From China's Biggest Fantasy Fiction Site to Nothing: What Did Huanjian Shumeng Get Wrong? | 20 Years of Web Fiction ⑧

"Resolve, groundwork, luck" — and a failed acquisition.

Anyone who ends up running a web fantasy fiction business in China tends to have come from one of two places. The first, naturally, is Qidian: both Chuangshi Chinese Network and 17K Novel Network were founded by teams that walked out of Qidian.

Many of the rest came from a site called Huanjian Shumeng. Xie Yue, editor-in-chief of Baidu Literature's Zongheng Chinese Network; Xie Sipeng, editor-in-chief of iReader Culture; and Li Yang, former editor-in-chief of Tadu Literature — all three were once editor-in-chief of Huanjian Shumeng.

Qidian succeeded. Huanjian Shumeng has all but vanished. Divine Axe (《神斧》), the novel sitting in the central recommendation slot on the site's homepage, was last updated in 2014. To anyone who came to web fiction only in the past couple of years, Huanjian Shumeng is a name they have never heard.

Only the "old-timers," the ones who lived through every stage of web fantasy fiction, know how big Huanjian Shumeng once was. Xiao Ding's Zhu Xian (《诛仙》), Shuxia Yehu's Soushen Ji (《搜神记》), A Yue's New Song (《新宋》) — these famous web novels all came out of this site, founded in 2001.

"Around the start of 2004, when Huanjian was ranked somewhere around 400th globally on Alexa, it was actually No. 1 in the industry — bigger than Hongxiu, bigger than Rongshuxia, a top-tier site at the very least," Kong Yi recalls.

Kong Yi was Huanjian Shumeng's largest shareholder and the man in control. He put money in and joined in 2002, and from then on set the site's management and direction, until 2006, when he sold it to Tom.com — a portal then at its peak, spoken of in the same breath as Tencent, NetEase, Sohu and Sina.

Today Kong Yi is a managing partner at Lantu Venture Capital, and his personal investments include Yixia Technology, the parent company of Miaopai, and Beijing Mofang Games. Looking back with an investor's eye at Huanjian Shumeng's path from its peak to its disappearance, he says: "On digital reading we were definitely ahead of the industry. But the groundwork, the resolve and the luck weren't there."

"Regret" is the word Kong Yi used most often in his interview with QDaily.

Huanjian Shumeng began as a loose alliance of literary book sites — Shuqing Xiaozhu, Shitou Shucheng, Xiaoshuting, Ningfeng Tianxia and others. When Kong Yi took it over in 2002, China's internet industry was climbing out of the dot-com bust; profitable models had appeared, and capital was starting to consolidate the web. For fiction sites that meant one thing: turn from a personal site into a commercial one, or be pushed out because the reading experience could not keep up.

Kong Yi liked reading novels and was genuinely interested in web fiction. But he was not only a fan — he treated Huanjian Shumeng as his own startup.

Born in 1973, Kong Yi had worked at the software company Kingsoft, running first its games business and then Kingsoft PowerWord. "Kingsoft had four business lines in all, and I ran two of them." Around 2000, Kingsoft was one of the most important companies in Chinese IT. "I was core middle management at that company — below Lei Jun there were basically just the few of us," Kong Yi says.

By around 2002 Kong Yi had hit the ceiling at Kingsoft and "started thinking about moving." He went to the founder of Xiaoshuting, one of the sites inside Huanjian Shumeng, who went by the handle "Xiaoshuting Zhu," and proposed they build Huanjian Shumeng together.

Huanjian Shumeng was then wrestling with whether it needed to commercialize, and what Kong Yi brought from Kingsoft — the contacts he could call on, his grasp of product — counted for a lot. After a month or two of talks, he became its general manager.

Kong Yi's Kingsoft background did help at first. "We'd add a server, change the pages a bit, and traffic would pour in," he said later. "Demand was extremely strong back then."

By that point Huanjian had already signed Xiao Qian, author of Journey Through the Mist (《飘渺之旅》), and Shuxia Yehu, author of Soushen Ji. The servers and other resources Kong Yi brought in raised how much load the site could carry, and it took a sizeable leap forward. At the time, Huanjian Shumeng and Long de Tiankong — another site stitched together out of personal sites — were the two powers of web fantasy fiction, running neck and neck. By December 2002 Huanjian Shumeng had entered Alexa's global top 2,000. Kong Yi, it is fair to say, was a big reason it stood out in those early years.

Still, Kong Yi did not bet everything on Huanjian Shumeng. Even as the site's traffic climbed, at the end of 2002 he co-founded an online games company called Happy Era with his old Kingsoft colleague Xing Shanhu and Chen Lin from Great Wall Software, taking the job of planning director.

Kong Yi likes to mention that Happy Era was named one of 2003's ten most promising IT companies, but in fact it did not last long. The two online games it licensed and operated, Tianjiao (《天骄》) and Soushen Ji, ran into hacker attacks and lost game data. Tianjiao in particular failed because it started charging too early and could not compete with the free games flooding the market.

