An interview with Allen Lau, co-founder and CEO of Wattpad
Allen Lau is the co-founder and CEO of Wattpad, the world’s largest community of readers and writers. Founded with Ivan Yuen in 2006, Wattpad is removing traditional barriers between readers and writers and building social communities around stories. It’s a model that’s not only working for amateur writers but also for established writers including Margaret Atwood and Paulo Coelho,
With years of experience building successful mobile tech companies, Allen first started prototyping a mobile eReading app in 2002 on an old grey-scale Java phone that could only display 5 lines of text. He wanted to solve a problem he was facing – how to read while on the go. So for the past 10 years Allen has been exploring the power of mobile/social collaboration, online communities, and user-generated content.
Wattpad now serves over 10 million readers worldwide, 1 million in the UK. 6 million user-generated stories span every genre including mystery, romance, sci-fi, poetry and fan fiction. A staggering 2.5 billion minutes are spent on Wattpad and 750,000 new works are added each month,
TLP: We often hear Wattpad cited in the context of the democratisation of writing. Was this your intention?
AL: Ten years ago in 2002, I was a serial entrepreneur – Wattpad is my third company. My first company was Tira Wireless. At that time we were focusing on doing mobile gaming but I’m not really a gamer. I want to create something I can use myself so I tried a prototype on a Nokia Candybar to see if I could bring my reading material onto my cell phone. But the cell phone capability was so primitive at that time that I didn’t pursue that idea. Fast forward to 2006, and I was planning to leave my first company and start something new, so I resurrected that project in my basement. At the same time, Wattpad’s co-founder – Ivan Yuen, who had been our number one employee at Tira Wireless, moved to Vancouver. I was still in Toronto. One day he instant messaged me saying ‘hey Allen, I’m working on a prototype, can you check this out?’ I clicked on his link and it was exactly the same thing that I was working on at night.
AL: It was mobile reading on a cell phone, but on top of that he had created a website where anyone can upload anything and then read it on a mobile phone – so he was a few steps ahead of me. I was so excited I flew to Vancouver two days later and Wattpad was born. In that meeting in Vancouver airport we decided on a few things. We knew mobile was going to be big so we wanted to focus on mobile reading, on mobile phones, that was our number one priority. We also both knew we didn’t have any knowledge of the publishing system, so it would have been crazy for us to start licensing content from the publishers. So at that time – now 2006 – when YouTube was getting really big and being acquired by Google, we’re thinking, “what else could we apply the YouTube methodology to?”
It made perfect sense for us to build a YouTube-like model around the book and we were hoping for some interesting results. Exactly how it was going to work we didn’t know as it was such early days. But now it is becoming clear our vision was kind of right on. More and more people are going to access content through the screen and the internet has opened up the floodgates for a lot more people to become content creators.
TLP: So how did you go about building the community? That’s actually quite difficult to do from scratch?
AL: If you look at the history at Wattpad, the first year’s traffic was very depressing. We almost pulled the plug. It was that bad. And then in the second year it was a little bit better but… still not great though…
TLP: How much is ‘depressing’?
AL: I pretty much knew every single user. I knew where they lived… [laughs] Maybe in the range of a few hundred.
TLP: Ok, that’s really interesting because one of the things we’ve noticed in terms of community building is that people might try something for six months, see some disappointing initial results and then pull the plug. What was your tipping point?
AL: I would say in years 3 and 4. You have to build a community step by step. You can’t just go straight to high traffic in a very short period of time. In the very beginning we imported public domain works like Charles Dickens ‘A Christmas Carol’, ‘Pride and Prejudice’ – works available on Project Gutenberg. One of the co-founders Michael Hart of Project Gutenberg – he passed away recently – helped us to import about 20,000 different titles, all public domain works at the time. We were so focused on mobile at the time and not too many people were looking at mobile e-reading (remember it was 2006 and early 2007… pre-Kindle, iPhone, smartphone). So because of that differentiator, we were able to attract the first few hundred users but it was still a very small crowd. Over a month we were able to grow it by 10% but that doesn’t sound very large, right?
TLP: But it was growing?
AL: It was growing from 100 to 110, then 121. It was actually quite depressing. But over a longer period of time the law of compound interest actually works.
TLP: So how were you funding the venture at this point? Were you self-funded or VC funded?
AL: At this point we were bootstrapping for 3 years and then after 3 years we raised a very small round of initial funding – half a million dollars or something – enough to allow us to hire two more developers to accelerate the progress. And then in Year 3 and Year 4 we started to see the hockey stick. Last year just before our fifth anniversary we raised our first round of venture capital from Union Square Ventures based in New York. Union Square Ventures funded a lot of similar ventures: large communities in different areas such as foursquare, twitter, zynga, tumblr, etc.
TLP: That must have been a big deal getting Union Square Ventures behind you – a real shift-change for the company.
AL: Yes… it was. Not many people took us seriously in the first couple of years and then one of the top five venture capitalists in the world invested in us. That helped us go to the next level and then this June (2012) we raised 17 million dollars from Khosla Ventures. Khosla Ventures were started by Vinod Khosla, a legend in Silicon Valley. He was the co-founder and first CEO of Sun Microsystems.
TLP: Wow, OK
AL: And Jerry Yang, co-founder of Yahoo, also invested…
TLP: OK, so this was a real turning point. When was the Union Square funding confirmed?
AL: Last summer 2011 we raised $3.5 million from Union Square Ventures. This year we raised 17 million from Khosla and Jerry Yang and a few other investors too. So in total we raised over 20 million dollars…
TLP: Nice. So presumably this helps you enable a full global roll out. Are you going to be concentrating on specific territories? Are you looking at emerging markets? How’s it working?
