Zhang — who founded Tiktok owner ByteDance in Beijing nine years ago — announced Wednesday that he would transition to a new role at the company at the end of this year and "focus on long-term strategy."
"Since the beginning of this year, I've spent a lot of time thinking about how to better drive real long-term breakthroughs," Zhang wrote in a letter to employees that the company posted publicly. He added that he made the decision after several months of thinking, and decided that leaving the "day-to-day responsibilities" behind would allow him to have "greater impact on longer term initiatives."
"The truth is, I lack some of the skills that make an ideal manager," he said. "I'm not very social, preferring solitary activities like being online, reading, listening to music, and daydreaming about what may be possible."
Liang Rubo, ByteDance co-founder and head of human resources, will succeed Zhang as CEO.
Zhang oversaw a handful of big acquisitions that helped ByteDance become a global name — including a 2017 deal for Musical.ly, a video sharing app that ByteDance merged with TikTok. The popularity of its flagship app has exploded, becoming one of the only Chinese-made apps to gain significant traction outside its home country.
Even after TikTok was embroiled in a dramatic battle in the United States last year over concerns that the app posed a national security risk, it has managed to stave off a ban and remains popular. It has about 100 million users in the United States alone. (TikTok has called the national security claims unfounded.)
ByteDance is also reported to be considering a massive IPO, according to multiple media outlets. Bloomberg has reported that the company has been valued at $250 billion in private trades.
"Zhang was a young software engineer without significant business experience when he suddenly found himself running a massive company in rapidly shifting markets while operating in an extremely complex regulatory and political environment," said Brock Silvers, chief investment offer at Hong Kong-based Kaiyuan Capital.
While Liang's appointment as CEO indicates the company isn't changing strategy, it's unwelcome news ahead of a possible IPO. "Founders suddenly abandoning their celestial perches may well signal a significant red flag to public markets," Silvers added.
Zhang's move, though, follows similar decisions by some of his peers. Colin Huang Zheng, the 41-year-old founder of e-commerce company Pinduoduo (PDD), announced in March that he would step down as chairman to pursue other goals, including his childhood dream of becoming a scientist or researcher. He had taken the firm from nothing to a platform capable of competing with Alibaba in less than a decade.
These top tech executives have a lot to worry about right now as Beijing works to reign in the sector.
Chinese President Xi Jinping has been calling for curbs on the internet sector to "maintain social stability." Regulators have imposed record fines on Alibaba (BABA), ordered an overhaul of its financial affiliate Ant Group, and launched antitrust investigations into Tencent (TCEHY) and Meituan.
Tech leaders who maintain close ties to their companies risk getting caught up in the crackdown. Alibaba co-founder Jack Ma — who resigned as executive chairman in 2019 — has been subject to intense scrutiny after he criticized financial regulators last fall, and watched as Bejing pulled an IPO for Ant Group at the last minute. Ma, who was famous for being an outspoken celebrity entrepreneur, has since shirked the limelight.
Others have found themselves pulled into controversy, even unintentionally. Earlier this month, Meituan lost billions in market value after founder and CEO Wang Xing posted a 1,100-year-old poem on social media that many people online interpreted as a veiled shot at the government. Wang later explained he was referring to Meituan's industry competitors, but shares were still rattled.
"The environment is now so opaque and difficult that even the iconic master-operator Jack Ma has paid a very dear price for missteps," Silvers said. "Zhang Yiming and Colin Huang are intensely aware of this example, and their desire to not follow in Ma's most recent footsteps probably played at least some role in their respective decisions to step down."
While "this may be beneficial or necessary from Beijing's standpoint," he added, "over the longer term it cannot bode well for China's tech ecosystem."
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