Founder Zhang Yiming Says Toutiao Is Not a Media Company but a Technology Company

More than 20,000 content producers have joined Toutiao and opened Toutiao accounts; about 5,000 of them are media outlets, government bodies and institutions.

At Toutiao's office in the Yingdu Building on Zhichun Road, a QDaily reporter met Toutiao founder Zhang Yiming. He wore his usual IT-guy uniform: the gray T-shirt that shows up in nearly every photo of him, jeans and sneakers.

Zhang, 32, is not tall and speaks unhurriedly. Toutiao, the news-reading app he founded, had 240 million cumulative activated users as of April 2015, and more than 20 million daily active users.

Toutiao is not Zhang's first startup. Before it he helped build or founded the travel search site Kuxun, Fanfou and 99fang. He calls himself "a heavy consumer of information," and says he started Toutiao because he wanted "to tell you the information you need the moment you need it."

Toutiao defines itself first as "a personalized information recommendation engine." In Zhang's words, it is not just a news app but an information distribution platform.

I put a challenge to him: the three big portals, Sina, Sohu and NetEase, were all media companies, and all were eventually overtaken by BAT (Baidu, Alibaba and Tencent). How could Toutiao escape the same fate? Zhang told QDaily again and again: "Toutiao is not a media company. It is a technology company with media attributes."

He is calm about last year's sudden copyright dispute: "So far we have not lost a single copyright lawsuit." Yet more than half a year on, Toutiao still gets labeled a "pirate" from time to time. Zhang believes Toutiao's value goes far beyond what most people can see today. He often cites Google founders Larry Page and Sergey Brin, who built Google on the Stanford campus: "Early search engines were denounced as piracy too. Nobody would see them that way today. Search is far more than simple piracy."

He calls himself rather conservative. In Toutiao's first year he was terrified that BAT would learn it existed, so he kept hiding. Now he can no longer hide and has to fight in the open, but he still wants to keep a low profile. "Some people want the industry to be livelier. I don't. I have always wondered why so many companies like holding strategy launch events. Strategy is an internal matter. Just do it quietly."

Yet he also wants to be more aggressive. The team has grown from 20-odd people at the start to more than 500 now, and he hopes headcount can grow by another order of magnitude.

Toutiao has raised three funding rounds (US$120 million in total) and is valued at around US$500 million (though some say its funding is not as large as the company claims; judge for yourself). Either way, for a company not yet three years old, that is fast. What we want to know is where Toutiao can still grow after a US$500 million valuation, and what Zhang Yiming will do next. Let's hear what he has to say.

Toutiao is not a media company.

QDaily: In some ways, what Toutiao does looks a lot like a news app, and many people wonder whether you are a media company or a technology company.

Zhang Yiming: We are definitely not a media company. Toutiao is not just a news app but an information distribution platform. Media companies usually have their own positions and their own content style, and some write editorials or editors' notes. We don't. But we spread information, so we have media attributes. Baidu has media attributes too, and so do WeChat and Weibo. You could say we are a technology company with media attributes.

You can see it in who we employ. Most of our people are engineers; most of theirs are media professionals. Toutiao now has more than 500 people: more than 200 in product and technology, about 100 in support functions such as legal and administration, more than 100 in sales, and about 100 more in other operations roles such as content partnerships. Technical staff are the biggest group.

QDaily: So you prefer to call Toutiao a technology company. Is that also because no real disruptor has yet emerged among media companies?

Zhang Yiming: Content is hard to disrupt, of course, and it is not what I'm good at anyway. Put another way, I want to make information flow and reach people more efficiently, on a large scale, and so make society more efficient. You can't do that by making content. You can produce one very influential piece, but you can't improve things at scale and systematically that way. That has to come from technology.

QDaily: Then who do you see as Toutiao's biggest rival?

