AcFun Hasn't Officially Been Declared Dead, But How It Got Here Is No Mystery

The better question may be the opposite one: with management this chaotic, how did AcFun survive as long as it did?

Whether AcFun is actually dead is still an open question. The site has been unreachable since the morning of February 2, but no one has come forward to declare it dead.

Against the eulogies pouring in from users, there was no clear sign of grief inside the company. The CEO had set his WeChat Moments to show only the past three days, and all that appeared there were comments on anime and TV series — at least that is how it looked to "Tian Dao," one of his employees. Tian Dao was baffled. Shouldn't the CEO be out there fighting to bring AcFun back to life?

CEO Liu Yanyan's last public statement also came on February 2. Speaking to Tencent's Shenwang, he said, "Whether AcFun is going to shut down, I can't say." He still insisted he would hold his ground.

To the outside world, AcFun had long looked like a company living on borrowed time. On January 31, media outlets rushed to report that its cash flow had broken down, and two days later the site vanished from the internet. Last November, AcFun was unreachable for three straight days, and in the months after that it was under constant pressure from regulators.

Employees stayed strangely calm, but not because they still had hope for the future. It was because AcFun had been a mess internally for years. None of this was surprising. "Xiao Zhang," who once worked at AcFun, told QDaily that Liu Yanyan was deeply passionate about ACG culture (anime, comics and games), and that he may well have done a great deal for AcFun as its CEO — but as an employee, Xiao Zhang rarely felt Liu was there as the company's CEO at all.

As he put it: "From January last year, it felt like this person simply wasn't in the office anymore."

Explaining how AcFun ended up here looks almost too easy, since nearly everyone who ever worked there can point to problems large and small. But if AcFun's management had always been this poor, then the fact that it still attracted heavy investment over ten years, and could still tell a story that rode the prevailing trends, is itself strange. AcFun survived less on its competence as a company than on the heat thrown off by the rise of the ACG market and on the way a user-generated-content site runs itself.

"The core operating team was never the controlling shareholder" is something many people agree on about AcFun. Since its official founding in 2007, China's earliest bullet-comment (danmaku) video site has passed through a string of owners — Xilin, Hangzhou Bianfeng, Yang Xinmiao and Alpha Group among them. Management turned over just as often: in the three years from 2015 to now, three different people have served as CEO — Sun Min, Mo Ran and Liu Yanyan.

AcFun's Ownership History

2007

AcFun is officially founded.

2010

Founder Xilin sells AcFun to Pan Enlin, general manager of the card-and-board-game platform Bianfeng Networks, and Chen Shaojie, general manager of Bianfeng's Wuhan branch.

April 2014

Alpha Group founder Cai Dongqing acquires a 92% stake in AcFun.

April 2015

Yang Xinmiao, through Liu Kuan, acquires a 41% stake in AcFun from Cai Dongqing.

August 2015

Youku Tudou invests in AcFun, acquiring an 18% stake.

January 2016

SoftBank invests in AcFun, acquiring a 15% stake.

July 2016

Mo Ran, of Yang Xinmiao's camp, returns his 29% stake to Cai Dongqing.

November 2016

Chinese Online invests in AcFun, acquiring a 13.51% stake.

Zhang Xia joined AcFun in mid-2015 as VP of product. In March 2016, then-CEO Mo Ran moved her to a peripheral business; she returned to the core business that July and later took over as chief operating officer. In March 2017 she left AcFun to start her own company. In internet circles Zhang Xia is better known by the handle "Icarus's Wings," and people who know her call her "Wings" for short.

In September 2015, the mobile team Wings led was about to ship a new version of the AcFun app. Three or four days before launch, she got an email from AcFun's CTO at the time saying he was going to replace the site's entire architecture. "I thought right away that this wouldn't work, that we couldn't do it this way. I remember writing back that I didn't accept doing it like this, that we couldn't be this reckless about it. He was the CTO and I was VP of product — I couldn't stop him."

AcFun's technical problems were always what users complained about most, and those problems were both a cause of the damage to the product and a portrait of the chaos in its management.

