Author/Zhou Yi

Editor-in-Chief/Su Huai

The story between Luo Yonghao and Yu Minhong continues. Among the silent parties, a "20-year-old friend" suddenly appeared, unleashing a passionate outburst that further escalated the situation.

On August 8th noon, Luo Yonghao responded with a well-reasoned 5,000-word essay, much of which involved past grudges with New Oriental (09901.HK, NYSE: EDU). It's hard for onlookers to discern who's right and who's wrong.

Screenshot from Weibo

Amidst the war of words between the two sides, negative news emerged about the "E-commerce Academy" incubated by "Make Friends," the MCN agency behind Luo Yonghao. Luo Yonghao serves as the honorary president of the E-commerce Academy, and promotional videos featuring him can be found everywhere on Douyin.

Screenshot from Douyin

A dissatisfied student of the E-commerce Academy bluntly stated, "Since Luo Yonghao uses his reputation to earn money from this training, he must also take responsibility with his reputation.""After a "dignified" breakup with Dong Yuhui, Yu Minhong transformed from a "vicious capitalist" to a "good boss of China," while Luo Yonghao faced criticism for his "selling shovels" business.

Despite announcing two years ago that he would "retire from the internet," Luo Yonghao's frequent comments on the live e-commerce industry and his "special attention" to competitors often make people forget that live streaming is merely his side business.

From the perspective of completing entrepreneurial tasks, Luo Yonghao faces far greater danger than Yu Minhong, who has proven himself twice over.

01

The "Selling Shovels" Business Isn't Easy

Make Friends Holdings (01450.HK) completed over RMB 12 billion in GMV in 2023; as of June 2024, it has over 60 vertical live-streaming rooms and successfully achieved cross-platform operations on Douyin, Taobao, and JD.com (09618.HK, NASDAQ: JD). Under a standardized and replicable "matrix" operating model, Luo Yonghao's "retirement" did not diminish Make Friends' status as a leading live e-commerce player.

Standardization and replicability mean that Make Friends has penetrated the entire live e-commerce industry chain, including IP incubation, live-streaming training, and overseas e-commerce operations. In 2021, Luo Yonghao proposed expanding into both training and live streaming, claiming, "Our agency has reached the pinnacle in both fields, a unique achievement." To that end, he recruited Li Liang, the former president of New Oriental.

From Make Friends' own live-streaming room matrix, it has established verticals in 3C technology, alcohol and food, beauty and daily chemicals, jewelry and apparel, as well as parenting and lifestyle, with a commanding lead in main account followers.

But can this really be replicated by other businesses?

Make Friends' position as a leading live e-commerce player is built on a myriad of matrix accounts, with a combined fan base exceeding 50 million. However, they all enjoy the same brand endorsement and supply chain support. Just as Luo Yonghao mockingly noted that New Oriental (01797.HK) lacks the ability to recreate another Dong Yuhui, Make Friends itself lacks the capability to incubate leading IPs. Beyond Luo Yonghao, few anchors in Make Friends' live rooms are recognizable to viewers.

An industry insider involved in knowledge-sharing and IP management told Yuan Media that the current market for anchor training is vast but rife with mixed quality, with many agencies resorting to copying PPT courses from one another. "Successful incubation cases are essential. Just because an agency has a well-known anchor doesn't mean they can make you equally famous," they said.

Examining Make Friends' matrix, it's evident that as an MCN agency, it hasn't ventured into additional sectors beyond live-streaming sales. In popular industries like sentiment, education, and health, it hasn't established distinctive IP images for content creation, nor has any anchor emerged as a second Luo Yonghao.

From the perspective of IP persona building, which is crucial for "account creation," comedian Li Dan, who is closely associated with Make Friends, once signed with them and launched the "Cai Dan Live Room" on Taobao in 2022, but it has since disappeared.

Notably, Li Dan's current battlefield is Xiaohongshu. Yuan Media observed that at the prime time of 10 pm on August 8th, Li Dan topped the Xiaohongshu buyer list. The comedian transformed into a sentiment coach in his live room, turning fans' sentimental anxieties and career crises into live-streaming material, boosting his popularity. Li Dan's MCN agency on Xiaohongshu, "Yi Zhi Hua," was founded by Yang Tianzhen.

Screenshot from Xiaohongshu Live

If even celebrity live content can't be tailored to individual strategies, one must question the effective conversion of Make Friends' companion services for amateur learners.

The recent public opinion storm surrounding Make Friends underscores that "selling shovels" while sitting on a gold mine is a risky venture with disproportionate rewards and penalties, especially when relying heavily on super IPs for promotion and personal reputation for endorsement, significantly increasing the chances of failure.

A paying student from Make Friends E-commerce Academy revealed that they spent nearly RMB 80,000. While Make Friends provided services like comprehensive planning and inventory analysis within the delivery cycle, the actual sales volume over a month was merely 35 orders, with a GMV of less than RMB 4,000.

