China Roundup: Xi’s power on bitcoin, the rise of Alibaba’s new rival

Welcome back to TechCrunch’s China roundup, a digest of the latest events that happened at major Chinese tech companies and what they mean to tech founders and executives around the world.

Alibaba’s nemesis

Alibaba’s new rival is shaking up China’s internet landscape.

This week, four-year-old e-commerce upstart Pinduoduo displaced JD.com to be the fourth-most valuable internet company in the country. Its market capitalization of $47.6 billion on Friday put it just behind e-commerce leader Alibaba, social networking behemoth Tencent and food delivery titan Meituan in China. Baidu, the search equivalent of Google in China, has fallen off the top-three club, ending a decade of unshakable dominance of Baidu, Alibaba, and Tencent (the “BAT”) on the Chinese internet.

The story of Pinduoduo comes down to growing internet penetration and the rise of social commerce. Pinduoduo, which is known for selling ultra-cheap products, is particularly popular with price-sensitive residents in small towns and rural regions, a market relatively underserved by online retail pioneers Alibaba and JD.com. However, Pinduoduo has set about targeting more urban consumers by heavily subsidizing big-ticket items such as iPhones.

Its seamless integration with WeChat, the ubiquitous messaging app owned by Pinduoduo investor Tencent, contributes to adaptability among a less tech-savvy population. WeChat users can access Pinduoduo via the messenger’s built-in lite app, skipping app downloads; they also get deals from group-buying, thus the name Pinduoduo, which means “shop more together” in Chinese.

The incredible rise of Pinduoduo, China’s newest force in e-commerce

Earlier this month, Pinduoduo founder and chief executive Colin Huang, a 39-year-old former Google engineer of few words, gave a 45-minute speech at the company’s anniversary, according to a summary published by local tech media Late News. He announced that Pinduoduo has surpassed JD.com in gross merchandise volume, or the total dollar value of goods sold. It’s unclear whether the companies use the same set of metrics for GMV, for instance, whether the figure includes refunded items.

While its rivalry with JD.com is nuanced as both companies are backed by Tencent, Pinduoduo’s competition against Alibaba is more blatant. In his missive to staff, Huang acknowledged that Pinduoduo is “standing on a giant’s shoulders,” hinting at Alibaba’s sheer size. When it comes to fighting the impending battle during the upcoming Single’s Day shopping festival (11/11), the founder sounded poised. “Pinduoduo should not feel pressured. The one who should is our peer.”

Also worth your attention

• 82% of Chinese adults used digital payments in 2018, up about 5%; among those living in rural China, 72% made transactions via online banking, telephone banking, the point-of-sale system, ATM or other digital channels, said a new report released by the People’s Bank of China. Beijing’s push for rural areas to go cash-free is in part what gives rise to such flourishing e-commerce businesses as Pinduoduo.
• Few things move the bitcoin market like President Xi Jinping’s endorsement of blockchain. Speaking at a politburo meeting on Thursday, Xi called for China to “take blockchain as an important breakthrough to achieve independence of core technologies” (in Chinese). Bitcoin price soared more than 10% in response. But as industry experts cautioned, when China, where crypto exchanges are banned, speaks of “blockchain” it usually means the encrypted technology that not only undergirds cryptocurrencies but can revolutionize a whole range of sectors like finance, manufacturing and agriculture. Expect all corners of Chinese society to capitalize on the blockchain concept with even greater force.

Xi: Blockchain, Blockchain, Blockchain (undertone is not Bitcoin as usual)