Zhang Yiming: In the traditional sense, the classic technology companies with media attributes are the portals, but I don't think the portals are strong enough to be rivals. Or rather, a portal is a media company with some technology attributes. Toutiao is roughly the mobile products of Sohu, Sina and Phoenix combined.

As a technology company you actually have more rivals. First comes BAT, especially Baidu and Tencent, who compete with technology companies in most major fields. But we aren't copying a particular need or benchmarking against a particular product, so we aren't in direct competition with them, the way Amap competes with Baidu Maps or Meituan with Nuomi. We are building a new kind of product for the future.

What happens when the company gets big?

QDaily: Toutiao has now raised three rounds. Has it grown faster than you expected?

Zhang Yiming: Yes, it has. I'm generally conservative, and both our user numbers and the size of the company are above what I expected. As of now (April 2015), Toutiao has 240 million cumulative activated users. These days I actually wish I could be a bit more aggressive.

QDaily: Growing this fast must have brought you some big challenges.

Zhang Yiming: It has. First, growth is what matters most, and growth solves many problems. Second, attitude matters too. We don't have much experience in many things, so we don't thrash about when these challenges come.

You shouldn't get carried away and say that because some company brought in some excellence program, we have to adopt the same model. Since we're not very experienced at management, we manage less: hire better people, tell them the goal, and let them manage themselves. That may not be the most efficient way, but it is certainly a decent one.

QDaily: How is the management team structured at the moment?

Zhang Yiming: We don't really have a structure yet. A dozen or so people report to me. Inside the company there are no titles and no levels; benefits and everything else are set by what the work requires. Some companies want a strict hierarchy. We don't.

QDaily: Going from a team of 20 to more than 500, you clearly can't handle everything yourself anymore.

Zhang Yiming: So I delegate fully. Before the company reached 100 people, I managed in great detail. Past 200, I started delegating, since I couldn't manage everything anyway.

QDaily: So where do you put most of your energy?

Zhang Yiming: On two things: product and technology, and hiring. In those two areas I ask about even the smallest details. Marketing and sales I basically never get involved in.

QDaily: This isn't your first startup, and you don't seem to have the anxiety you had last time.

Zhang Yiming: I used to, and now I have less of it. I used to talk a lot about embracing uncertainty. When uncertainty is high you get anxious, because you always want a definite outcome. If you first accept the worst outcome the uncertainty could bring, and admit that high uncertainty is a fact you can't change, you can embrace it more boldly, and then you actually do better. It isn't only true of startups. In many things you have to live with uncertainty.

How does Toutiao actually do advertising?

QDaily: How much advertising revenue does Toutiao make right now? Are you happy with it?

Zhang Yiming: I can't disclose the figure. I'm fairly happy with it.

QDaily: Quite a few users feel the ad formats on Toutiao are too limited.

Zhang Yiming: We're improving that, and there will be more formats. Video is coming next, for example, and landing pages will get richer so users can convert directly. The video format will launch this May or June.

QDaily: Are car ads still the biggest share?

Zhang Yiming: No. The car share is falling (I can't give the exact figures), while ads for internet services and fast-moving consumer goods are rising. Car ads shrink as a share every quarter, and online services grow every quarter. We will also carry ads on more subjects, such as travel. Right now we have very few travel ads.

QDaily: Many companies keep searching for new business models. Have you ever been unsure about advertising?

Zhang Yiming: On advertising we are probably the least confused company around. We have never run any kind of traditional advertising. Since our founding, our forms of commercialization, our models and our forecasts have not changed. Everyone else keeps searching for new business models, but we haven't changed. We still do precisely targeted, demand-based advertising.

QDaily: So what advertising problems do you still need to solve?

Zhang Yiming: I think we need to move faster. Ads may need to be richer and more readable, and we have many ideas we haven't delivered yet. Also, our ad sales team is a bit over 100 people, far smaller than at comparable companies. That isn't enough, and we will keep hiring.

QDaily: Besides video, what are the ideas you haven't delivered yet?

