to chat with people.
Secondly, considering security issues, live video streaming is not a big problem now, but it is certainly not as good as voice, which can be accepted by everyone.
Yalla product image source: App Store
Q: At that time, live video streaming had already started to become popular. Don’t you worry that the voice is going to be outdated?
A: Opportunity, if everyone can understand it, chance is not yours, right?
Q: You have expressed to the outside world that you want to make Yalla the Middle East version of “YY Voice + Momo”. Do you still think so?
A: This view was published in the Beijing News in 2016 . At that time, we were just starting a business, and we didn’t say that we wanted to interview, we just talked briefly.
Later, Yalla gained some popularity, and maybe everyone paid more attention to my definition of Yalla as “YY voice + Momo ” at that time. It is true that YY Voice and Momo were both listed companies at the time and were at the node at the time. It was no problem to learn from them, but after so many years of development, Yalla has created its own business model.
Q: Yalla Group only raised three rounds of capital before going public. Why?
A: Because we are the first company to explore voice social opportunities in the Middle East, and our business model is quite unique. We reached a small-scale cash flow leveling in May 2017. At that time, business development was more important than seeking financing. urgent.
Q: Then why did Lanxin Asia and SIG invest in it?
A: After we have determined the direction of listing, we need to improve the shareholder structure and introduce first-line USD funds. Under this background, we have reached cooperation with Lanxin Asia and SIG.
Q: After the listing, the high point of Yalla Group’s stock has reached $41, which is 5.5 times the IPO price, but it has recently fallen back to close to the issue price. What do you think of the recent market value?
A: The company needs to focus on long-term development. Changes in market value are caused by many factors, which not only reflect the judgment and sentiment of the capital market, but are also affected by the economic situation in the general environment.
Although the market value has fluctuated in the past six months, the fundamentals have been stable. We are also developing a richer product matrix, and plan to launch the first meta-universe social product in the Middle East in the first quarter of next year. We believe that as long as we truly serve users well, the company’s long-term development will be guaranteed, and the capital market will definitely give positive feedback.
Q: The short selling of some institutions this year has also affected the market value of Yalla Group to a certain extent. What do you think of this matter?
A: That short selling report was very unprofessional and even ridiculous. It can be seen that short sellers lack the most basic common sense, and lack the most basic understanding of the industry, our business model, and the user community. Yalla’s product is a voice community with no anchors and no withdrawals. It requires users to actively interact to precipitate social relationships. People who have a basic understanding of this industry will know that putting robots in chat rooms does not provide any effective operation. effect. Regarding the “inflated user volume” mentioned in the report, some users may create trumpet accounts on the platform for reasons such as collecting rewards. Yalla has always restricted or even banned these. This phenomenon is also common on other platforms, and it is difficult to completely eliminate it.
In addition, short sellers even attacked our intention to open a bank account at Citibank Singapore branch. This is an attack that nakedly ignores basic financial knowledge. As a multinational company, it is the most normal thing to allocate resources among internationally renowned banks. The short-selling institution cannot provide evidence and cannot explain. If Yalla Group is a fake company, how to achieve the normal development and growth of revenue, profit, and cash, can only say that Yalla is too good to be true.
Shorting this matter is clear to those who have knowledge of the capital market. It is a business, and it is usually announced in an anonymous form and will not be held responsible for their words. Short-selling institutions are just taking advantage of investors’ ignorance of the Middle East market for profit. Listed companies are legally responsible for what they have said and disclosed information. We have been disclosing information in a transparent and timely manner in accordance with the regulations of the US Securities and Exchange Commission and the New York Stock Exchange.
No “wine tray” is allowed
Q: There are more and more language chat and live video products in the Middle East market. The difference is not obvious from the product form. What is the difference between Yalla?
A: The first thing to ask is what exactly Yalla refers to. Yalla Group can do a lot of research and experimentation in terms of product form, but what we define for Yalla’s product is to create a pure social platform, not an performing arts stage. Yalla’s products cannot be cashed out. Currently, no product in the Middle East market can do this. This is the biggest feature and core that distinguishes us from other products.
Because once there is a financial relationship between people, the relationship is not pure. At least the platform that can be withdrawn cannot be said to be a social platform. After you bought a ticket and listened to Guo Degang’s cross talk, can you say that you two are in a social relationship?
Q: The anchor model seems to be doing pretty well in China, why doesn’t Yalla (product) do it?
