It isn’t the best time for Kwai, the Chinese video platform that is now under the scrutiny of Chinese cyberspace regulatory authorities. The largest Chinese video mobile application is being heavily criticized by Chinese state media for sharing and spreading unhealthy, vulgar, and inappropriate content that is assumed to have a negative impact on Chinese society.
Kwai, together with several other Chinese video applications such as Douyin and Huoshan, has been forced to withdraw from Chinese iTune Stores and Chinese Android Stores indefinitely.
In a bid to show their willingness to cooperate with regulatory authorities, Kwai has partially given up its algorithm-driven content distribution strategies and has started to recommend state media content to its nearly 100 million daily active users.
Facing a Challenge from the Government
In addition to the long-standing political risks that video platforms face in monitoring their massive video content, applications such as Kwai are now facing a new rule introduced by the regulatory body. The platforms are now required to review all content before making them visible to application users. If the video platforms are unable to meet such requirements, they will be asked to reduce the number of videos that users can view.
On the face of it, it does not seem like an unreasonable demand. However, with approximately 100 million daily active users on board, the potential number of videos that users may upload is too huge to cover. In a recent statement made by Kwai, the video application intends to hire an additional 3,000 staff to review the video content uploaded on its platform. The additional hiring will cost the platform at least 100 million RMB (15 million USD) each year.
With the huge increase in its operational cost, Kwai hopes to have better control over its content and hopes to face less pressure from the Chinese government. Yet, the question remains: Can Kwai possibly review all its video content?
Missing the Optimum Output
If Kwai’s only aim was to comply with the regulatory requirement, the mission would be an easy one. As long as it hires a sufficient amount of staff, be it 3,000 or 30,000, the company will be able to meet the standards set by the Chinese regulatory authorities. Even in the worst-case scenario, Kwai can still manage to solve the problem by reducing the number of videos available for its users. However, as a company seeking profit from its applications, Kwai’s challenge lies in more than complying with rules set by the government.
From an economic point of view, it makes no sense to review all the content despite the potential discomfort and negative impact it may cause to users. The marginal benefits of reviewing all videos are nowhere close to covering the cost this will incur. Video platforms will need to pay wages to additional staff, increase the waiting time for content producers to publish their video content, and delay its content updating rate, just to ensure that users are not offended by video content that fellow users upload.
There are many smarter ways to minimize the detrimental impact that vulgar and inappropriate content can cause. For example, one strategy could be to review all content that has more than 500 clicks, or content that is positioned at the top of the content feed. Such strategies can effectively reduce the number of videos that need to be reviewed, thus allowing Kwai to maximize profits. As a profit-seeking video application, there is no doubt that Kwai’s product manager would make the right decision in its content reviewing strategy, thus saving it from interference from any regulatory body.
Larger Issue Revealed
For Kwai, the damage caused by this regulatory check is more than the additional costs that it will incur by hiring additional staff. The fact that its application can be easily removed by the Chinese government authorities shows its fragility in risk-management and crisis handling.
Despite its highly valued net-worth, Kwai’s product is not that closely interwoven with users’ daily lives. Unlike WeChat, AliPay, or Didi, Kwai has little impact on users in their daily life. Not being able to watch Kwai videos will cause only a slight boredom in users lives as opposed to the mayhem were apps like payment tools and taxi-ordering services to be removed. Thus, Kwai’s limited effect on people’s lives leaves the firm meagre space to leverage against government pressure.
The platform also faces high political risk in China. With the regime having strict policies in controlling speech and media, Kwai’s application feature could lead the firm into trouble. Not only does Kwai need to censor content that is against the regime, but it also faces a rather uncertain standard that the regulatory body has set to manage Internet content. What was OK yesterday does not mean an automatic green light for today even for the exact same content. Other players too on the platform could be banned any day for no particular reason.
It is a risk that could cause unlimited potential damage. The Kwai application could be removed from app stores; or similar to the fate of The New York Times and The Wall Street Journal, it could be banned from the Chinese Internet. It is a risk that is unsure but must be anticipated. No one can say for sure when the next ‘official meeting’ with the government official will take place. And no one can say for certain what content is safe to publish.
Perhaps these could be the driving factors for Kwai to develop its business internationally. With experience in handling government censorship, Kwai could diversify some of its risks by investing in various countries, following the old saying: Don’t put all your eggs in one basket.