Market: pumped Bitcoin 13%

More reads below – pic.twitter.com/RayGwbtKkv

— Dovey Wan (@DoveyWan) October 25, 2019

• One of China’s most prominent venture investors just closed $352 million for the first fund of his new financial vehicle. JP Gan, a former managing partner at Qiming Venture Partners, recently started Ince Capital Partners with internet veteran and venture investor Steven Hu. Having backed noted companies including Xiaomi, Meituan, Ctrip, Musical.ly, to name just a few, Gan will continue to fund early to growth-stage startups in China’s internet, consumer and artificial intelligence sectors.
• Smartphone maker Xiaomi hired leading voice recognition expert Daniel Povey. The researcher who was part of the team to develop the widely used open-source speech recognition toolkit Kaldi announced his next move on Twitter. Before this, Povey declined an offer from Facebook after he was fired by John Hopkins University for attempting to break up a student sit-in. He told The Baltimore Sun earlier that he intended to join a Chinese company because “they don’t have American-style social justice warriors” and he would feel “more relaxed among the Chinese.” Many Chinese tech companies have research and development operations in the U.S. including Xiaomi, which set up a U.S. R&D center in 2017 (in Chinese) to deepen collaboration with chipmaking giant Qualcomm.
• NetEase’s e-learning unit Youdao began trading at $13.50 per ADS in the U.S. on Friday amid increased regulatory scrutiny on Chinese IPOs. Youdao, which operates a suite of popular online educational products from dictionaries to MOOC-style courses, had over 100 million monthly active users by the first half of 2019, shows its prospectus. It’s one of the many attempts by NetEase founder Ding Lei, once China’s richest man back in 2003, to add momentum to his 22-year-old company. These days NetEase makes the bulk of its revenue from video games and ranks only behind Tencent in China’s booming gaming sector. In September, it sold its once-hopeful cross-border e-commerce business Kaola to Alibaba for $2 billion. 

Facebook AI Research says it has created a system that can modify human faces in live video feeds to thwart state-of-the-art facial recognition software (Khari Johnson/VentureBeat)

Khari Johnson / VentureBeat:
Facebook AI Research says it has created a system that can modify human faces in live video feeds to thwart state-of-the-art facial recognition software  —  Facebook AI Research says it has created a machine learning system for de-identification of individuals in video.

Stripe launches in Mexico, three weeks after the country's central bank launched CoDi, a mobile payments system that lets consumers make payments using QR codes (Justin Villamil/Bloomberg)

Justin Villamil / Bloomberg:
Stripe launches in Mexico, three weeks after the country's central bank launched CoDi, a mobile payments system that lets consumers make payments using QR codes  —  Mobile payment startup Stripe Inc. began operations in Mexico, three weeks after after the launch of a similar central bank-backed system aimed …

Profile of vTaiwan online service, created after 2014 protests, to help groups of people with different interests achieve consensus to guide new regulations (Carl Miller/BBC)

Carl Miller / BBC:
Profile of vTaiwan online service, created after 2014 protests, to help groups of people with different interests achieve consensus to guide new regulations  —  There is one thing that practically everyone can agree on: politics has become bitterly divided.

Two FTC commissioners say the Sunday Riley settlement, which involved no return of gains, despite strong evidence of wrongdoing, may usher in more review fraud (Paris Martineau/Ars Technica)

Paris Martineau / Ars Technica:
Two FTC commissioners say the Sunday Riley settlement, which involved no return of gains, despite strong evidence of wrongdoing, may usher in more review fraud  —  “Dishonest firms may come to conclude that posting fake reviews is a viable strategy.”  —  Like much of the Internet, online reviews are often fake.

Meet Utah’s next unicorn

Weave, a developer of patient communications software focused on the dental and optometry market, was the first Utah-headquartered company to graduate from Y Combinator in 2014. Now, it’s poised to enter a small but growing class startups in the ‘Silicon Slopes’ to garner ‘unicorn’ status.

The business announced a $70 million Series D last week at a valuation of $970 million. Tiger Global Management led the round, with participation from existing backers Catalyst Investors, Bessemer Venture Partners, Crosslink Capital, Pelion Venture Partners and LeadEdge Capital.

The company was founded in 2011 and fully bootstrapped until enrolling in the Silicon Valley accelerator program five years ago. Since then, it’s raised a total of $156 million in private funding, tripling its valuation with the latest infusion of capital.

“Our aim with this funding round is to exceed our customers’ expectations at every touchpoint, investing heavily in the products we create, the markets we serve and the overall customer experience we provide,” Weave co-founder and chief executive officer Brandon Rodman said in a statement. “We will continue to invest in our customers, our products and our people to build a solid, sustainable, and scalable business.”

Weave charges its customers, small and medium-sized businesses, upwards of $500 per month for access to its Voice Over IP-based unified communications service. Rodman previously launched a scheduling service for dentists and realized the opportunity to integrate texting, phone service, fax and reviews to facilitate the patient-provider relationship.

While his second effort, Weave, has long been targeting the dentistry and optometry market, Rodman told Venture Beat last year the opportunities for the company are endless: “Ultimately, if a business needs to communicate with their customer, we see that as a possible future customer of Weave.”