A: Yalla did adopt the anchor mode in the first month of its launch. A total of 17 anchors were found. But after going online, the local anchors are exactly the same as we expected. Most of them are just for basic salary and don’t care about the users who enter the chat room. On the contrary, the rooms of natural users are more lively.
There is a fuse to abandon the anchor model. There is a Moroccan anchor who works very actively, and the first month is divided into four or five hundred dollars. At that time, the user didn’t know that there was an anchor. Later, her friends in Yalla discovered that her income could be exchanged for cash. Many people rushed to the chat room and besieged her, saying that they regarded her as a friend. Why did she exchange gold coins for money? After saying a lot of bad things, the little girl returned the income in the end.
The community atmosphere is something very mysterious. It may be incomprehensible in this way, but you can make an analogy. It’s like you go to a bar to drink with a friend in China, and then go to the boss to get commission after drinking the so-called “friend”. If you know it, you won’t be friends with him, right. Bar? This is not a friend, but a wine tray.
We wanted to keep the atmosphere of the Yalla community pure, so we resolutely abandoned the anchor model one month after launching.
Q: If you can’t withdraw cash, don’t you worry about losing some users?
A: This is the rule. In order to protect the user atmosphere of Yalla, our rule is that there should be no monetary relationship between users, and no “wine trust” is allowed.
Yalla’s early new users were very slow, and everyone has always maintained this kind of thinking. These users precipitated and became very precious seed users. They formed the early Yalla community atmosphere. Everyone is equal. In Yalla, it is chatting and socializing. friend.
Q: From Q3 of 2020 to Q3 of 2021, the MAU of Yalla’s product has increased by 3.97 million, but paying users only increased by 184,000, which does not match the overall growth rate of Yalla Group. Should this data performance be vigilant?
A: Both the Yalla product and the Yalla Group’s overall MAU have achieved growth in the past year. In terms of MAU and revenue, they far exceed our plans last year and the guidance expectations disclosed to the public. Of course, we might as well look at this issue from another angle. In Q3 this year, Yalla Group’s payment rate reached 30%, and Yalla Ludo’s payment rate was even more than 40%, which is definitely far ahead in the industry. We are quite satisfied with this figure.
Q: Why did you become Yalla Ludo?
A: In 2018, Yalla will definitely be completed in terms of product, user, and revenue scale. The subsequent listing is a high probability event, but the Middle East is a very large market. We hope that the company will have more space in the future. The experience gained on this product is applied to other products.
Get Yalla Ludo on: Google Play
Q: There are many chess and card products in the Middle East. Ludo alone has thousands of them. Among them, Yalla Ludo has 15 million MAUs. Why can these users be retained?
A: There is no difficulty in developing small games like Ludo or Domino, but it is more demanding to make users willing to spend more time on your product instead of other products.
First of all, as a Ludo fan, what users want to download software is to start the game as soon as possible. Don’t talk about sign-in, VIP, and gift packages. This is not what users care about most. Many similar products will do everything possible to make the surroundings very complete, and finally become big, complete, and annoying.
The second is product interaction, and the interface layout should make people feel refreshed and concise. There are also detailed designs, such as how the dice turns, in which direction, how many turns, and whether the chess flies or jumps. It cannot be designed in a way that is counter-intuitive.
Finally, localization, such as the button contact area, the size of the thumb of a Middle Eastern user is usually 1.5 to 2 times that of a Chinese. If the contact area of the finger in accordance with the size of the Chinese people to design , invalid clicks will be more and more users to the bureau a multi-hundreds of times, experience a sense is very poor.
There are many details in it, and we have adjusted every detail many times.
Q: Some reports have questioned Yalla Ludo’s monetization ability, thinking that Yalla Ludo has a lot of users but very little game revenue. What do you think of this analysis?
A: This is because they did not take it seriously and did not understand the classification of our financial report income. The income of games is not equal to the income of Yalla Ludo. Yalla Ludo has both social and games. The caliber we disclosed is to divide the income into social and gaming. Social income includes income from the Yalla and Yalla Ludo chat rooms.
Q: In the past few years of making products for the Middle East, what is the core experience you have summarized?
A: As a social entertainment platform, if you want to live a long time, you should not involve the sensitive issues of the environment. As adults, everyone should know what the order in which the world works , and respect the existing order in order to survive and develop under the order.
According to our past work and life experience, this is the probability of 0 and 1. If there is a problem, the platform will not exist. This is definitely not just talking, it involves the fundamental problem of whether the company can exist. Yalla Group is serious about doing this. It is definitely not a slogan. We have invested a lot of financial, material and manpower.
