Context: The interview took place in 2016, where Josh Elman (a General Partner at Greylock and Board Observer of Musical.ly) interviewed Alex Zhu, the co-founder and co-CEO of Musical.ly. Almost a year after this interview was uploaded, Musical.ly was acquired by ByteDance and merged into TikTok. Alex is now the VP of Product at ByteDance.

Summary Notes

  • Alex - Before working on Musical.ly, Alex mostly worked in enterprise software (SAP) but had a passion for consumer businesses and a futurist of education in SAP. Alex and his co-founder looked into coming up with a 'billion dollar' startup idea in the education sector. They wanted to combine Coursera and Twitter into a new product. Their vision being to make educational content content mobile-first and bite sized. This turned out to be a "complete failure."
  • Musical.ly pivoted from education short form videos into awesome short form music videos.

The lessons from their failure in education:

  1. If you want to build a new user-generated content platform or social network then content has to be extremely light. Content creation AND consumption need to happen within seconds, not minutes.
  2. Education is counter to human nature.The majority of people use their phone to communicate and entertain (play games, using social media, or messaging) then to learn.
  3. It's an uphill battle to try change human nature. Better to follow human nature than to fight against it.
  4. For a new social platform to take off, your early adopters need to be young. In the U.S. it's teenagers. The reason is because teens have a lot of time and they are creative. They are already digital native and if you can attract a small group of them, they will talk about it in school and on social media - you won't need to spend so much on distribution or even better... have zero distribution cost.

From 0 to 1

Initially, Musical.ly focused on utility. Before you have the critical mass of users, you need to focus on utility. Once you have more users, you can start building more of a community around it. As an example, the initial users of Instagram didn't come for the feeds, the likes or the comments. They used it for the amazing filters which you can they post on other social media platforms.

at first. Before you have the critical mass of users, you have to focus on utility. And then once you have enough users, you can start building a community around it.

Instagram Example:

Initial users of Instagram 1.0 didn't use Instagram for the feeds or likes or comments. They used Instagram for the amazing filters that they would post on other social medias.

Talk Highlights

10:44: Alex: "In the early stage building a community from scratch is just like you discovered a new land. You give it a new start. America. And you want to build an economy, a population... you want people from Europe to migrate to your country. Instagram is Europe. Facebook is Europe. How can you do it? The economy in Europe is already really developed.

How can you attract those people to come in?

The problem in Europe is the social class is already stabilised. The average citizen of Germany and France they would have almost zero opportunity to go up the social class. So now you have a new land. A very important thing is in the beginning you need to build a centralised economy meaning that from wealth distribution point of view you make sure that the majority of wealth is distributed to a small amount of people. You make sure they get rich first.

Then these people become role models. The Europeans take a look and see that "Hey, I can be rich too". Then you get them coming over to your economy and you now have population. But very importantly, you have to do decentralisation at the same time. Having an American dream is good but if it is only a dream, people will wake up. They know they won't have a chance. They know they can't be rich, so you have to decentralise your traffic model. Give an opportunity to the average people, and make sure they have got satisfaction and a middle class coming up."

Goldrush paper claims

13:58: The Chinese Ecosystem
In China, there is a lot of innovations but different to the U.S. The innovation is not necessarily around technology but in service and commercial.

For example, WeChat.

During the Chinese Spring Festival, there is a tradition to send red envelope with money as a gift. So...they do this online game on WeChat where users can send the red envelope with small amounts of money through the messenger. This became a super popular game which resulted in a lot of people starting to associate their bank accounts with their messaging accounts. Retail then became a lot easier.

17:05: Most social networks in the U.S. become ads based businesses. How will Musical.ly think about monetisation?

Alex says that the ad business is a great business. Integrating ads in an organic way is scalable, you don't need to have much of human sales and it doesn't affect the user that much.

However influencers are also a big thing especially for Musical.ly. What needs to happen is to create an ecosystem rewarding creators and influencers. YouTube became so successful because of their partnership program. A lot of users on TikTok also produce content on YouTUbe as they make money there.

"The first thing that users seek when they join a social media platform is fame. However, once they have the fame — it's not enough. They need to monetize. If the platform is a platform that can generate the most revenue for influencers, then they will stick around". - Alex Zhu

19:20 Music is a big component of Musical.ly. How does Musical.ly work with the music industry?

In Alex's opinion, Musical.ly uses music as a raw material rather than how Spotify uses music - as an end product. For Musical.ly this means they help artists increase their exposure. They aren't competing with labels or publishers. The other revenue streams for artists are not hurt. Having music on Musical.ly actually helps them generate more revenue. As an example, Jason Derulo published his music on Musical.ly and they ran a campaign for him. Within 4 days, more than 1 million videos were created by Musical.ly users for his sound clips. Before Jason's song was even released, millions of songs impressions were already generated and his song became very popular.

For some example of this hilarity, check out:

Jason Derulo on TikTok

25:10 Make use of trends. At the time, there was a popular U.S. show of lip sync. What Alex and Co. noticed was that after the show, a lot of people searched for the songs in the show. So what they did, was they presented onboarding videos for the most important use case and on the trend - lip sync on Musical.ly and the best human curated content for new users. They also sent notifications on how to use Musical.ly and this helped retention.

27:45 How to get the first 10 users. Test and make sure there is a visible link for your early adopters to send you feedback. Musical.ly had a link for 'my ideas' and every day they got the top 3 things which their users liked and the top 3 things which the users disliked. They also spent a lot of time observing users, developing empathy and fostering participatory design.