Zhang Yiming: We can target more finely, and in more situations. If you travel from Beijing to Jiuzhaigou, for example, we can recommend a local travel guide. The whole team is now developing the technology for this.

I want to do advertising better: ads that help users, that don't spoil their experience, and that give advertisers good returns. So far Toutiao has not opened up to medical advertising at all. We are cautious and restrained there. We can't do too much harm to users for the sake of commercialization.

QDaily: Will you never open up to medical advertising?

Zhang Yiming: We will when we're confident. It has to be positive and beneficial overall. That is a principle too: it has to benefit both users and clients.

QDaily: Toutiao is also trying new things, such as its e-commerce platform Today's Deals. Are you planning to turn it into your own online store? E-commerce businesses that live on referral traffic are struggling right now.

Zhang Yiming: When many advertisers sell something, they want users to be able to buy it on the spot. When a new phone is advertised on our platform, for example, quite a few users want to buy it right away. That is why we built e-commerce. Most transactions on Today's Deals can now be completed directly on our platform; it isn't just about sending traffic elsewhere. Where we do refer traffic, we choose big platforms such as JD.com and Taobao, to keep the user experience as complete as possible. In short, user experience is our standard, and we won't send Today's Deals traffic to more websites.

How to face competitors?

QDaily: Which company do you see as Toutiao's model?

Zhang Yiming: I read a lot of biographies of company founders, and personally I lean toward Facebook. I hope we come close to Facebook in how we see talent, in our management style and in many of our beliefs.

QDaily: Facebook took some detours as it grew too. What can Toutiao learn from it?

Zhang Yiming: They take big strides in product. Many projects they tried failed and drew objections from many users, but they firmly believed the direction was right and did it all over again. They are ambitious and try things boldly. Toutiao should learn from that: don't settle for the status quo, and dare to take big steps in product. I say not to thrash about, but in product you do need to experiment, and Toutiao is doing that too. Don't get stuck where you are.

QDaily: What score would you give Toutiao today?

Zhang Yiming: Out of 100, I'd give it 30. There is a lot of room to improve in product, in technology and in internal operations and management.

QDaily: What, in the end, do you want the product to achieve?

Zhang Yiming: We aren't like NetEase, which makes a news app "with attitude." We want to make a news app "without attitude," giving each person the news they care about. We keep working on the algorithm: when a user's interests change, how do we catch it faster and respond? I'd like to do away with the lament so many people have, "If only I'd known about Toutiao sooner," and turn it into "Good thing Toutiao told me." That is still a big challenge.

QDaily: When I interviewed you more than two years ago, you said you badly didn't want BAT to know you existed; you were rather afraid of competition then. Now competitors are multiplying. Sogou and Tencent, for example, launched "WeChat Headlines," which the industry sees as a strong pursuer of Toutiao. How do you see the competition?

Zhang Yiming: Early on I hid. Now I can't hide anymore, so we speed up. First, we keep our own distinctive understanding of things. A big reason Facebook succeeded where others failed is that they understood things in their own way, and that goes beyond what the interface or the buttons look like. It includes how the product is developed, and what matters most and what doesn't. Our team understands the vision and the direction better than other companies do, and cares about them more. Second, we have to act more decisively and faster than other companies.

Beyond those two points, everything else is fine. Competition is something you can't change. I always use one comparison: when you're running, you mainly look ahead, glance left and right now and then, and don't look back.

We're happy for people to know we exist, and happy to share what we've achieved, but we'll keep our more specific plans for the future quieter. We won't be like some companies that hold strategy launch events and tell the world everything they're thinking. I've always wondered why so many companies like holding strategy launch events. Strategy is an internal matter. Just do it quietly.

QDaily: Competitors keep arriving. Is that a good thing or a bad thing?

Zhang Yiming: Some people want the industry to be livelier. We don't. Luckily, we later found that they only look like you on the surface; their most basic thinking isn't necessarily the same as yours. They may just be joining in for the excitement.

