ByteDance staff and investors have been amazed as the creator has stepped back

Zhang Yiming said he discussed resigning as CEO of ByteDance in March, but said he was caught off guard by an initial $ 200 billion investor.

After a tumultuous year, the 38-year-old founder has announced that he will hand over the duties to his CEO on Thursday to step down from staff, even as his company is preparing for a public start-up.

While in his letter he said he was not so interested in “really managing people”, Zhang was the only CEO of ByteDance, and TikTok built a company with a viral video application to become a global challenge. To Facebook and Tencent.

Even the company’s worst crisis survived recently: the U.S. government’s threat to ban TikTok.

“Yiming Zhang has dared to announce his resignation, a truly amazing CEO,” tweeted Patrick Collison, chief executive of the $ 95 billion payments company Stripe. “To make sense of the quality of their execution: ByteDance was founded in 2012, generated $ 35 billion in revenue in 2020, and hired 40,000 people last year.”

Investors at ByteDance said they were shocked and could only explain Beijing’s recent pressure on the technology sector as an explanation.

Since the end of 2020, China has been losing in its technological giants by using antitrust and other rules. Zhang’s resignation was that of the founder of e-commerce giant Pinduoduo Colin Huang in March, and his departure was also unexpected. Earlier this month, Simon Hu Ant, the group’s general manager, also resigned, a few months after Beijing broke its double-record list in Shanghai and Hong Kong.

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

In his resignation letter, Zhang said he wanted to avoid the “trap of turning the CEO too central.” This reflects the concern of the central government, which has long been concerned about the power of technology leaders.

As for ByteDance, especially since the top three apps require an average of more than an hour a day, “regulators have always been concerned about how it might affect public discourse. Propaganda is the Party’s salvation,” Fenge added.

Beijing has provided a wealth of guidance on the governance of social media algorithms and the promotion of “positive” content. So far this year regulators have criticized ByteDance for problems ranging from sexual content to deepfakes.

“Yiming is not very good at government relations [in China]”One of the most popular said that in 2018, ByteDance suffered the first moment of its life or death at the hands of the government, which criticized several applications for hosting” regular “content. ByteDance had to shut down Neihan Duanzi, with 22 million daily users he had an app to share the joke.But the company backed down after a long public apology, and hired more employees to manage government relations.

Zhang clashed with Beijing again in 2020, trying to satisfy what the Trump administration has demanded to make TikTok’s U.S. operations US-owned. The Chinese government fired establishing export controls above the corresponding technology, while censors allowed the storm of social media criticism to go down to Zhang.

Liang Rubo, a fellow at Zhang University, co-founder of ByteDance and head of HR, will take the witness stand after six months. Staff who have worked with Liang describe Zhang as a loyal lieutenant.

While the staff at ByteDance were generally shocked by Zhang’s resignation, those who worked at Liang were even more shocked. “My colleagues and I never expected Liang to take over,” a Humanities official said, adding that Chinese President Zhang Lidong had “more power and courage” than Liang. “[Liang] it doesn’t scream at the CEO, ”said another Human Resources employee.

Liang’s selection suggested that Zhang Yiming would “govern behind the curtain,” a former HR employee said.

Employees do not expect to stray from Liang Zhang’s career, which in itself is a source of comfort. “We were all shocked,” said a ByteDance engineer. “But after a bit of discussion, they all went back to work because we thought Liang would mostly take Yiming’s plans, and there shouldn’t be too much change.”

Zhang’s departure reveals the fragility of ByteDance’s management structure and its centrality, with all senior executives reporting directly to him.

ByteDance declined to say whether Zhang would remain in the five-member board, as investors would take the other four seats.

The company has had the largest hiring in technology history, nearly doubled in the past year and a half to more than 100,000 employees, and its application has been hugely successful, earning about $ 35 billion in 2020, according to two well-known people.

The next step was to have a blockbuster IPO In Hong Kong or New York. Several people close to the planet have said that discussions with Hong Kong stock exchange officials have made great strides earlier this year. People said, however, that the talks slowed down this spring.

In April, the state-run China Securities Journal reported that ByteDance had begun an IPO process in Hong Kong. Although other media outlets had widespread follow-up, they deleted the original story one day, and told the state media not to republish the story – an unusual behavior for government censors who usually do not intervene in market speculation. ByteDance later said it was “not ready at this stage.”

“Zhang’s departure may help the company get enough government approval for the IPO,” Feng said. While ByteDance’s concerns about its listing plans are clear, political pressure would explain its previous censorship of IPO rumors.

Zhang’s resignation was part of a “logical order,” with one person involved in the preparations saying the company was moving toward an IPO. “He made the decision, and of course he had to report it before he could move on to the next phase of the offer – he couldn’t leave the post until he went public.”

His move will not affect ByteDance’s Chinese business structure, as it is the source of most of his income. In March 2020, Zhang put China’s operations under the direction of Kelly Zhang and Zhang Lidong.

At the same time, he became the CEO, and created a separate CEO position for TikTok, which is now filled by Shouzi Chew.

Li Chengdong, the founder of Beijing Dolphin Technology Consulting, said the decision to back down could benefit ByteDance. “He defends the company and himself from future attacks.”

“Usually, changing CEOs is not good for the company, but that is a CEO with Chinese characteristics,” Li added. “Zhang can still remain in power.”

Additional news from Nian Liuk in Beijing, Tabby Kinder in Hong Kong and Hannah Murphy in San Francisco