Dialogue with Netease CEO Zhou Feng： How do entrepreneurs stay aggressive and optimistic under the ＂three mountains＂ of policy, epidemic situation and China ｜ Interview with Titanium

This year is very difficult for everyone, very difficult, very difficult, not three years ago.

But no other industry can experience the difficult situation of online education of listed companies in US stocks — — Teaching and Training, Internet, and American Stock Market — — This track has collected almost all the keywords of the "Black Swan" event.

The same is true for me. "Life is full of flowers and roses." After Netease was listed on the New York Stock Exchange in 2019, CEO Zhou Feng described the feelings at that time to Titanium Media APP.

Even in 2020, after the outbreak of the epidemic, the whole industry is very optimistic about the future. Under the East Asian cultural system that attaches importance to education, what is more promising than redoing education with science and technology?

However, with the implementation of the "double reduction" policy in July 2021, all companies whose main business is education and training were forced to transform overnight, and their business models had to be reshaped.

Almost tacitly, the industry collectively responded with a posture of "lying flat", but Zhou Feng was willing to take risks to go to the stage and be interviewed by the media, and landed a new business that was more "heavy" than Internet products — — A new hardware product "intelligent learning lamp" which is very test for current logistics and supply chain.

In charge of Netease’s first independent listing business, Zhou Feng, together with many colleagues in teaching and training companies, has turned around and left the K12 route. He defined the company as a "technology+consumption" company. However, according to the long-term observation of Titanium Media APP, as a newly emerging young entrepreneur in the education industry, Zhou Feng still has many differences compared with the founders of the previous generation of traditional teaching and training companies.

When the whole public opinion field is immersed in a pessimistic and anxious argument, what Zhou Feng shared in his circle of friends recently is mostly related to the hardware industry and the scientific direction related to the virus, which seems to be calm, rational and enterprising.

Similarly, in the face of great changes in the industry under the "double reduction" last year, you didn’t see a way to play warm cards and sell miserable cards in the public opinion field. The release of the first intelligent learning desk lamp a few days ago is the most important action after the "double reduction".

However, intelligent learning lights are not a new species in the educational hardware track. Previously, ByteDance’s first independent split brand vigorously educated, and released a vigorous intelligent learning lamp on its first brand appearance, which became an instant hit and quickly occupied an important role in the market. As an old-fashioned enterprise in the education track, Netease’s introduction of smart lights is also a positive "counterattack" for the first time.

Recently, Zhou Feng accepted an exclusive interview with Titanium Media APP and talked about the current hot topics such as the transformation of the teaching and training industry, the challenges under the epidemic, and the stock market turmoil in the capital market.

Titanium Media APP: The intelligent learning desk lamp is not a new product in the industry. Why didn’t it be made before and was officially released this year?

Zhou Feng:In fact, we have been preparing for it for a long time, for two years. We usually run multiple events at the same time. In the middle of the running process, there are some projects that need to be taken out quickly, and the order will be different. In the process of making the lamp project, we found that the demand of our users is relatively large, and our product strength has reached a good state, which is why we took it out at this time.

I have many kinds of intelligent learning hardware. Dictionary pens will definitely be updated this year, which is a relatively large project. Including the recent listening treasure, an artificial intelligence repeater, is also selling well. Our current thinking is to position ourselves as "technology and consumption". Intelligent hardware empowered by artificial intelligence should be of great value to consumers.

There are several things to consider when making a product. First, whether it is valuable to users, second, whether users are willing to pay for this product, and third, the cost of materials and research and development. When the three aspects are put together, it is often negative, so we can only give up our thoughts and stop doing it. I think the lights are all good together now, and the actual situation depends on the situation of the product running down.

Titanium Media APP: How is it considered in business?

Zhou Feng:Hardware is a good business model, and most of the hardware is a tool. Like, what is a car? Many people say that they want to sell things in the car, which I think is a bit ridiculous. The core attribute of the car is a transfer tool from point A to point B, which is the car. Of course, it can be more environmentally friendly and have a better driving experience.

From our point of view, because when we used to make internet tools, it was more difficult to have a large number of users, but it was difficult to realize them. Now it is equivalent to taking out all the capabilities and turning it into a useful product. This product can also attract users’ attention. After reading it, he feels good and is willing to pay for the product function itself. The business model is more direct.

In my opinion, many business models in China should be more and more direct, because when our economy was not so developed, the Internet was to do traffic first and then realize it. Now many of them are not needed, and most users are willing to pay for good products and experiences.

Titanium Media APP: You just mentioned that you want the product to be as simple as possible. In fact, it is not easy for Internet companies to do this. Last year, Youdao had another move, which was to make a tool product like Youdao Dictionary into a traffic platform mainly based on graphic and video like Xiaohongshu.

Zhou Feng:This is because the APP model has limitations. If an APP sells for 100 yuan and everyone is willing to buy it, I don’t need to realize traffic. But hardware can be like this. However, the biggest problem in the hardware field is that some people who have got investment before, or who have mines at home before, want to make money through traffic.