Will not blindly internationalize
Q: How to plan the future product matrix of Yalla Group?
A: The products of Yalla Group are now divided into two lines: social and gaming. The top-level traffic pool design, we hope it is an IM product called YallaChat.
In terms of social networking, there will be Yalla, and there will be two more products in the future. One of the meta-universe social products will be launched as early as the first quarter of next year, and the other social product is also under development. Social products are all based in the Middle East and may differ in form. The core is still to meet the social needs of a certain group or most people.
For games, we now have Yalla Ludo, 101 Okey Yalla for the Turkish market, Yalla Baloot for the Gulf region, and Yalla Parchis for the Latin American market. There will be one or two more chess games, casual chess and cards. The game layout of the class is basically completed. In terms of moderate to heavy games, we have established a game publishing company to distribute games in the Middle East.
Yalla Group Product Matrix Source: Image courtesy of the company
Q: There are already tens of millions of products like Facebook and WhatsApp in the Middle East. Why do you want to make an IM product at this time?
A: I think that regions with their own unique culture, language, and life needs should have their own IM products. Facebook and WhatsApp are big, but it does not mean that they meet the needs of the locals. Internet products will always introduce new ones, and user needs may accumulate to a certain extent, and the wind may suddenly change. No one has ever tried to make an IM product specifically for locals in the Middle East.
This matter is very difficult. IM has been in development for almost 10 years, and it is impossible to say that the launch of YallaChat will immediately catch on. It can only be said that we have seen the demand and made various preparations. The best result is that it can become the top traffic pool of Yalla Group’s product matrix. If the development is not good, I don’t think there is much. At least we have tried, and there will never be a chance if we don’t try. With Yalla Group’s current cash reserves, it is worth doing this.
Q: What did you think about when Clubhouse went viral at the beginning of this year?
A: Yalla Group was already listed when Clubhouse became popular, and many investors forwarded various links to me. I also downloaded the APP and took a look. The product function is still relatively simple. At that time, what I thought was that if there is something, then change it, and if there is nothing, I will encourage it. Yalla Group has been making products for 5 years and has been on the market. The business model is proven.
Q: Clubhouse has encountered a lot of difficulties now, and it seems that it has stalled. Why do you think it is?
A: From the product point of view, it has several problems.
First, the threshold is relatively high. It is for the quasi-elite, requires the user to have a certain knowledge base and table Danone force, but most people do not have the ability or willingness. Even if there is, no one wants to do such a thing every day.
Second, it is just a simple function, without a business model. When it had the largest number of users, it did not accomplish this. You must pay attention to common sense in doing things and doing business. Without your own business model, you cannot become a real business. It can only become a phenomenon.
Third, operational capabilities. I think that Clubhouse does not pay enough attention to content control. Clubhouse was indeed banned in many countries.
Q: At present, the income structure and market of Yalla Group are still relatively single, but the capital market needs a growth story. Will Yalla Group expand the market next? What is the plan?
A: Focusing on the Middle East and diversifying products is our main strategy, but it does not mean that we will close our eyes to opportunities in other markets. Yalla and Yalla Ludo have established business models. We reserve our own localization teams in each language area. Once opportunities arise, we can quickly organize teams to do it.
But we will not blindly do internationalization.
Q: Except for the Middle East, are there any successful cases?
A: A typical example is the product Yalla Parchis, which is actually the Spanish version of Ludo game, but there are some subtle differences in the rules. We drew a team from Yalla Ludo, based on Yalla Ludo, combined with the UI style and gameplay in South America to transform it, and the development took only three months. Yalla Group’s third-quarter earnings report has begun to disclose Yalla Parchis data.
Q: Is it still the same monetization model?
A: There should be differences, but the product form is certain.
Q: Some people say that the founder spends too much energy on business and product details, and will be stretched out in strategy and thinking. What do you think of this sentence?
A: Focus on business and products, and do not conflict with strategy and thinking. Take Yalla Group as an example. At the beginning of the business, the company only had one product. If the product is unsuccessful, the company will die. Therefore, the strategy for 2016 is to survive. In 2018, the company’s financial situation has been relatively good, but we are not rich and settled. We have found a new direction, Yalla Ludo, from socializing to the game, which is also a strategy. In order to better develop business in the Middle East, we decided to go public to further consolidate and establish our dominant position in the Middle East. This is still a strategy.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/we-chatted-with-the-founder-of-yalla-open-wasteland-in-the-most-mysterious-market/
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