Users took to the phrase "the site blew up" to describe AcFun's years of chronic downtime, and its Baidu Tieba forum was always piled with threads titled "Why did AcFun blow up again?" Search the Chrome extension store and you will find plenty of plugins users wrote themselves just to help get into the site. Users joked that they were "powering the site with love" — keeping AcFun running on their own enthusiasm.

When AcFun was born in 2007 it was nothing more than a personal website, rough and grassroots. The interface was all text, with no video thumbnails; the content was piled together in a jumble, with video links marked only by blue underlines. It didn't look like a video site at all. When founder Xilin sold AcFun to Hangzhou Bianfeng, the cost of video bandwidth and the limits of his own technical skill were both among the reasons.

Even after it became a company, AcFun's technical ability was still lacking. A Zhihu user named Zuo Neilixiang, who says he worked as a developer for AcFun for three years before 2014, wrote: "Because I was immature, during that period the site's development process, its architecture and the code itself all took a lot of wrong turns. Technical debt kept piling up, and some badly planned refactors added new technical debt of their own."

In early 2015, AcFun moved from Wuhan to Beijing, and at one point word spread that AcFun's Wuhan tech team had resigned en masse. QDaily has learned that some of the original Wuhan engineers did move to Beijing to take up posts there, but that did not help the newly hired Beijing engineers understand or get comfortable with the codebase.

Replacing the site's architecture and rebuilding everything from scratch looked like the obvious choice, and it was also the riskiest one. Wings recalls that in September 2015 AcFun swapped out its site architecture and moved its server room at the same time, which knocked the site offline for several days running. Soon after, the CTO who had led the rebuild left AcFun too.

That still wasn't AcFun's biggest technical blunder. In August 2016, China Unicom cracked down on unlicensed server rooms, and AcFun went dark for about 37 hours. After the server room was shut down, AcFun tried to bring the site back and found that, during Mo Ran's time as CEO, its Alibaba Cloud backup machine had filled up its disk two months earlier and had never been expanded, so nothing had been backed up since. In the end AcFun could only restart its servers from a two-month-old backup, wiping out every video, message, comment and bullet comment users had uploaded in the meantime and leaving a large number of site features broken. For AcFun it was a huge blow.

In fact, nearly every person connected to AcFun whom QDaily spoke with could tell a story behind one crash or another. "AcFun's tech was just a mess," Xiao Zhang said. "It's like building a house where the foundation was never laid properly, so as you keep building up, you're patching this part one minute and that part the next."

QDaily has learned that Sun Min, Mo Ran and Liu Yanyan all understood the internet business poorly, and that none of them had done work connected to it before. They therefore lacked the experience to find people who could fix AcFun's technical problems. They even turned themselves into part of the problem.

Tian Dao recalls that Mo Ran, who took office in January 2016, threw himself into company business with great enthusiasm. To get ready for the coming Chinese New Year, he wanted a new holiday mascot designed, and went to a colleague who handled UI design. After submitting more than 100 versions, the designer quit.

AcFun never built anything like a mature management system. Xiao Zhang recalls that the operations department he worked in did not hold a single meeting in a week — "no big meetings, no small meetings" — which meant everyone was feeling their way forward alone, with "no management process to speak of."

Wings had once fought to win performance bonuses for the mobile team she led. Mo Ran also tried to set up a company-wide KPI system at AcFun, one that would both set targets for employees and serve as a yardstick for judging them. But Mo Ran left AcFun soon afterward, and many departments never got a KPI system at all. Tian Dao told QDaily that, as far as he knew, some AcFun editors' entire day's work was to download two videos from other sites and upload them to AcFun.

This absence of management finally produced a strange state of affairs across AcFun in which authority and responsibility were barely distinguishable. Xiao Zhang suffered from it himself: he would often be handed odd jobs out of the blue by other departments. Over time, a mood of quiet slacking took hold at AcFun. As Xiao Zhang put it: "By the later period it was definitely a management problem. Everyone was thinking about who would end up 'holding the bag' — taking the blame — so nobody dared take anything on. People either dodged responsibility or pushed it onto someone else."