Based in Lehi, Weave added 250 employees this year with total headcount now reaching 550. The company claims to have doubled its revenue in 2018, too. While we don’t have any real insight into its financials, given the interest it’s garnered amongst Bay Area investors, we’re guessings it’s posting some pretty attractive numbers.

“Weave has some of the best retention numbers we’ve ever seen for an SMB SaaS company,” Catalyst partner Tyler Newton said in a statement. “We’re continually impressed by their accelerated growth and results.”

Utah’s Divvy raises $200M to eliminate expense reports

The rise of Indian internet content creators abroad

Children of Indian immigrants are going against the tide and becoming internet content creators, even if it means giving up stable and well-paying jobs. https://ift.tt/2WipKKC https://ift.tt/eA8V8J

Wedding service providers tap into social media platforms to grow their business

With millennials taking on to social media to fish for wedding ideas, several wedding service providers have also turned social-media savvy to market their services https://ift.tt/2MR0YhJ https://ift.tt/eA8V8J

How NYC, where 1.5M packages are delivered daily, is dealing with worsening congestion, road safety, and pollution, exacerbated by the rise of online commerce (New York Times)

New York Times:
How NYC, where 1.5M packages are delivered daily, is dealing with worsening congestion, road safety, and pollution, exacerbated by the rise of online commerce  —  The push for convenience is having a stark impact on gridlock, roadway safety and pollution in New York City and urban areas around the world.

Week in Review: You break it, you buy it

Hey everyone. Thank you for welcoming me into you inbox yet again.

Last week, I talked about Zuckerberg’s quest to tell us that Facebook has governing principles when he’s really just building the stairs one step at a time.

If you’re reading this on the TechCrunch site, you can get this in your inbox here, and follow my tweets here.

---

The big story

Plenty of ink has been spilled on WeWork and SoftBank and WeWork’s Adam Neumann, and yet it still feels like not nearly enough people are talking about it.

The startup’s post-S1 saga has just been just so messy that it’s understandable one could only grab a sneaking glance of headlines before having to look way.

One reason everyone is talking about it because Neumann’s maneuverings have created an anthology of sketchy founder dealings that’s nearly cartoon villain worthy. He’s got the eccentricities of Jack Dorsey, the frattiness of Evan Spiegel and the “change the world” delusions of Elizabeth Holmes. Critiques of WeWork weren’t all that sparse preceding its S-1, and yet many of venture capital’s talking heads had some kind of founder-friendly admiration for someone that seemed to had bent the world’s heftiest venture capital fund to his will.

It’s far beyond the pleasantries now, what happens to WeWork could deeply shape how late-stage venture capital operates. SoftBank was raising the second vision fund just as WeWork’s shit hit the fan and now it’s the fund’s deepest embarrassment and a financial commitment they’ve poured $18.5 billion into. If WeWork craters, that second vision could fall far short of its aspirations. Plenty of Silicon Valley’s investors would be happy to see control shift to more even-handed institutional forces who did not have capital commands that could set terms with a glance. Nevertheless, there are an awful lot of unicorns that have depended on SoftBank’s growth capital up to this point who would be in danger of being left high and dry.

At this point, SoftBank’s sunk costs have led the desperate fund to go all-in on a sans-Neumann WeWork. They will have to shape the business on their own. They enabled Neumann and now they are left with the task of reverse engineering a disaster into a great turnaround story.

SoftBank says it has now invested $18.5 billion in WeWork, ‘more than the GDP’ of Bolivia, which has 11.5 million people

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On to the rest of the week’s news.

(Photo by Chip Somodevilla/Getty Images)

Trends of the week

Here are a few big news items from big companies, with green links to all the sweet, sweet added context:

• Extra! Extra!
  Facebook is getting into the news game once again, paying publishers and building an Apple News-like product called Facebook News that is determined to give America access to trusted news. Facebook is doing great fresh out of the gate by giving Breitbart the distinction as a trusted news source. Kudos, Mark. What could go wrong?
• Netflix keeps racking up the bills
  Hit TV shows don’t feel like they should be as expensive as building a quantum computer and yet Netflix’s hefty original content spending is still chugging along. The streaming company announced this week they’re raising $2 billion in debt to fund its next efforts, which may or may not include another 14 seasons of Stranger Things.
• Antitrust attorneys general
  This week was another rough one for Facebook, a New York antitrust investigation picked up the support of a whole lot of other states as the probe seeks out anticompetitive practices. There are now 47 attorneys general taking part.

