Chinese-founded social network Yalla gets going in Middle East

Financial Times
Dubai-based app saw monthly users of chat and games apps rise nearly fivefold in year to last June

Yalla’s share price has more than tripled since an IPO in New York last October © FT montage; Dreamstime

Yalla’s share price has more than tripled since an IPO in New York last October © FT montage; Dreamstime

TikTok is the most famous example of a Chinese social media app that became a smash hit overseas, but in the Middle East there is a second Chinese-founded app that is taking the region by storm.

Yalla, or “Let’s go” in Arabic, saw the monthly users of its chat app and its games app increase by nearly fivefold to more than 12m in the year to last June, and its share price has more than tripled since an IPO in New York last October.

The company has localised so well, with headquarters in Dubai, that many users are unaware that its engineering team and founders are all in Hangzhou, near Shanghai — a rare example of a successful Chinese-foreign hybrid tech company.

Yang said he came up with the idea while travelling around the region, from Egypt to Afghanistan, and noticing how much time people spent talking on the phone.

He decided to build a social network based around chatting, rather than typing, and today each user spends an average of five hours in the app, much of it not actively talking, but hanging out or listening, akin to having a radio on in the background.

Yalla reports strong user growth but declining revenue per user. Three charts showing monthly average users peaking at more than 15m in Q4 2020. Paying users peaking at more than 5m in Q2 2020 but average revenue per paying user declining to just over $5 per user in Q2 2020, down from almost $35 in Q3 2019

When he started, there was little interest in the region, he said. “The Middle East was a world overlooked by venture capitalists.” But he said that it was much easier to grow an app in the Middle East than in his home market, China.

He took inspiration from China’s livestreaming platforms, where millions of users tune in to watch their favourite stars, but then decided to create an app that would enable people to socialise in small groups.

Unlike Clubhouse, a more recent voice-based social network which has raised money at a $4bn valuation, Yalla is mostly centred around small rooms of up to 20 people, who are invited in by their friends.

Yang described the idea as a virtual majlis — describing the social gatherings he used to attend in Abu Dhabi. And, like a majlis, guests bring gifts: Yalla’s profits come from the in-app virtual presents that users send to one another.

Yalla’s offices in Hangzhou are filled with 350 staff, including graphics designers who animate the in-app gifts, front-end developers for the app interface, and also teams developing new apps, such as its recently launched Yalla Ludo multiplayer game, which now contributes the majority of its revenues.

The company saw huge growth during last year’s Covid lockdowns, and Yang said the apps now have momentum after being recommended on Apple and Google’s regional app store homepages for several months.

He concedes that user growth has now returned to its previous level of about 15 per cent a quarter, but said: “We’re not pursuing explosive growth . . . We don’t want to dilute the community atmosphere. People stay because they like the atmosphere.”

Ismail attributed Yalla’s success to the Arabic-centric approach to the language, look and feel of the app. “We touch every Arab heart by talking their language and by celebrating and interacting with what they feel, express and do,” he said.

Its Arabic-oriented chat and gaming apps are most popular across the six Gulf states, Egypt, Jordan and Algeria, but also support seven other languages, from Urdu to Turkish, to serve the mix of nationalities in the region and beyond. Uyghur, a language close to Turkish, is not supported, however. The company recently added Spanish and Portuguese and is expanding into the South American market.

The basic rule for the platform is known as “PRP”: no politics, no religion, no porn — the importance of which Yang learnt from working with government clients while at ZTE. Describing the diversity of nationalities and religions in the UAE, Yang concludes “The reason everyone can get along harmoniously, is because we don’t talk about [certain things]”. Violating PRP means losing one’s account.

The team takes a serious approach to content moderation, which is particularly costly, because computers are not yet able to effectively filter speech. Instead, human intervention is needed to judge the context of conversations.

As a result Yalla has 200 content monitors to listen in on channels in real time, and big rooms in particular — which can stretch up to thousands — are carefully monitored. It is helped by tens of thousands of users who voluntarily submit complaint reports, and by the fact that the platform and community is not focused on politics, but on much more casual conversation.

“Without content monitoring, you will run into problems in many different countries,” said Yang, who spent time observing Clubhouse before Beijing’s internet censors blocked the app after it became a popular place to discuss topics such as the mass internment of Uyghur Muslims in Xinjiang. Oman has also banned Clubhouse.

Yang, who describes himself as a “businessman, not an entrepreneur”, is also rather unusual compared to other Chinese social app founders for his slow and steady approach. He boasted that he knows many of the eccentric early users on Yalla personally, after spending time with them in the early days of the app.

Tired of being asked why he doesn’t expand into the much bigger Chinese market, he referred to the dominance of China’s Big Tech companies, as well as the high cost of user acquisition. To convince a user to download a gaming app through advertising, for example, Yang cited the cost of $20 in China compared with a few dollars in the Middle East.

“China’s domestic internet industry is brutal, because nearly all of its traffic is in the grips of a few giants,” says Yang. For the past 15 years, he adds, his career has centred on the Middle East, and that is his advantage. “Why would I want to go to a market where someone else has the advantage?”

Financial Times

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