Tian Dao, for his part, was indignant about how unprofessional many AcFun employees were. Some people in operations did not even know what DAU (daily active users) meant. What struck him as most absurd was the time AcFun, short of cash, decided to temporarily suspend pay for staff at the director and manager level and above — and HR went to the product department and told them that since everyone there held the title "product manager," they fell within the scope of the suspension.

"This really isn't a joke," Tian Dao said.

As noted above, the root of that unprofessionalism may be the absence of any goal. Had a KPI system been set up early on, it could have screened employees through an elimination mechanism and raised the overall level of professionalism. But one big reason AcFun took so long to roll out KPIs may be that it never had a clear goal in the first place.

Both Sun Min and Mo Ran were vague in interviews about what AcFun's future goals actually were. Speaking at the World Internet Conference in late 2015, Sun Min's line was that the site would improve the overall user experience, carry more quality content and also work toward profit. What Mo Ran liked to stress were emptier phrases still: "the demographic dividend of youth," "subculture."

A relatively clear statement came from Liu Yanyan in a 2015 interview, in which he said AcFun was not thinking about profit for the time being, only about how sticky its users were. The two priorities for growth were making its own anime and drama series, and supporting UP creators making original content. In practice, in-house anime and drama moved extremely slowly and stayed almost negligible within AcFun as a whole. On the UP creator side, as the site's own traffic fell, large numbers of UP creators drifted to other platforms.

Ideas were not what AcFun lacked internally. Livestreaming, travel and social features all appear to have been developed at one point or another as new lines of business — and none of them ever launched.

Even Wings cannot say exactly why livestreaming never went live. "It just wasn't allowed to go up. There were some detailed reasons, but when I asked, I felt I never got an answer I found reasonable or satisfying. There were probably decisions behind it that I didn't know about, that weren't convenient to tell me."

For employees, this meant knowing almost nothing about AcFun's decisions. In June 2017, AcFun signed a contract with an advertising firm and held a press conference announcing that it was starting to make money from its audience, yet Xiao Zhang, as an employee, felt nothing at AcFun had changed — and he did not even hear about the announcement from inside the company.

"We had no internal announcements at all. We had to go find the news ourselves, and usually it was users who told us," Xiao Zhang said. "Liu Yanyan changed after he became CEO. Back when he was doing content, he'd still meet with operations every week. But once he was CEO, whatever he was doing, he never let us see it. Honestly, it's fair enough for a CEO to keep what he's doing from the people below him. But it's one thing not to let us see what he's doing — we couldn't even see the results of what he was doing."

This opaque decision-making may be tied to AcFun's long, complicated ownership structure and the infighting among senior management that came with it — which is exactly what outsiders have criticized about AcFun for years.

After becoming CEO in March 2016, Mo Ran moved Wings and Liu Yanyan, both of whom had played fairly important roles, onto peripheral businesses. Qunbai, which Mo Ran's emails called a strategic-level business, had originally been Wings's own side venture before she joined AcFun. To avoid a conflict of interest after joining, Wings broke up the original Qunbai team and scattered its members across different AcFun departments. As for the in-house production business Liu Yanyan was handed, how much it could accomplish depended on how much AcFun put into it — and that was clearly never going to be one of Mo Ran's priorities.

Four months later everything changed. According to Tian Dao, on July 1 a group of special-duty officers broke down the door and stormed into AcFun's office, trying to force their way into Mo Ran's office to seize the company seal and leaving the place in disarray. That same night AcFun announced that Mo Ran had submitted his resignation to the board for personal reasons and had decided to give up all his positions. Alpha Group vice president Li Bin took over as AcFun's chairman, and Liu Yanyan became the new CEO.

AcFun then went through a round of layoffs, nominally to trim staff and save money. Inside the company it produced an atmosphere of dread. Tian Dao said that at mealtimes back then, what people talked about most was which employee in which department had suddenly left. What QDaily has learned suggests many departments were hollowed out this way.