AL: We have reasonably good presence, a strong presence, I should say, in developing, emerging markets in addition to the developed countries. For example, the US is our number one country with the UK, Australia, Canada and New Zealand pretty strong too. But we also have a pretty strong presence in the Philippines and in Vietnam. India is growing. Spain is growing too.
TLP: Are you finding success in those countries that have been leapfrogging straight to mobile technology?
AL: Yes, that’s one of the reasons why we are so popular in Vietnam. A lot of their users access Wattpad through mobile devices. But in different countries it’s a different story. In the Philippines for example they started on the English site because most are bilingual. They start in English and then they discover they can write in Tagalog – their own language. That’s how we jump-started that community. Spanish is similar – with so many Spanish speaking people in the US it helped to seed the content in the Spanish community.
TLP: So a Spanish reader can find already find lots of content in Spanish?
AL: Yes in the main top navigation bar on the website you can choose your language. On the mobile you can switch between languages too.
TLP: And how many languages do you have on the site currently?
AL: We offer 24 different languages.
TLP: In terms of genre you mentioned in your TOC session today that fan fiction, romance, vampires is working well for Wattpad. We wondered how many literary fiction writers are using Wattpad? Margaret Atwood is obviously the oft-cited example but our sense is that that literary writers often feel excluded from what is happening in the digital realm. Are you doing anything specifically to encourage this group of writers?
AL: The behaviour has changed over the years. Initially, maybe three years ago, most of our users were teenagers, but eventually they start in college, slowly move up the chain and become older adults.
TLP: Like Facebook.
AL: Exactly – the same is happening at Wattpad. We started with teenage girl users and some of the stories were interesting – not necessarily the boy meets girl type of story. We started to attract some older readers – and turn this started to attract older writers. This helped us to grow the user base and now I would say maybe 50% of our users are adults.
TLP: How do you moderate the Wattpad community?
AL: We put in a lot of effort in to ensure that in the community is safe. It’s very clear in our code of conduct when you sign up that we don’t want offensive behaviour. If you swear too much we can ban you – three strikes and you’re out. We also have our team of ambassadors. If you go to a user’s profile you would see the ambassador badge on their profile – and they help us to moderate content and behaviour. We put a lot of effort into making sure the community runs safely and efficiently. A lot of people are saying that Wattpad is one of the best managed, most important communities on the internet and there’s a reason for this.
TLP: You mentioned earlier a generation of writers who aren’t necessarily using Wattpad to move onto a traditional publisher. Is your sense that the younger generation – those teenage writers coming up now – actually don’t want to be traditionally published so long as they’re king of the hill in the Wattpad environment?
AL: That’s our sense. There was a survey a few years ago in the New York Times, stating that 81% of Americans want to write a book. Sometimes I use this analogy: most people would love to pay money to play golf but there are only so many Tiger Woods out there who can earn money from playing golf. I think writing is the same. For a lot of writers their motivation may not be making money. For most people the motivation is having someone to appreciate their creation. They care more about people showing appreciation of their work.
TLP: So what’s your business model? Currently there is no monetisation of the site…
Al: There’s no transaction, at the moment, because we are still in the early phase of the business, we are still building our user base. If we introduce a business model too early inevitably it would create friction in the entire process and slow us down.
SR: So in the long term have you got any ideas about monetisation … that is to say, we’re sure you have, but can you share any at this stage?
AL: We have a long list of different ideas. But I’m also a true believer that when you have let’s say 100 million users or 500 million users, there will be a million ways to make money. When I have 100 million users I can take a cut and maybe the broader ecosystem get benefit from that too. And we are starting to see some of that happening with people getting published traditionally. I do see the world becoming like a solar system where the centre of the universe is writers, readers and the social network – the community. Then there are stars or planets rotating round the centre of the universe and traditional publishing is one of those, options for television are another. There are many other planets that we haven’t discovered yet…
TLP: Interesting – with twitter it’s taken them… actually how long did it take them before they started trying to introduce sponsored tweets?
AL: They just started last year… when they had 200 million users…
TLP: So this is the normal process from a VC perspective… to wait?
AL: Yes that’s the way most social networks have grown. The early phase is focusing on the user base and once you have the critical mass you can produce different models.
TLP: On the creative process, is Wattpad actually improving the quality of writing? Currently it’s relying on peer-to peer review but do you ever try to bring in expertise from the outside in order to help writers?
AL: We don’t .
TLP: Deliberately democratic?
AL: On the Internet it’s all about giving up control. It’s counter-intuitive but if you give up control you actually create a more fluid and more dynamic community and I’m a strong believer in that. From an editorial perspective we let the community do this job because if you look at the amount of content we have (it’s close to 7 million stories, 1 million new stories published every month), it’s impossible for us to manually facilitate that process.
TLP: So our last question then – what do you think will happen to traditional publishers in the future?
AL: If you look at music, the music labels today still play a role in the entire ecosystem but their power has been diminishing over the years – I believe the same thing will happen in publishing as once the content, once the entire ecosystem is becoming more and more internet native, a lot of the work that was done by the publishers – using editing as an example, but other processes too, are no longer needed. So I think their role, their responsibility, in the ecosystem will diminish over time. This doesn’t mean that they will completely disappear. I still believe in that solar system model….
Wattpad will be at our Rich Mix Writing Platform day for writers at Rich Mix London on 8th November 2012 – MORE INFO