Titanium Media APP: Before, I talked with the product research and development departments of some head companies in the industry. Why didn’t they make learning lights? One of the reasons is that they think that learning lamp now is essentially a flat-panel solution, and there are not many innovative things. The so-called eye protection function of the lamp is actually a very popular application in the industry. What do you think of this view?

Zhou Feng:I think there is some truth in this statement, but we have found a way to do differentiation. At first, we had many ideas, and some of them didn’t work out.

Our intelligent learning lamp, the most important thing is from the perspective of interaction, finger interaction and voice interaction. Why don’t we make the screen so big is because we think finger interaction and voice are the most important things. We spent a long time optimizing the word search and reached a speed of 0.5s This is our innovation based on the needs of users and our advantages. We have been doing word search for many years, and there have been mature schemes for sale before.

Titanium Media APP: What is the basis of your lamp pricing? I’ve heard that friends have sold one and lost another. Is this the way it is?

Zhou Feng:We don’t make hardware that loses money, and we can’t kill ourselves. I think parents are actually willing to pay for good products in education. Our dictionary pen has repeatedly proved that we have made a valuable product, and parents think it is worth the money, and he does not hesitate. Some parents will try the cheap one. After the test, he doesn’t feel that he has made a bargain. After a while, he comes back.

Titanium Media APP: But some of them are sold far below the cost price, and the products are also good, and parents will choose them.

Zhou Feng:That’s unsustainable. This happened before. There was a well-known manufacturer who sold dictionary pens very cheaply before, and finally increased the price, because he found that he lost money after doing it for a while and the business model could not run.

Titanium Media APP: Under the same price, as a consumer, why should we choose a new product?

Zhou Feng:We have achieved the ultimate function that users need and commonly use, and believe that users can feel it in use. For example, 0.5 seconds ultra-fast check is very impressive to users.

Titanium Media APP: Are you not afraid of price war?

Zhou Feng:It’s not that I’m not afraid of the price war. If a particularly rich player rushes in and does it, I’ll quit. I think it is unlikely that this will happen now, because in fact, everyone has done such a thing and finally found it boring.

Pricing is very important. The team can’t be greedy. You can’t say that your product is only worth so much money, but if you set a higher price, it will cause problems, which is a matter of smashing brands. You can’t set the current price with some illusory future business model, which is also very easy to have an accident.

Titanium Media APP: If there is no "double reduction" policy, will the intelligent learning lamp be listed at this time?

Zhou Feng:It may be a little late. Recently, we must have increased our investment in hardware.

Titanium Media APP: After the "double reduction", you mentioned that there is a way to exert strength in the direction of "technology+consumption". However, the consumer market has changed too much now, and the macro-environmental challenges this year are also great. It is generally believed that consumer confidence has been frustrated. What do you think?

Zhou Feng:Let’s ride out the storm together. There are some things I can’t say, because the financial report hasn’t been issued yet. It can be said that there were some difficulties last year and some different difficulties this year. Regarding the consumer market, I have seen that some data in the mobile phone industry have been released before, and Q1 has dropped by 20%, which is somewhat similar to our body feeling.

Our field is a little better. It is a rising period in itself, which is equivalent to a rediscovery of hardware for study, home use and children. In fact, this thing existed 20 years ago, and electronic dictionaries existed at that time, but the core difference is that there is artificial intelligence now, but not at that time. Everyone is equivalent to taking out these needed equipment and doing it again with some new models. This is a rising field, which will offset part of the problem of declining consumer demand, but it is also very difficult on the whole.

Titanium Media APP: Intelligent learning desk lamp has been established for a long time. Did you expect such a bad situation this year?

Zhou Feng:We started doing it in 2020. At that time, everyone was still very optimistic, and there were flowers and roses in the middle of life. We went public in 2019. In fact, in 2020, everyone will try some new directions. Later, we will find that the pressure is relatively high, but I always feel that if the product is good enough, we should stick to it.

Titanium Media APP: Now it is true that we see a lot of negative news every day. Almost all major manufacturers are laying off employees, shrinking their fronts and controlling costs for the winter to cope with the uncertainty of the external environment and the uncertainty of supervision. What are the considerations for developing new products at this time?

Zhou Feng:New products are always coming out. Everyone is developing new products. If there are difficulties, we must find ways to get out. Enterprises must do what they can. For us, it has been a process of transformation since last year, and our strategy is still relatively clear. Among them, intelligent hardware is our biggest investment direction, so we still hope that new products can attract more consumers’ attention.

Titanium Media APP: After the "double reduction", there are four transformation directions (intelligent hardware, adult education, quality education, and educational informationization). Why do you put the hardware in the most important position?

Zhou Feng:Because among these four directions, hardware and adult education are relatively large in business scale from the original, and according to last year’s volume, the business level is almost 1 billion. In addition, quality education and education informatization are relatively small, and we have long been very optimistic about quality education, and we also have advantages in quality education. We are also optimistic about educational informatization for a long time under the encouragement of policies, and believe that our technological advantages can empower the high-quality development of educational digitalization.

