US$ 6 Billion Chinese Startup Unicorn, Xiaohongshu Might Simply ‘Die’ After Being Banned By Chinese Government
Chinese Unicorn Startup Ecommerce Platform App, Xiaohongshu was removed From China android stores and banned since last week and it is also not available on Apple’s App Store anymore. No news is in sight that the ban might be reversed.
Xiaohongshu, the Chinese Unicorn startup that is valued at over US$6 billion and which has more than 200 million users had been removed from all Android Stores In China and temporarily banned by the Cyberspace Administration of China(CAC).
The CAC is China’s regulatory body that oversees the internet, websites and apps, and it frequently targets apps that hosts a lot of user-generated articles, reviews and videos and might contain pornographic content, politically sensitive content or fake product reviews.
The CAC only in June of this year had called for 26 apps to be removed and banned including Ximalaya, a popular program in China for podcasts. In this recent move, no reason or explanation was given by the CAC.
Xiaohonshu (or little red book as it is known in Mandarin) management team did however announced on Weibo, a social media platform that its app had been removed from android stores and banned but will be reviewing all its contents and also investigating what triggered the action and if possible find a solution to resolve the issue.
Vendors, investors and also users are however worried that this might mark the end of Xiaohonshu and say that the fault lied with the management for not properly monitoring the kind of contents that users posted.
Xiaohongshu was founded by Miranda Qu and Charlwin Mao in 2013,
and initially started as an online guide for Chinese shoppers. The original intention of creating Xiaohongshu was to provide a platform for users to review products and to share their shopping experiences with the community. In October 2014, Xiaohongshu started focusing on connecting Chinese consumers with global retailers and established its own cross-border e-commerce platform, where Chinese consumers can buy products from overseas and order directly.
By beginning of 2017, Xiaohongshu users exceeded 80 million, with sales of nearly 14 billion Yuan.
In June the same year, Xiaohongshu held a shopping festival to celebrate its fourth anniversary, which saw the sales revenue exceeded 110 million Yuan in 2 hours, while the app ranked in first place in the iOS App Store under "Shopping" category.
In June 2018, Xiaohongshu completed a Stage E $300 million funding led by Tencent and Alibaba , bringing its total valuation to more than US$ 6 billion.
The faith of Xiaohongshu is unclear as the CAC has not responded to comment and It was not clear what the offending content was on the app, nor if and when it would be available for download again on Android or Apple Store.
Off course the company management, investors and vendors are all in jitters at the moment as a platform that is valued at US$ 6 billion can overnight be perished.
It also provides a textbook case study for internet based startups to see how fragile a position they are in as their existence on the internet is controlled by governments or even influenced and affected by large corporations. For example having your startup platform’s URL banned by the likes of Facebook or Weibo or Line or Google etc can have disastrous effects while an internet ban by a government is simply a death sentence.