Kong Yi tried to run both at once. "[Huanjian Shumeng] was still going, it's just that games were the priority by then — but I still had to look after Huanjian. I remember it clearly: my salary was 8,000 yuan a month, and I took maybe 4,000 or 6,000 of it, I forget the exact figure, to pay everyone's wages."

While he ran between the two, the work at Huanjian Shumeng was no great burden, because it had never been a full-time job — it was closer to a hobby. "You didn't have to show up at this site. Everyone divided up the work: someone reposted content, someone looked after the forum, someone like me looked after things like server bills, and people might chip in opinions when we redesigned. That was it," Kong Yi recalls. "It was like a personal website — we called ourselves personal webmasters. You really didn't need to clock in."

"Later the games company stopped working, and [Huanjian Shumeng's] numbers were growing nicely, so I decided this was worth doing full-time," Kong Yi says.

From investing in Huanjian Shumeng in 2002 to coming back to it full-time in 2004, Kong Yi thinks he may have been late. "Actually I wanted to do [Huanjian Shumeng] full-time the moment I left Kingsoft. It's just that my buddy pulled me into that games company for a while longer. I could have started much earlier."

The deeper reason may be that Kong Yi believed in online games more firmly than he believed in web fiction. He describes himself as "firmly bullish" on games, and by then there were successes to point at, such as Shanda's Legend of Mir (《传奇》). On what he thought of web fiction at the time, his account goes vague. He had guessed early that web fiction would become a source of material for film, television and games, but he also says he "only had a hazy feeling about it" and "didn't understand it deeply enough."

That Kong Yi never threw himself into commercializing Huanjian Shumeng is the site in miniature. Internet entrepreneurs were rare in 2003 to begin with, so a professional management team was always going to be hard to build. By the time he started working for Huanjian Shumeng full-time, he says, "it was me and Xie Yue full-time, plus one person on tech and one on editorial and content — a lot of it was still part-time."

In August 2003 Huanjian Shumeng redesigned the site, hoping to replace the old arrangement — authors send manuscripts to editors, editors upload them — with one where authors could edit and upload their own work. But after the new version went live, the database broke, and readers could not reach the books they were following.

"It really came down to a technical blunder," Kong Yi says, putting it down to the team. He sounds resigned: "Everyone was part-time then, so you can't blame anyone. It wasn't a professional operation to begin with — just hobbyists doing it on the side, so problems like that are normal."

From this point Huanjian began to lose its lead. The year Kong Yi invested, 2002, was exactly when web fiction was moving from personal sites to commercial operations in earnest. Huanjian Shumeng and Long de Tiankong looked like they had web fantasy fiction to themselves, but a wave of sites — Qidian, Tianying Literature, Cuiweiju — rose on the same current and came for Huanjian Shumeng's territory.

"Qidian's team was more complete. There were five or six of them, Wu Wenhui, Luo Li and a few others, and they were all doing this full-time. I think they were more determined. On team focus we fell short of Qidian — that's the first thing," Kong Yi says, on why Huanjian Shumeng finally lost the fight. "When our team still had only ten people, Qidian might already have had fifty."

Another result of Kong Yi not concentrating on Huanjian Shumeng was that the site kept wavering between commerce and personal taste. "Look at Huanjian's early pages — they were done with a lot of feeling, a lot of poetry. And we didn't automatically push whatever sold best; we wanted to find the ones we liked most. There was a lot of personal preference and personal opinion in it," he says, by way of example.

That preference later set off an argument on Huanjian Shumeng. I Am a Hooligan (《我就是流氓》), by the author Xuehong, was attacked as vulgar, violent and wrong in its values. "We wanted the writing in a book like this to be better, and the values to be at least clearer. Hooligans, lowlifes, anything that tipped entirely into darkness or decadence — we didn't much encourage it. We had our own limits and preferences," Kong Yi says.

This too has been named a reason for Huanjian Shumeng's decline. After Xuehong left for Qidian, he quickly became the first author on that platform to earn more than a million yuan a year in royalties. His books leaned on the underdog's comeback and on revenge — ideas thick with aggression — which made them more popular with the far larger crowd of ordinary readers. By comparison, Kong Yi himself admits, Huanjian Shumeng's taste was "relatively niche."

Kong Yi does not think that was a mistake. Do something niche well, he believes, and it can still hold its ground in the market. But after the botched redesign and the departure of authors, the market Huanjian Shumeng faced in 2004 was no longer as forgiving as 2002.

Qidian was founded in 2002. The redesign it launched in 2003 was so easy to use, so clear and so smooth that it became the template every web novel site follows today. Having taken in a wave of authors who left Huanjian Shumeng, Wandering Toad and Xuehong among them, Qidian's catalogue grew richer too. In October 2003 it launched its VIP paid subscription system and began growing explosively, closing on Huanjian Shumeng.

What settled the fight was capital. In October 2004, Shanda bought Qidian for US$2 million. "Once Shanda bought Qidian, the pressure on us went way up. Think about it: they had money, they weren't afraid, any losses were Shanda's to absorb — Qidian had no pressure at all," Kong Yi says, describing how he felt when he heard.

One crude and effective way to compete in web fiction was to poach authors from rival sites: whoever paid more got the popular writers, and their readers came along. That war of cash held Huanjian Shumeng back.