Yuan Media found over 30 products in the Make Friends E-commerce Academy's Douyin store. Apart from a creative mousepad with e-commerce knowledge maps priced at RMB 19.9, most items were expensive. Notably, the "Douyin Omnichannel Training Camp" costs RMB 22,800, and adding the "Excellent Anchor Practical Training Camp" brings the package price to RMB 31,600.

According to Chanmama data, Make Friends E-commerce Academy sold between 50,000 and 75,000 units in the past month.

It's noteworthy that some students revealed that their tuition was not paid in the Douyin live room but rather directed to a private WeChat group.

While IP incubation and live-streaming training are not emphasized in Make Friends' external promotions, and their financial reports do not disclose performance in this area, Cui Dongsheng, Vice President of Make Friends E-commerce Academy, once revealed that the academy began promoting online enrollment in 2022 and had achieved its first-year revenue target of tens of millions by June.

It's worth mentioning that Yu Minhong also mentioned potentially opening an e-commerce academy in 2022 but hasn't acted on it since. Perhaps Yu also realizes that the "selling shovels" business not only consumes internal resources but also comes with consumer dissatisfaction during the conversion process. As a newcomer to e-commerce focused on becoming "China's Costco," he may not have the bandwidth to pursue this track.

In contrast, after using live streaming as a "shortcut" to repay debts, Luo Yonghao was more inclined to engage in "asset-light" businesses through this channel, but the outcome may not be optimistic.

02

AR Entrepreneurship Is Still Ongoing

From an entrepreneurial perspective, Luo Yonghao, who has failed once and returned to the cutting-edge technology race, faces far greater crises than Yu Minhong, who holds two listed companies.

Luo Yonghao claims not to like live streaming or selling goods, but he's intimately tied to the live e-commerce ecosystem. Conversely, his ongoing AR entrepreneurship has been quiet for a while.

How many remember Luo Yonghao's "Thin Red Line Tech"?

Image from Taogehaoffer Screenshot

In 2022, Luo Yonghao repaid RMB 600 million in debts through live streaming sales. Unable to suppress his passion for technology, he chose to start a new venture in the AR direction.

Founded in June 2022, Thin Red Line Tech aims to create "the next-generation personal computing platform after smartphones." By the end of November that year, Thin Red Line completed a US$50 million angel round of funding from investors like Meituan Dragonball, BlueRun Ventures, Legend Capital, Matrix Partners China, and follow-on investments from Li Wanqiang, co-founder of Xiaomi (01810.HK), and Wu Yongming, co-founder of Alibaba (09988.HK, NYSE: BABA). After this round, Thin Red Line was valued at US$200 million.

One must admire Luo Yonghao's influence in the tech and venture capital circles. While Smartisan Phone was a failed venture, it was indeed a successful product.

In the two years since Thin Red Line's inception, two significant events occurred: the release of ChatGPT 3.5 made large models a buzzword in the tech industry, prompting rumors that Luo Yonghao had abandoned AR for large models, which were quickly refuted. The other was Apple's launch of its first head-mounted display, Vision Pro, sparking global enthusiasm. As a self-proclaimed "successor to Jobs," Luo Yonghao commented during a live stream that "the product is good, but pricey. At US$3,500, it's clearly meant for fools.""Thin Red Line's website proclaims "AN OPPORTUNITY FOR PLATFORM-LEVEL REVOLUTION," suggesting a platform-level revolutionary opportunity, with golden arcs resembling a rising sun.

Image from Thin Red Line's website

From Thin Red Line's disclosed patent information, we can glimpse its current focus. Tianyancha shows that Thin Red Line disclosed 10 patents in 2023, primarily related to AR devices, specifically head-mounted displays and AR glasses.

Image from Tianyancha's website

In this year, Luo Yonghao's live-streaming side business flourished as always. During the 2023 "618" sale, Luo Yonghao actively participated in promotional activities across Douyin, Taobao, and JD.com, achieving remarkable results on his JD.com live debut, even selling a house in his live room.

In 2024, Luo Yonghao's live-streaming frequency decreased significantly. Cui Dongsheng, Vice President of Make Friends, mentioned that "Luo Yonghao currently only does two live streams per month.""Meanwhile, Thin Red Line was active in 2024. In February, its business scope expanded to include mobile terminal and mobile communication equipment manufacturing, leading many to speculate that Luo Yonghao's new company would revive smartphone production.

More excitingly, in April during Make Friends' 4th anniversary live stream, Luo Yonghao revealed that a new product would be launched in September, urging fans to "prepare budgets of US$199 and US$299.""Currently, Thin Red Line is recruiting software development engineers, business managers, and other positions. Judging from the number of recruits and business developments, Thin Red Line's R&D work is progressing steadily.

Yu Minhong has his stable "patch of land" with New Oriental's education and training business slowly recovering. Although Dongfang Zhenxuan is enduring the pain of losing its top IP, Dong Yuhui, its long-term strategy of becoming "China's Costco" remains unchanged. In contrast, Luo Yonghao's frequent returns to live streaming have clouded his AR entrepreneurship.

Will the new product launch in September as scheduled? Will fans be surprised or shocked? By then, it remains to be seen if Luo Yonghao will pen yet another long essay.

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