QDaily: But they might also be coming to upend the whole landscape.

Zhang Yiming: Right, but you can't control it anyway, so there's no need to try. There's a car behind you. Whether it drives straight or sideways, you just drive forward faster and watch whether to turn left or right at the next turnoff. How the car behind is driving, or how many cars are back there, we don't pay much attention to.

QDaily: You're quite optimistic.

Zhang Yiming: I'm optimistic in the long run and cautious in the short run.

QDaily: How do you see the shape of Toutiao's industry? Will one company come to dominate it?

Zhang Yiming: That mainly depends on whether network effects and economies of scale appear, which is decided by the nature of the industry. If an industry is naturally fragmented, meaning marginal cost does not fall as you grow, no dominant company will emerge. Portals are an example: it is hard for one to dominate, because different portals have different styles and users naturally split among them. A personalized recommendation engine is different. It costs a lot up front and little at the margin, and it has economies of scale and network effects (a network effect means value grows exponentially as users increase). The bigger a product gets, the more competitive advantages it has, and an industry like that easily produces a dominant company. By that analysis, the personalized recommendation engine industry should produce a leader.

What value does Toutiao bring to the media?

QDaily: Not long ago, the National Copyright Administration officially joined the mobile news app Toutiao and opened a Toutiao account. Is that the best possible answer to last year's copyright dispute?

Zhang Yiming: I think Toutiao has done very well on copyright. So far we have not lost a single copyright lawsuit, and those who had disputes with us before have nearly all become partners. Besides the National Copyright Administration, more than 20 central government ministries and commissions have joined, and even more government agencies, plus all kinds of institutions, nonprofits and so on. Many government bodies use us to publish official information, to make society more transparent, as a platform for open government. I think that is only natural.

Looking back, I should actually thank the critics in last year's copyright dispute. Their criticism pushed us to put more effort into helping content producers find their audiences as fast as possible, and we will open up more tools to help content producers in the future.

QDaily: In other words, is it also because you have handled your government relations well?

Zhang Yiming: All I can say is that 90 percent of the reason is that we did well at protecting copyright and building the content platform.

QDaily: How many media outlets are you working with right now?

Zhang Yiming: More than 20,000 content producers have joined Toutiao and opened Toutiao accounts. About 5,000 of them are media outlets, government bodies and institutions, and more than 1,000 are traditional media we work with.

QDaily: What do those 1,000-plus traditional media outlets actually get from joining Toutiao?

Zhang Yiming: Revenue, attention and traffic. Some we pay directly, with copyright fees on the traditional model.

QDaily: The share you pay must be small, and the income can't be high.

Zhang Yiming: I'd estimate about 100 get paid. The income isn't high, but it meets industry standards.

QDaily: How will you avoid a zero-sum game between portals and traditional media in the future?

Zhang Yiming: Frankly, many new media outlets do better with us. They can already get traffic online and run on new business models. From the feedback I'm seeing, how much we can help traditional media depends mainly on how the teams themselves think, and on how far along they are in moving to new media. If they haven't changed much themselves, it is still hard for us to help them.

QDaily: That is also a problem you need to solve.

Zhang Yiming: Not necessarily. Why? Because new media already make up a bigger share of all content than people imagine. On our platform, content produced through Toutiao accounts makes up more than 70 percent of everything displayed and read. People underestimate how much content new media can create.

QDaily: Where do you think Toutiao's greatest value lies for the media?

Zhang Yiming: It's like this: the whole media landscape is changing, both how content is distributed and how it is created. For the industry as a whole, we have encouraged more long-tail, more niche content. A colleague shared a piece a few days ago about the guzheng, the Chinese zither. Content like that could never have been published in a magazine before. Now it can, and we push it to guzheng fans. Second, Toutiao speeds up the exchange of information in society, such as the open-government information I mentioned: government work reports, case information, police alerts. The benefit to society depends on how fast information moves through it.

