The Chinese Art of Working in Pajamas

As China returns to work, will virtual office hot stocks remain darlings among investors?

Author: Chiu-Ti Jansen   

Do you have a fantasy of working in your PJs not only when you are sick? I do.  

If you have loaded up shares of Zoom Video Communications (Nasdaq: ZM) while dancing to the tune of "I Will Survive" in your living room, congrats! Zoom, a marquee remote conferencing service provider trading on Nasdaq, has seen its shares more than doubled year-to-date.

U.S. Surgeon General Jerome Adams told "Good Morning America" on March 27 that some parts of the country could remain coronavirus combat zones come, "Easter, Memorial Day, or [even] Labor Day." This is bad news for America, but good news for Zoom Video.

Yet analysts are divided as to whether Zoom's PE ratio, by reference to its most recent earnings per share, at a whacking 1,794.38 as of March 27, can sustain itself post-COVID-19. Zoom trades at a multiple of 32 X projected revenues expected for the next fiscal year, while the average multiple for SaaS (software as a service) company trades at a multiple of 8.2 X revenues. 

Still, whether remote work will become the norm in the future remains an open question. China was two months ahead of the U.S. in its first massive, socially coordinated work-from-home experiment, necessitated by the COVID-19 outbreak. As Chinese society returns to work, do those virtual office hot stocks remain darlings among investors?

300 Million Chinese in Virtual Offices

 Ai Media Consulting's data show that in the first week following the Wuhan lockdown, more than 18 million companies and 300 million people connected through remote office software. Three out of five most downloaded apps in Apple Store pertained to cloud-based office applications.

Chinese stock analyst Shen Xinfeng thinks for the long run the Chinese population that needs access to remote work products should stay around 200-300 million, but not many more.

Zoom has become inaccessible in China starting last September, unless through a localized version offered by Zoom's Chinese partner Huawan Telecom. Most of my friends in China use the applications offered by tech giants Alibaba, Tencent and ByteDance. 

There are also sector-focused players that benefited from the upticks of teleworking from home. It is worth-noting that the top Chinese remote office suites are already internationally forward-looking before the coronavirus outbreak. As the pandemic continues to circle the globe, we should expect these Chinese players to tap onto overseas demands and extend their reach globally.

Tencent's VooV

Tencent launched VooV, an international version of Tencent Meeting, in more than 100 countries and regions on March 20. Armed with a beauty filter that would give you a wide-eyed look with pointy chins and porcelain skin, VooV is essential to keeping up your façade (sans face masks) while being sequestered at home.

But critics have pointed out VooV's lack of many functions to facilitate real-time work collaboration. And unlike Zoom, VooV does not offer you a selection of virtual backgrounds, which I guess means you have to tidy up your handouts and change out of your pajamas before you go on air. Judging from Walmart's increased sale of office tops but not bottoms, the trick seems to be dressing for work above the torse while (hopefully) wearing the unseen pajama pants. 

But VooV has an advantage over its competitors in that it's embedded in Tencent's ecosystem of apps, including ubiquitous messaging app WeChat that boasts over 1.15 billion monthly active users as of the end of Q3 2019. Users can access its service via existing WeChat accounts without additional registration requirement while enjoying a broad range of file-sharing functions.

Alibaba's DingTalk

During the COVID-19 outbreak, Alibaba's DingTalk (Dingding in Mandarin) consistently ranked No. 1 among all apps.  The app has been downloaded more than 1 billion times. Used by more than 5 million companies globally, the app also enables online training and education.  

Often compared with its Western counterpart Slack in offering group communications, voice and video calls and file-sharing, DingTalk also includes a contingent of monitoring features that privacy advocates find intrusive.

Reviewers of DingTalk prize its comprehensive features, user-friendliness, strong cloud storage function, feature enabling transferring money or "tipping" through a "red envelop", and a video airbrush filter.

 ByteDance's Lark

ByteDance, the world's most-valued unicorn that also owns super app TikTok, launched its enterprise messaging and productivity app Lark in overseas market in April 2019. Lark's Chinese version, named Feishu (Flying Book), has risen in popularity in the wake of the nation-wide lockdown.

On February 24, Feishu announced that it would be open to all enterprises and organizations in the country free of charge, regardless of size and duration, and all users can use all-suite functions. 

Available on macOS, Windows, iOS, and Android, Lark is an office collaboration suite with built-in functionality that includes text and voice communications, and creative capabilities such as documents, creating charts and mapping thought process. In addition, Lark can conduct audio and video conferences, with calendar and open platform features.

Critics have lauded Lark's strong cloud storage capability, built-in translation function, and voice-to-text conversion. Lark also uses Amazon Web Services (AWS) to provide infrastructure services. With a support team based in the Bay Area, Lark is expected to make aggressive moves in North America.

Other Niche Players

A Chinese online commentator proposed that Zoom, founded in the U.S. by Chinese immigrant Eric Yuan, should merge with BizConf Video, to "streamline the worlds of China and overseas cloud office video conferencing platforms." According to BizConf's own website, it was established in 2006 to provide companies with cloud-based video conferences, audio conferences, and webcasts. 70% of Fortune Global 500 companies with a presence in China use its cloud conference platform for their daily work and communications. 