In a Zhihu answer to "Why did Huanjian Shumeng decline," a user called Lianfeng, who says he is the site's former webmaster "Fighting Cat," wrote: "Tang Jia San Shao left because he wrote too fast — on his own he could eat up all of Huanjian's working capital at the time." And: "[Kong Yi] offered A Yue, the author of New Song, 25 yuan per thousand characters."

The question of what authors were paid did make Kong Yi a target; quite a few writers used blunt language to accuse him of not respecting them. Kong Yi sounds wronged: "Think about it — Huanjian was a commercial operation. It had no reason to treat authors and readers badly."

He says he no longer remembers what the rates were, only that against the industry average they were "decent enough." Huanjian Shumeng, he stresses, "gave the authors whatever it made"; back then it was not losing money, but it "definitely wasn't making any" either.

On the stories about Tang Jia San Shao, Kong Yi replies: "He wrote a book or two with us, we probably didn't pay him enough, and he went straight to Qidian. Qidian paid more — this must have been after the acquisition — and he left at once. It still came down to the rate. Once the working capital is gone, there's nothing to discuss."

"Huanjian did respect its authors, at least in attitude," Kong Yi says. Respect, he thinks, has a lot to do with money: "Give me 500,000 yuan a month and it's fine if you don't respect me. Give me 50 yuan a month and be respectful about it — I call that disrespect."

Either way, one thing is certain: Kong Yi was never a man willing to spend. One report notes that Huanjian Shumeng's office was in a residential building in Shilipu, Chaoyang District, Beijing. It quotes Liu Yang, Kingsoft's former marketing director: "A few desks pushed together in one room, a few people working — it was rough, but spirits were high."

Given the size of the web fiction market now, Kong Yi's reluctance to spend back then is easy to read as a failure of vision. Seen another way — no mature financing channels at the time, and the future of web fiction still unclear — spending carefully and keeping the site running was not illogical either.

There is no denying, though, that Kong Yi missed his chance to take capital. In 2003 Shanda asked him for a price; Kong Yi says he "didn't like the people at Shanda" and turned them down.

After that he went looking for financing, but the market as a whole was not that keen on web fiction. Not until 2006 did offers to buy him out start to appear, one after another. After weighing them, Kong Yi passed on Tencent's price and chose Tom.com. Beyond the higher offer, he was drawn to the man behind it: Li Ka-shing.

When he sold Huanjian Shumeng to Tom.com, the site was under a hacker attack and would not load. Kong Yi had borrowed a few servers from Lei Jun, but he felt that would not hold for long. He felt he could not keep going: "You feel your site is under attack and nobody is coming. You feel you haven't laid enough groundwork, and the outlook isn't clear."

What followed proved that Tom.com was an awful buyer. It wanted Huanjian Shumeng to become one of its subdomains, which plainly worked against the site developing on its own. To feed its SMS business, it also told Huanjian Shumeng to develop short stories — when, as things turned out, very long serials are what web fiction runs on. All of it slowed the site down; and when the portal era ended and Tom.com had no other business worth showing, Tom.com collapsed altogether and took Huanjian Shumeng with it.

"Li Ka-shing was only looking at big business. The internet was too small a thing for him, not worth the bother," Kong Yi says. "We're talking about a market cap of just over 10 billion yuan. For Li Ka-shing, isn't making 10 billion over ten years almost too easy? Every other business of his made more money than this one." He thinks Huanjian Shumeng fitted Tencent's structure at the time better, and might have ended up somewhere better.

Stranger still: "I sold the company, signed the agreement, and within about two weeks Li Xueling said he wanted to invest in it. It was that close — a week or two," Kong Yi says. "If I'd waited a bit longer — well, if your backer is willing to support the project, then of course you're willing to keep going." Had they held on, he believes, the No. 1 spot in the industry might still be Huanjian Shumeng's.

That may not be wishful thinking. In 2006, the year Tom.com bought it, Huanjian Shumeng had lost the lead but was still a serious player. When Qidian announced in August 2005 that its PV — page views — had reached 60 million, Huanjian Shumeng's PV for the second quarter of 2005 was also above 40 million. Many readers at the time described the situation as "Qidian in the south, Huanjian in the north."

After that, though, Huanjian Shumeng had nothing more to do with Kong Yi. Following the acquisition he stayed on for a while as a transition and a handover, and then, under the agreement the two sides had signed at the time of the sale, he left for good. He took part in several more startups before turning into an investor in the capital industry.

About Huanjian Shumeng, Kong Yi keeps saying the same thing: it is "a bit of a regret" that he never took Huanjian higher. From where he sits now as an investor, a company dying is entirely ordinary; it is only that "this one I really liked, and it was the first company I ever built, so it left a deeper mark on me. But it's not something I feel too sad or too sorry about."

Nor does he think Huanjian Shumeng was a complete commercial failure: "The site didn't succeed, but the company still delivered value to its shareholders through the sale. On investment returns, basically all the shareholders were satisfied. Including the fact that the partners bought property early — think about it, buying a home in 2005, that's a killing by now, right?"