Hongyi Zhou’s Early Lessons: A Star Team and a Lack of Focus

The outsider who most influenced Tencent’s outlook—Hongyi Zhou Zhou has written several books on internet businesses and product development. Interested readers can seek them out for deeper insight into running an internet business. His company 360 fought Tencent in the 3Q war, the fiercest battle in Chinese internet history. Afterward, a technology company known for using its platform advantage to copy and monopolize almost any product—and considered an enemy by nearly every startup—became a giant with an open ecosystem. --- Born in 1970, Zhou began his first venture, 3721, in 1998. It offered “Chinese-language web access”: instead of remembering complicated domain names, users could type Chinese names into a browser’s address bar to reach company websites or find information about businesses and products. You could even regard 3721 as a search website, helping users quickly reach their destinations. Before Baidu, it was China’s largest search website, used by 80 million people daily, with more than 600,000 paying corporate customers. Yahoo bought it for US$120 million in 2004. Zhou’s first venture was quite successful. After Yahoo acquired it, however, Baidu’s emergence increasingly marginalized Yahoo Search. Zhou’s independent-minded personality also made an international corporation hard to adapt to. Yahoo China subsequently became a bargaining chip in a transaction and was absorbed by Alibaba. Zhou did not get along with Jack Ma. A few months later, he left Alibaba and joined IDG as an investor. But Zhou was not content to remain only an investor. He kept preparing for another venture, and what followed became a classic business case. He had personally invested in Qihoo, led by Xiangdong Qi, his former Yahoo China colleague. Including investments from Zhou, Sequoia China, and CDH, Qihoo had raised US$20 million. It could be seen as the platform Zhou was building for his next venture. In March 2006, Zhou formally joined Qihoo and started again. He had long wanted to build search, so his immediate idea was a search platform. Baidu was already substantial, and Zhou chose differentiation: instead of webpage search, Qihoo aggregated “community search.” Its slogan was “Create 100 million portals.” Users would customize content to build personalized websites. A sports enthusiast’s homepage would feature sports; a fiction reader’s would feature fiction. Everyone could have a personalized page. The concept closely resembled what Toutiao delivers today. (Robin: people used to seek content; now content finds people, with customized, personalized material whenever they open a page.) But Qihoo’s idea was ahead of its time. There was no iPhone in 2006. The concept better suited a mobile-internet era in which collecting personal data and consuming content anywhere, anytime were easier. Community search soon hit a bottleneck. Zhou subsequently tried text messages, multimedia messages, image and ringtone downloads, podcasts, audiovisual search, and other businesses. Without focus, Qihoo never found a true core revenue source. ----- Hongyi Zhou’s lessons from failure In his autobiography 顛覆者 (The Disruptor, descriptive title), Zhou identifies several mistakes: Mistake one: starting with a star team. They had technology and experience, had challenged Baidu, and had raised considerable money. This made them restless, overconfident, and eager for grand achievements. Yet the internet constantly changes; experience is often unreliable. Founders must be able to start from zero at any time. Mistake two: Qihoo remained focused on becoming a platform without selecting a specific entry point. A platform product must initially enter through something that resonates with users. Zhou later summarized the lesson this way: “A first baby takes ten months of pregnancy; so does a second. But when having our second, we thought experience and extra effort could produce it in two months. That was a serious mistake. Looking back, a little more focus and persistence in any one of those undertakings could have built a substantial business. We made every mistake a founder could make. Investor Wang Gongquan once told me: ‘I do not understand your business either, but we invested hoping you would do something different. Instead, you seem to have built another Sina, another Baidu, and another Alibaba. Are you preparing to compete with everyone? Can you do so many things simultaneously?’ His words were a revelation and a sharp wake-up call.” The good news was that, like Wang Xing earlier, Zhou clarified his thinking and retained a highly capable team despite Qihoo’s poor start. That preserved the spark for the future, including the famous 3Q war in Chinese internet history.