At that point Cai Dongqing, the Alpha Group founder who held the majority stake, took control of AcFun, and the company did steady itself for a while. According to a report by 36Kr, Cai Dongqing began brokering financing for AcFun. In November 2016, Chinese Online announced it was taking a stake in AcFun, investing 250 million yuan.

In theory, AcFun could finally settle into steady growth. Instead, all through 2017 it kept running into pressure from regulators.

In June 2017, the official website of the State Administration of Press, Publication, Radio, Film and Television ordered AcFun's video service shut down, on the grounds that sites like it were offering audiovisual programming without an Information Network Dissemination of Audio-Visual Programs License, and were carrying large volumes of current-affairs programming and social commentary that broke state rules and promoted negative views.

On July 12, AcFun's film-and-TV section disappeared, and movies, TV shows and similar content were wiped out. Several former AcFun employees believe this hit the site hard, because a large share of its traffic at the time came from precisely that film-and-TV content.

Employees had plenty of complaints about this too, because for something this big, Liu Yanyan never stepped forward to say anything. A story that later circulated inside the company held that the decision to close the film-and-TV section wasn't Liu Yanyan's at all, but an operations editor's.

"Really, all they had to do was clear out the content that infringed copyright and the film-and-TV section could have stayed open. But that editor didn't want the hassle, so he just shut the whole section down."

With current-affairs content, military content and other categories closed as well, about 70% of AcFun's user-generated content vanished. 36Kr's figures show that daily active users fell from 8 million in early 2017 to 1.6 million. As AcFun's user numbers fell, its finances grew harder too.

According to figures disclosed when Chinese Online took its stake at the end of 2016, AcFun's annual operating costs ran above 100 million yuan while its revenue was only in the millions. In public reports, AcFun's confirmed funding rounds came in August 2015, January 2016 and November 2016, worth US$50 million, US$30 million and 250 million yuan. That money does not appear to have arrived in full: only 131 million yuan of Chinese Online's investment was actually received.

For employees, a tight budget seemed to be the permanent condition. At many AcFun events, staff had to front the money themselves and then file for reimbursement, which usually took a long time. And no matter the amount — 20 or 30 yuan, or 20,000 or 30,000 — it had to be signed off by the CFO or even the CEO himself. Sometimes a budget promised during event planning simply evaporated by the end.

From 2016 on, AcFun kept looking for new financing. But as its user numbers shrank and its valuation fell, raising money got harder. At the rate AcFun was spending, Chinese Online's 131 million yuan looked set to run out in about a year. So from October 2017, employees began posting on social media that AcFun owed them back pay, and staff started leaving one after another.

According to a report by 36Kr, Alibaba and Yunfeng Capital, both of which had been interested in investing in AcFun, disagreed over price and shifted to "sitting tight and waiting to see." This coincided with the expiry of AcFun's server contract with Alibaba Cloud. With its cash flow broken, AcFun couldn't afford to renew — which appears to be the direct reason the site went dark this time.

QDaily has learned from people close to Alpha Group that Cai Dongqing does indeed intend to sell his stake in AcFun. Alpha Group, which he founded, started out as a contract toy manufacturer and has spent recent years trying to turn itself into a pan-entertainment company, buying up a batch of anime and comics businesses along the way, U17 and AcFun among them. Cai Dongqing's eye for acquisitions was good, but managing them was never his strength, and these companies have all been sliding in recent years. That appears to be what pushed him to sell the assets and cut his losses.

For an Alpha Group in this position, AcFun is no longer a vehicle for pan-entertainment ambitions but a commodity waiting for a buyer — and even that commodity's value doesn't really come from AcFun itself.

In its early days, AcFun drew a base of users through anime. After moving to Beijing in 2015, its daily active users grew to several million in about a year. That was also the year capital was chasing anime feverishly, and AcFun's own price rose with the tide. Over the past two years, though, the ACG subculture has cooled, and AcFun's own problems along with the outside pressure on it have driven its value down — and that value will keep falling the longer the site stays unreachable.

Besides, truly saving AcFun would take far more than putting the site back online.

(At the interviewees' request, "Tian Dao" and "Xiao Zhang" are both pseudonyms.)