QDaily: What do you make of the current media environment?

Zhang Yiming: I think big changes are coming. Many fields will become products of cognitive surplus: much creative work will be done by people with plenty of spare knowledge and a desire to express themselves. I might write up some thoughts on product design, for example, and a colleague might write a technical blog. That is all creation from cognitive surplus, and also a kind of sharing economy, where you share what you know with others. Many fields will go this way and become more long-tail, and that will have a big effect on the media.

QDaily: Will Toutiao produce in-depth content in the future?

Zhang Yiming: For in-depth content we will try some partnerships. We hope to offer a platform to people who create high-quality in-depth work. I don't want to say much more about that for now.

QDaily: How do you usually gather user feedback on Toutiao?

Zhang Yiming: Every Monday at noon I read through all of the previous week's feedback and group similar items together. The complaints are still basically the same: repeated stories, wrong recommendations and stale content.

QDaily: How do you deal with them once you have this feedback?

Zhang Yiming: We aren't the kind of company that is always pumped up. Put the right people on the right path, use the right methods, keep improving, and that's OK.

We look for this week to be better than last week, say complaints of a certain type down 20 percent, and seeing that is enough. For 80 percent of the feedback I set no targets. I only keep an eye on sudden problems, or problems we should be avoiding.

What does Toutiao plan to do next?

QDaily: Will you consider developing hardware?

Zhang Yiming: Not for a long while at least, but we will work with hardware companies.

QDaily: We noticed Toutiao's strategic investment department has been hiring. What areas are you preparing to invest in?

Zhang Yiming: Our investments complement our core business. We look at vertical content, such as vertical communities and vertical tools, tools for creating and distributing information, and any other areas that might interest us.

QDaily: How many people are in the investment department now?

Zhang Yiming: Two right now, and we should hire three more. We are a technology company with a lot of data to analyze, and that data points to some conclusions that we don't want to waste. That is where investment comes in.

QDaily: Have you already invested in anything?

Zhang Yiming: We have made six or seven investments so far. None of them makes content directly; they are all tools (I don't plan to tell you which ones right now). We may invest in content in the future, and we are still studying that.

QDaily: What matters most to you in 2015?

Zhang Yiming: We have some product goals. Overall we hope to triple daily active users. We also hope to make some progress internationally. In the product itself, we want to go further with discussion around users' interests, and to improve comments further (we can't say much about future strategy).

QDaily: Of all your departments, which most needs to expand?

Zhang Yiming: Technology. It could at least double again.

QDaily: What is the biggest problem to solve this year?

Zhang Yiming: Hiring good people and improving how the team is managed.

QDaily: What have you been reading lately?

Zhang Yiming: I mostly read fairly classic books. Last night I went back over The Effective Executive. I don't read that many books: on average two or three Chinese books a month, and half to one English book.

QDaily: More and more people around us talk about internet startups. Do you have advice for young people who want to start one?

Zhang Yiming: I think "Internet Plus" today is a lot like the old "downgrade theory." Everyone is remaking every kind of traditional industry, and a whole wave of O2O (online-to-offline) startups has come out. I'd actually like more people to build things that move upmarket, in emerging fields, major fields and foundational fields, not only startups in car maintenance, food delivery and laundry. Those are convenient enough, but as technological innovation they get a little tiresome.

Recommendation engines, artificial intelligence, electric vehicles: bigger, more innovative fields like these deserve encouragement too. For a while some people scorned them. Young people working on these things fail at a fairly high rate, the argument went, so why not build something that migrant workers in third- and fourth-tier cities like to use, or something that makes money more easily and sits closer to the cash. Society as a whole should be more tolerant of them.

QDaily will keep following a certain kind of company: ones that have survived for a while and won a solid reputation with users and a voice in their industry, but cannot yet be called big companies. For these companies, which keep their startup spirit but have begun to reach scale, we will look at what they plan to do next and what they are thinking about now.

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