GAFA Gaffes

How did the top tech companies screw up this week? This clearly needs its own section, in order of badness:

1. Facebook is still publisher enemy #1:
   [Why the Facebook News Tab shouldn’t be trusted]
2. Google’s emoji puritanism:
   [Google’s Play Store is giving an age rating finger to Fleksy, a Gboard rival]

Disrupt Berlin

It’s hard to believe it’s already that time of the year again, but we just announced the agenda for Disrupt Berlin and we’ve got some all-stars making their way to the stage. I’ll be there this year, get some tickets and come say hey!

Announcing the Disrupt Berlin 2019 agenda

Sign up for more newsletters in your inbox (including this one) here.

New York-based Blueground, a platform that leases apartments and upgrades them with various tech gadgets for long-term corporate rentals, raises $50M Series B (Mary Ann Azevedo/Crunchbase News)

Mary Ann Azevedo / Crunchbase News:
New York-based Blueground, a platform that leases apartments and upgrades them with various tech gadgets for long-term corporate rentals, raises $50M Series B  —  New York-based Blueground, a tech-equipped apartment rental company, announced today it has raised $50 million in a Series B round co-led by WestCap and Prime Ventures.

Mice with disrupted microbiomes don’t forget their fear as they should

Enlarge / A mouse. (credit: Berit Watkin / Flickr)

The gut-brain axis is officially a thing. Evidence is accumulating that the gut microbiome, and perturbations in it, can affect behavior—at least in mice. New work is starting to unravel how.

Extinguishing fears

Normally, animals can adapt to changes in their environments with corresponding changes in their behaviors. One well-studied example is what's called "fear extinction learning." Animals can be taught to associate harmless things like a sound or lights with a negative outcome. But, if that association changes over time, they can also forget it.

To be more specific, animals can be trained to associate a tone with a painful shock; when they hear the tone, they freeze in fear. But they can be retrained by exposure to the tone without the shock. Eventually, they learn that the tone is OK, and when they hear it, they just blithely go about their business.

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https://arstechnica.com

Watchmen and the golden era of the single-season series

Enlarge / A small army of Rorschachs. (credit: YouTube/HBO)

HBO's choice to adapt two critically acclaimed book series, Game of Thrones and Watchmen, may seem like a case of two peas in a pod. They're game-changing works in their respective fields with cult followings and "unadaptable" reputations.

But GoT and Watchmen differ in a key respect: where they sit on the "epic television" spectrum. Arguably, both examples prove, in very different ways, that TV series needn't last multiple seasons to be considered "great."

When Game of Thrones ended in May of this year, a small cottage industry of worriers fretted that this was somehow the end of HBO. But the channel is already back with a new high-profile series, inspired by Alan Moore's comic classic Watchmen. Showrunner Damon Lindelof insists that, like its source comic, he plans to stick to a "limited series" run, instead of any intention to run the series for multiple seasons.

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The Vast of Night is a masterclass in small budget sci-fi

A festival circuit trailer for Amazon's The Vast of Night.

AUSTIN, Texas—Everyone kinda, sorta knows the story of The Vast of Night before they even hear of this movie. Filmmaker Andrew Patterson readily admits he partially based his debut feature on a real-life event—the 1955 Kecksburg incident—and even the initial idea that led him to researching Kecksburg struck Patterson as familiar. “I have a document in my phone of three or four dozen single line movie ideas,” he told Ars. “This one said, ‘1950s, black and white, New Mexico, UFO film.’”

But The Vast of Night ultimately doesn’t hinge on how its plot plays out. This small budget, tightly scoped sci-fi film has wowed festival audiences enough to attract Amazon money largely on its spectacle—individual images you’d gladly frame for the office wall, dialogue that draws you in no matter the subject, sonic flourishes that stick with you long after the credits roll. Talking to the filmmaker after a recent Fantastic Fest screening, it becomes hard to shake the feeling he’ll be managing a much larger studio budget of his choosing in the very near future.

“We knew we were working in a genre that was shop-worn, nothing new,” Patterson says. “We wanted to let people know, ‘OK this is an abduction in New Mexico—we know this story, you know this story. How can we find a way in and do something special, to make something new?' I wanted to make it like the films I enjoy, which are usually about people learning about each other, their dynamics and relationships. So, OK, I want to start this like it’s a Richard Linklater movie… then we get side-swiped into something extraordinary.”

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