Zhang Yiming mentioned he first mentioned stepping down as chief government of ByteDance “with a small group” in March, however investors within the $200bn start-up mentioned they had been caught unexpectedly.
After a tumultuous yr, the 38-year-old founder introduced he was handing over his CEO duties in a resignation letter to staff on Thursday, regardless that his firm is getting ready for an preliminary public providing.
While he claimed in his letter that he was not so all for “actually managing people”, Zhang had the truth is been the only real supervisor of ByteDance’s high management, and had constructed the corporate, which owns the viral video app TikTook, into a worldwide challenger to Facebook and Tencent.
He had even just lately survived the corporate’s worst disaster: the US authorities’s menace of a ban on TikTook.
“Bummed to hear about Yiming Zhang stepping down — truly an amazing CEO,” tweeted Patrick Collison, the chief government of the $95bn funds start-up Stripe. “To give a sense for the calibre of their execution: ByteDance was founded in 2012, is reported to have generated $35bn of revenue in 2020, and hired 40,000 people last year.”
ByteDance’s investors mentioned they’d been shocked by the transfer, and may solely level to current stress on the tech sector by Beijing as an evidence.
Since the top of 2020, China has been reining in its tech giants utilizing antitrust and different rules. Zhang’s resignation follows that of ecommerce big Pinduoduo’s founder Colin Huang in March, whose departure additionally got here as a shock. Earlier that month, Ant Group’s chief government Simon Hu additionally stepped down, months after their record-breaking twin itemizing in Shanghai and Hong Kong was cancelled by Beijing.
“The government is weakening the central authority of all the leaders of the tech giants,” mentioned Feng Chucheng, companion at Beijing-based consultancy Plenum.ai.
In his resignation letter, Zhang mentioned he wished to keep away from the “trap of the CEO becoming overly central”. That displays a priority of the central authorities, which has for a very long time fretted concerning the energy of tech leaders.
For ByteDance, particularly, whose high three apps every command greater than an hour of consumer time on common every day, “regulators have always been worried about how it might impact public discourse. Propaganda is the Party’s lifeline,” Feng added.
Beijing has issued a number of directives over the governance of social-media algorithms and selling “positive” content material. So far this yr regulators have criticised ByteDance over points from sexual content material to deepfakes.
“Yiming is not very good at government relations [in China],” mentioned certainly one of his acquaintances. In 2018, ByteDance confronted its first life-or-death second by the hands of the federal government, which criticised a number of apps for internet hosting “vulgar” content material. ByteDance was compelled to close down Neihan Duanzi, a joke-sharing app with 22m each day customers. But the corporate bounced back after a prolonged public apology, and employed extra staff to deal with authorities relations.
Zhang clashed with Beijing once more in 2020, by attempting to fulfill the Trump administration’s demand that TikTook’s US operations be US-owned. The Chinese authorities shot back by imposing export controls over the related expertise, whereas censors allowed a social media storm of criticism to descend on Zhang.
Liang Rubo, Zhang’s college classmate, ByteDance co-founder and head of HR, will take over after a six-month handover. Staff who’ve labored with Liang describe him as a loyal lieutenant for Zhang.
While ByteDance staff as a complete had been shocked by Zhang’s resignation, these working for Liang had been much more shocked. “My colleagues and I never expected Liang would take over,” mentioned one HR worker, who mentioned China chair Zhang Lidong had “more power and courage” than Liang. “[Liang] doesn’t scream CEO to me,” mentioned one other HR worker.
The selection of Liang recommended Zhang Yiming would “govern from behind the curtain”, mentioned a former HR worker.
Staff don’t count on Liang to deviate from Zhang’s course — which is in itself a supply of consolation. “We were all surprised,” mentioned one ByteDance engineer. “But after discussing it for a while, everyone went back to work, because we felt Liang would mainly take Yiming’s plans, and there shouldn’t be too many changes.”
Zhang’s departure exposes the fragility of ByteDance’s administration construction and his centrality, with all senior executives reporting to him immediately.
ByteDance declined to touch upon whether or not Zhang would keep on its five-member board, with the opposite 4 seats taken up by investors.
The firm has had the largest hiring spree in tech historical past, nearly doubling in measurement up to now yr and half to greater than 100,000 staff, and its apps have been wildly profitable, producing about $35bn in revenues in 2020, in line with two folks accustomed to the matter.
The subsequent step was to be a blockbuster IPO in both Hong Kong or New York. Various folks near the plans mentioned discussions with officers on the Hong Kong Stock Exchange had made important progress early this yr. But the talks had then slowed by this spring, the folks mentioned.
In April, the state-run newspaper China Securities Journal reported ByteDance had initiated an IPO course of in Hong Kong. Although it was extensively adopted up by different media, the unique story was deleted inside a day, and state media had been advised to not republish the story — an uncommon transfer for presidency censors, who don’t often intervene in market hypothesis. ByteDance later mentioned it was “not ready at this stage”.
“Zhang’s departure may help the company gain enough government approval for it to IPO,” mentioned Feng. While the explanations for ByteDance’s wavering over its itemizing plans stay unclear, political stress would clarify the earlier censorship of its IPO rumours.
Zhang’s resignation was a part of the “logical order” as the corporate strikes in the direction of the IPO, mentioned one particular person concerned within the preparations. “He took the decision, then obviously had to announce it before moving to the next stage of the offering — he couldn’t have stepped down during the IPO.”
His transfer may even not have an effect on the construction of ByteDance’s China enterprise, the supply of nearly all of its revenues. In March 2020 Zhang put the China operations below the management of Kelly Zhang and Zhang Lidong.
At the identical time, he made himself the worldwide CEO, and created a separate CEO place for TikTook, which is now held by Shouzi Chew.
His resolution to step back might in the end profit ByteDance, mentioned Li Chengdong, founder of Beijing-based tech consultancy Dolphin. “It defends both the company and himself from future attack.”
“Usually, a change of CEOs is not good for the company, but this is a CEO change with Chinese characteristics,” Li added. “Zhang could still stay in charge.”
Additional reporting by Nian Liu in Beijing, Tabby Kinder in Hong Kong and Hannah Murphy in San Francisco