Zhang Yiming said he first mentioned stepping down as chief executive of ByteDance “with a small group” in March, but investors in the $ 200bn start-up said they were surprised.
After a turbulent year, the 38-year-old founder announced that he handed over his CEO duties in a letter of resignation to staff on Thursday, even as his company prepares for the first offer of public.
While he admitted in his letter that he was not interested in “truly managing people”, Zhang was actually the sole senior management manager of ByteDance, and founded the company, which owns the viral video app TikTok , to a challenger in the world of Facebook and Tencent.
He has yet to survive the company’s worst crisis: the U.S. government’s threat to ban TikTok.
“Hearing the news about Yiming Zhang’s downfall – truly an amazing CEO,” tweeted Patrick Collison, chief executive at startup of the $ 95bn payout Stripe. “To inform the caliber of their implementation: ByteDance was founded in 2012, reportedly generated $ 35bn in revenue in 2020, and attracted 40,000 people last year.”
Investors in ByteDance say they were shocked by the move, and can only point to the recent pressure on Beijing’s tech sector as an explanation.
Since the end of 2020, China has grown its tech giants using antitrust and other regulations. Zhang’s resignation follows ecommerce giant Pinduoduo founder Colin Huang in March, whose departure also came as a shock. Earlier that month, Ant Group chief executive Simon Hu also stepped down, months after their record -breaking double -list in Shanghai and Hong Kong was canceled in Beijing.
“The government is undermining the central authority of all the leaders of the technology giants,” said Feng Chucheng, partner of Beijing -based consultancy Plenum.ai.
In his resignation letter, Zhang said he wanted to avoid the “CEO trap of being too central”. That reflects a concern of the central government, which has long been concerned about the power of tech leaders.
For ByteDance, in particular, that the top three applications each command more than an hour of user time on average per day, “regulators have always been concerned about how this will affect public discourse. .Propaganda is the life line of the Party, ”Feng added.
Beijing has issued several directives on the management of social-media algorithms and promoted the “positive” content. So far this year regulators have criticized ByteDance on issues ranging from sexual harassment to deepfakes.
“Yiming is not very good at government relations [in China], ”Said one of his acquaintances. In 2018, ByteDance faces its first life-or-death moment at the hands of the government, which has criticized many apps for hosting “vulgar” content. ByteDance has been forced to shut down Neihan Duanzi, an app that shares jokes with 22m daily users. But the company came back after a lengthy public apology, and hired more staff to manage government relations.
Zhang also fought in Beijing in 2020, by trying to satisfy the Trump administration’s demand that the U.S. operation on TikTok be U.S.-owned. The Chinese government was shot back at imposing export controls about related technology, while censors allowed social media criticism of Zhang to decrease.
Liang Rubo, Zhang’s university co -founder, co -founder of ByteDance and head of HR, will take over after a six -month handover. The staff working with Liang designed him as a loyal lieutenant for Zhang.
While the ByteDance staff was generally shocked by Zhang’s departure, those working for Liang were even more surprised. “My colleagues and I never expected Liang to take over,” said an HR staffer, who said Chinese chairman Zhang Lidong had “more energy and courage” than Liang. “[Liang] don’t yell CEO at me, ”said one HR employee.
Liang’s choice suggested Zhang Yiming “manage from behind the scenes”, as an HR staffer.
The staff didn’t expect Liang to deviate from Zhang’s course – which in itself was a source of comfort. “We were all amazed,” said one ByteDance engineer. “But after talking about it for a while, everyone went back to work, because we felt that Liang would be in charge of Yiming’s plans, and there shouldn’t be much change.”
Zhang’s departure exposed the weakness of ByteDance’s management structure and its centrality, with all senior executives reporting directly to him.
ByteDance declined to comment on whether Zhang will remain on the five -member board, along with the other four seats taken by investors.
The company has the most employment in the technology’s history, nearly doubling in size last year and a half to more than 100,000 employees, and its apps are already successful, generating about $ 35bn in revenue by 2020, according to the familiar two of the matter.
The next step is to be a blockbuster IPO in either Hong Kong or New York. Many people close to the plans said discussions with Hong Kong Stock Exchange officials had made significant progress during the year. But conversations are slowing this spring, as are people.
In April, the state -run China Securities Journal reported to ByteDance that it had begun an IPO process in Hong Kong. Even if it was followed by most other media, the original story was removed within a day, and the state media was told not to publish the story – an unusual move for government censors, which is not uncommon. interfere with market speculation. ByteDance later said it was “not ready at this stage”.
“Zhang’s departure could help the company get enough government approval for this IPO,” Feng said. While the reasons for ByteDance’s skepticism about its listing plans remain unclear, political pressure will explain the past censorship of IPO rumors.
Zhang’s departure is part of the “logical order” as the company goes to IPO, as someone involved in the preparations. “He took the decision, then clearly had to announce it before moving on to the next phase of the offering – he couldn’t come down during the IPO.”
His move will also not affect the structure of ByteDance’s business in China, the source of most of its revenues. In March 2020 Zhang placed the Chinese operation led by Kelly Zhang and Zhang Lidong.
At the same time, he made himself global CEO, and created a separate CEO position for TikTok, which is now held by Shouzi Chew.
His decision to step back could ultimately benefit ByteDance, said Li Chengdong, founder of Beijing -based tech consultant Dolphin. “It defends the company and itself from future attacks.”
“Usually, a change of CEOs is not good for the company, but it is a change of CEO with Chinese characteristics,” Li added. “Zhang may still be in office.”
Further reporting by Nian Liu in Beijing, Tabby Kinder in Hong Kong and Hannah Murphy in San Francisco