Shenzhen Stock Exchange-listed BizConf (ticker no. 300578) saw its stock price shot up 222% from January 1 (¥25.79) to March 3 (¥82.98).  The stock closed at¥48.55 on March 27, 41% from its one-year high, still turning in an impressive 88% YTD return.

For perspective, the Shenzhen Stock Exchange Index closed at 10109.91 on March 27, reflecting a 3% YTD return.  Despite the virus, the Index reached its one-year high at 11,772.38 on February 24.  On a 12-month basis, the Index hit its lowest point at 8,584.94 on June 6, 2019, reflecting concerns over the U.S.-China trade disputes at the time.

Xiamen-based Yealink, a unified communication solution provider, provides enterprise communication terminal equipment for global companies through outsourced processing. Yealink's stock (ticker no. 300628) price rose 36% from January 1 (¥72.41) to March 2 (¥112.48).  But the stock closed at¥84.7 on March 27, 24% from its one-year high, yielding a 17% YTD return.

Comix Group's cloud video conferencing platform Fastmeeting, another leading video conferencing brand that leverages its technology beyond corporate meetings. In addition to video conferencing, it also provides online meetings, remote training, online education, telehealth, remote interview, and emergency guidance services. 

Comix Group (ticker no. 002301) went up 36% from January 1 (¥12.16) to February 26 (¥18.89).  But the stock closed at¥14.31 on March 27, 24% from its one-year high, resulting in an 18% YTD return.

Kingsoft's WPS: China's Answer to Microsoft 

The work-from-home trend also benefits online office and cloud service providers.  According to Master Cicada's data tracking the number of downloads, among the free iOS applications Kingsoft's Office WPS' ranking rose from 112th to the 10th during the period from January 22 to February 11. Measured by efficiency, its ranking rose from 4th to 1st.

Another study by Qimai shows that the iOS version of the WPS Office app was downloaded 193,900 times on February 12, 2020, a significant increase from 50,700 times on January 25, 2020.

Kingsoft has been in business for 32 years and it seems to finally see the end of the tunnel with the changing work environment. Kingsoft has been trying to use handset devices as its entry point to crack Microsoft's dominance.  As of March 2019, the number of monthly active users of Kingsoft Office's main products exceeded 328 million, the total number of registered WPS users reached 280 million, accounting for 42.75% of the domestic office software market.

A strategic alliance with Alibaba's Taobao and TMall platforms, inked during 2016-18, has given Kingsoft a leg-up.  Now with the sweeping adaptation of DingTalk after the outbreak, the bundled documentation service provided by Kingsoft WPS is enjoying its moment.

Kingsoft (ticker no. 688111) debuted on China's STAR (short for "science and technology innovation board") Market at the Shanghai Stock Exchange on November 18, 2019, at ¥126.35 per share, which reached its all-time high on March 3 at ¥270. The stock closed at ¥245.8 on March 27, showing a 50% YTD return.

Top Tech Giants Still Dominate

 While some nimble competitors have thrived with the overall market trend, tech giants still dominate the remote working space, presumably owing to their ability to leverage their wide user base from their other platforms. According to a recent study that ranks top nine Chinese remote work applications, DingTalk takes the top spot for user connectivity (based on the number of free users for any given setting), while VooV and  Enterprise tie for second.

VooV ranks No. 1 in user-friendliness and ease of sharing documents. It also takes home the top spot in the all-around ranking.

However, Alibaba, Tencent, and Bytedance, with their existing international foothold, will be in a better position to capitalize on the epidemic-necessitated work-from-home trend.

Work-from-Home and 996

But the super apps that make working in pajamas easier also come with a cost. For instance, DingTalk is dubbed the "Big Brother of Workplace", offering clock in/out function that simulates a digital "punch card machine".

DingTalk sends out reminders to users minutes before their work hour. By tracking WiFi connections, it keeps tabs on when employees arrive at the virtual office and when they take breaks. While this feature may be helpful in tracking overtime, it could certainly exacerbate any micro-managing corporate culture.

Many Chinese users complain that DingTalk serves employers' interest at the expense of their employees, by making it easy for the bosses to "control, micro-manage, monitor and exploit" their underlings. In fact, DingTalk was able to accelerate its wide adaptation in workplaces precisely because bosses can dictate which office software to use at work.

While DingTalk doesn't allow managers to track employees' real-time locations automatically, the managers can do so if a user enables location services.  I wonder whether some employees may opt to do so in an effort to show loyalty and earn points.

In Chinese Ding, as a noun or a verb, literally means nail.  So the duplicative compound Dingding sounds like hammering a nail. I guess you can imagine yourself in a carpenter's workshop sawing wood and nailing away.  Except now you are 996, a bombastic term that shot to fame last year as it refers to the grueling work culture in China's high tech world—working from 9 A.M to 9 P.M. and for 6 days.  

Jack Ma, the founder of Alibaba, said it's an honor to work 996 before he corrected himself after a massive international outcry.  Of course, bosses (a.k.a. slave-drivers) love 996, especially if they don't have to pay overtime. If remote work is here to stay, with more surveillance functions empowered by these super apps, we may be compelled to work 996 or even more, albeit in our fancy pajamas.  

But for now the fans of DingTalk and VooV are just happy to keep their jobs.

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