However, because the hardware itself is in the stage of rapid growth, we think it is more logical. Last year, the performance of Q3 and Q4 was very good, and Q4 was a little over 300 million.

Titanium Media APP: What is the difference between the difficulties this year and last year?

Zhou Feng:Last year, the supply chain was particularly difficult and lacked cores. It seems that there are some difficulties on the demand side at present this year. I think if these problems can be solved quickly and improved, and the policy toolbox is still very strong, I believe there will be a turn for the better in the future.

Titanium Media APP: I heard that the impact of the epidemic in Shanghai recently had a great impact on the sales of Youdao hardware.

Zhou Feng:Last month, Shanghai fell out of the top 10 in our sales list, which was still a bit shocking and hard to see for us. It may also be because of logistics problems.

Titanium Media APP: Now the epidemic situation is repeated, which puts pressure on logistics and supply chain. How do you deal with it?

Zhou Feng:Working together with supply chain partners, we have a group of supply chain partners who have cooperated for a long time and are very capable. Hardware production is very different from software. Hardware is divided into many stages, and we have done at least seven or eight iterations. If a factory is blocked in the middle, the final product will not come out.

Titanium Media APP: What impact does the change in the capital market have on you now?

Zhou Feng:There will definitely be various pressures on business. From last year to this year, some of our projects stopped and some businesses are changing. Basically, fortunately for us, we have been fully prepared for our promising direction, and we have basically kept it, and now we can also have business growth.

One of the reasons for this is that Youdao’s business is inherently diversified, so no matter what kind of pressure it is, we can still cope with it better. For example, like the division of these businesses, K12′ s education and training accounted for 40% before, and when it was affected by the policy, the remaining business still accounted for 60%. At the earliest, when we did more business, some shareholders had great opinions on us, thinking that the courses were so profitable that we should do all the courses.

Titanium Media APP: How did you answer them at that time?

Zhou Feng:Capital is still greedy. In fact, our purpose is quite simple. To tell the truth, I always think that education and technology are not the ultimate form, especially focusing on service and manpower. Taking classes is a very labor-intensive thing, and I always think that this is not the ultimate final plan. Even when the course business is very good, we are willing to spend some energy to try a route that is not so labor-intensive and give full play to the advantages of our technology company, so we have other business layouts.

Titanium Media APP: As a company that was mainly engaged in education business before, have you ever worried about the current capital environment?

Zhou Feng:The capital market may not be able to give you a lot of ammunition in a short time, which is a more difficult point. My idea is that everyone is the same. However, if there are real opportunities, some opportunities that will be difficult to encounter in the next ten or twenty years, I think investment should be done or done, and value accumulation should be done.

But we really need to strike a good balance. On the whole, the opportunities are still very good, not just learning, we want to do consumption and technology, and the most important thing is artificial intelligence. Where consumption and technology intersect, there are other opportunities for expansion. From this perspective, there is a lot of room.

Titanium Media APP: At present, China Stock Exchange is in the forefront. As a China company listed in the US stock market, what do you think of this situation?

Zhou Feng:For enterprises, they must do what they can. We are relatively special, we have a major shareholder, and Netease still holds more than 50% of the shares. On the one hand, I want to communicate Youdao’s strategy with major shareholders clearly. On the other hand, Netease is very supportive of Youdao’s work in all aspects, and we are also very grateful to spend the difficult transition period together.

Titanium Media APP: Do you care about the stock price rise and fall?

Zhou Feng:It’s no use caring, we still focus more on products and business.

Titanium Media APP: Who will protect the interests of investors?

Zhou Feng:The problem now is that many factors are intertwined. We must do a good job in communication with the outside world and in all aspects, and we must be responsible to shareholders.

Titanium Media APP: Have you adopted any strategies to deal with the risks in the capital market?

Zhou Feng:What enterprises can do is relatively limited, and what we can do will be done seriously, and there is nothing special to talk about at present. I’m sure I still hope to find a good path for future development, and I’ll think of all kinds of ways.

Titanium Media APP: Has the change of external environment affected the adjustment of your decision-making direction?

Zhou Feng:I think it will have an impact on expectations, but it will not affect the current work. When our management makes a judgment, there are some things that need to be taken into account.

There are some things that have nothing to do with expectations. Should we pay attention to the desk lamp? Absolutely unaffected by this. Our responsibility is also to protect the team from external interference. If the team is uneasy, it can’t do well.

But it will affect our expectations. For example, when I spend money on new projects, I may be more careful. When you want to recruit some expensive people, you may have to consider it. Including which business directions are more promising, to be honest, things with a particularly long cycle may have to be cautious. For example, if I invest in one thing, it will take three years to get the result.

Titanium Media APP: Will there be a gambling mentality to vote?

Zhou Feng:Some companies will have it. If everyone doesn’t vote for me, there may be more opportunities in the future, but there are a few. Entrepreneurs should control risks.

Titanium Media APP: Now there is a saying that the era of globalization is coming to an end. What do you think?

Zhou Feng:It’s hard to say whether it’s over or not, but I firmly believe in China.

(This article is the first titanium media APP, interviewing and writing | Li Chengcheng)