The founder took a step back and ByteDance employees and investors were shocked

Zhang Yiming said that he had discussed with a small group of people in March that he would resign as the CEO of ByteDance, but investors in the $200 billion start-up company said they were surprised.

After a turbulent year, the 38-year-old founder announced in his resignation letter to employees on Thursday that although his company is preparing for an initial public offering, he is still handing over the position of CEO to employees .

Although Zhang claimed in the letter that he was not so interested in “actual managers”, in fact, he was actually the only manager of ByteDance’s top leadership and built the company that owns the viral video app TikTok as a global challenger to Facebook and Tencent.

He even survived the company’s worst crisis: the US government threatened to ban TikTok.

Patrick Collison, the chief executive of Stripe, a $95 billion payments startup, tweeted: “It’s shocking to hear that Zhang Yiming’s stepping down. This is really an amazing CEO.” “From In a sense, their ability to execute: ByteDance was established in 2012, and reportedly generated 35 billion U.S. dollars in revenue in 2020 and employed 40,000 people last year.”

Investors in ByteDance said they were shocked by the move and could only point out Beijing’s recent pressure on the technology industry as an explanation.

Since the end of 2020, China has been using antitrust and other regulations to control its technology giants. Zhang’s resignation follows the resignation of Colin Huang, the founder of e-commerce giant Pinduoduo in March, and his resignation is also surprising. Earlier this month, Ant Group CEO Simon Hu also stepped down after Beijing cancelled its record-setting dual listing in Shanghai and Hong Kong.

Feng Chucheng, a partner of Plenum.ai, a Beijing-based consulting firm, said: “The government is weakening the central authority of all leaders of the technology giants.”

Zhang said in his resignation letter that he wanted to avoid “CEOs falling into the trap of over-centricity.” This reflects the concerns of the central government, which has long been concerned about the power of technological leaders.

Especially for ByteDance, its top three applications require an average of more than one hour of user time per day. “Regulators have always worried about how it will affect public discourse. Propaganda is the lifeblood of the party.”

Beijing has issued multiple directives on the governance of social media algorithms and the promotion of “active” content. So far this year, regulators have criticized ByteDance for everything from sexual content to fakes.

“Yi Ming is not very good at government relations [in China]”, one of his acquaintances said. In 2018, ByteDance faced the first moment of life and death in the hands of the government. The government criticized several applications that host “vulgar” content. ByteDance was forced to shut down Neihan Duanzi. A prank sharing app with 22 million users every day. But the company bounced back after a long public apology and hired more employees to handle government relations.

By working hard to meet the Trump administration’s requirement that TikTok’s business in the United States be owned by the United States, Zhang once again clashed with Beijing in 2020.The Chinese government strikes back Implement export controls Regarding the censorship of related technologies, the censors let a storm of social media criticism sweep Zhang.

Zhang’s college classmate Liang Lubo, co-founder and head of human resources of ByteDance will take over after six months of handover. The staff working with Liang described him as Zhang’s loyal adjutant.

Although the entire ByteDance employees were shocked by Zhang’s resignation, the employees who worked for Liang were even more surprised. A human resources employee said: “My colleagues and I never expected Liang Hui to take over.” He said that China Chairman Zhang Lidong “has more power and courage” than Liang Hui. “[Liang] Wouldn’t yell the CEO to me,” another HR employee said.

A former personnel department employee said that Liang’s choice implied that Zhang Yiming would “rule from behind the scenes.”

The staff did not expect Liang to deviate from Zhang’s line-this in itself was a source of comfort. “We are all surprised,” a ByteDance engineer said. “But after discussing for a while, everyone restarted their work, because we think Liang will mainly adopt Yiming’s plan, and there shouldn’t be much change.”

Zhang’s departure exposed the fragility of ByteDance’s management structure and his central position, and all senior executives reported directly to him.

ByteDance declined to comment on whether Zhang will continue to serve on its five-person board, while the other four seats will be held by investors.

According to two people familiar with the matter, the company has had the largest hiring boom in the history of technology. It has almost doubled in size in the past year, half of which has increased to more than 100,000 employees, and its application has also been a success, creating by 2020 Revenue of about 35 billion U.S. dollars. this matter.

The next step is to become Large IPO In Hong Kong or New York. Many people close to the plan said that discussions with officials from the Hong Kong Stock Exchange made significant progress early this year. People familiar with the matter said, but by this spring, negotiations have slowed down.

The state-run newspaper China Securities Journal reported in April that ByteDance had initiated the IPO process in Hong Kong. Although other media followed the matter extensively, the original story was deleted within a day, and the official media was told not to republish the story-this is an unusual move for government inspectors, who usually do not Intervene in market speculation. The byte beating later said that “it is not ready yet.”

Feng said: “Zhang’s departure may help the company obtain sufficient government approval for an IPO.” Although it is not clear why ByteDance has shaken its listing plan, political pressure will explain its previous review system for IPO rumors.

A person involved in the preparatory work said that Zhang’s resignation was part of a “logical order” as the company moved towards an IPO. “He made a decision, and then obviously must announce this decision, and then move on to the next stage of the issuance-he cannot resign during the IPO.”

His move will not affect ByteDance’s business structure in China, which is the source of most of its revenue. In March 2020, Zhang placed China business under the leadership of Zhang Kaili and Zhang Lidong.

At the same time, he appointed himself as the global CEO and created a separate CEO position for TikTok, which is now held by Shouzi Chew.

Li Chengdong, the founder of Dolphin, a Beijing-based technology consulting firm, said his decision to step back may ultimately benefit ByteDance. “It defends the company and himself against future attacks.”

“Normally, changing the CEO is not good for the company, but this is a CEO change with Chinese characteristics,” Li added. “Mr. Zhang can still be responsible.”

Other reporting by Nian Liu in Beijing, Hong Kong’s Tabby Kinder and San Francisco’s Hannah Murphy