Chapter 76: The Internet Bubble

As a man, having made a fortune and with such a considerate girlfriend by his side, Wu Xiang felt his life was truly worthwhile—worth it for a lifetime. As for buying a bike, well, it was just a mountain bike, after all, and these days, the most reliable seemed to be the ones from Big G’s company—an island brand manufactured on the mainland, priced fairly, with decent specs. Other brands, like Daming or Trek, were just too expensive; he wasn’t that rich, and all he needed was a bit of cover, nothing more.

Of course, all this was information Wu Xiang had gathered from Brother Kun, who knew a bit about bikes—certainly more than Wu Xiang did. They ended up buying two, one each, and Wu Xiang didn’t skimp, spending over six thousand. Even so, his classmate Haiqing found it hard to believe—when had bicycles ever been so expensive?

After a spirited round of haggling, the bike shop owner, sweating profusely, ended up throwing in a pile of gear for free—cycling clothes, helmets, glasses, gloves, water bottle holders...

“Your wife really knows how to run things,” was the shopkeeper’s verdict.

Wu Xiang was beaming with satisfaction after hearing that.

Truthfully, Teacher Hai was missing the point—a three-thousand-yuan mountain bike was still just entry-level in professional terms, but for the two of them, it was more than enough.

Of course, they couldn’t ride back together; that would be too suspicious—a detail not to be overlooked.

Overall, Wu Xiang was elated. Lately, everything just seemed to be going his way—life was sweet.

But for some people, things weren’t going so smoothly.

“Take your time, what happened?... Something’s wrong again?” Wu Xiang answered a long-distance call from Pengcheng.

Ma Huateng had run into trouble again—this time not because someone was suing him, but because he was scared.

It was mid-March of 2000, a time when an extraordinary historical event unfolded: the bursting of the internet bubble. Once-mighty internet companies collapsed in an instant! The NASDAQ plummeted, dragging down the Hong Kong market, and even on Jade Channel, it wasn’t called a crash, but an explosion—a detonation more apt than any mere bubble.

With the NASDAQ and Hong Kong shares in turmoil, could the mainland market remain unscathed?

Stocks that once soared high crashed to the floor in a heartbeat; some truly worthless ones were delisted outright.

In such a time, countless IT elites lost everything, and companies once standing atop the clouds crumbled overnight. Ma Huateng, as the leader of a small IT company that hadn’t made a cent and was only burning money, felt utterly lost.

But if you’re lacking confidence, let me fill the gap for you!

According to the bet, “First Intimate Contact” should invest twelve million RMB in Penguin, but since the company’s value was now rock bottom—despite having lots of users, it hadn’t earned a penny—the valuation could only be based on its debts, and especially in this climate, Wu Xiang’s investment amounted to just ten million.

There was no rule about this; Penguin simply couldn’t justify the original twelve million, and even the ten million was more than it was worth. Still, both parties agreed by contract.

And, as stipulated, Wu Xiang couldn’t hold more than thirty percent of the shares, meaning the ten million brought excess premium. What to do?

Wu Xiang came up with a solution: stock options.

Put simply, Penguin wasn’t listed yet, but they could sign an agreement that, when it did go public, the excess money would be converted into secondary market shares. Of course, professionals would be needed to ensure this was all aboveboard. As for how many shares per yuan? Well, that would remain a secret for now.

The paperwork was no issue; professionals handled it. With Pengcheng so close to Hong Kong, Asia’s financial center, such talent was easy to find. Wu Xiang himself couldn’t be the legal representative, so he followed the example of many hidden tycoons—set up a company in the Cayman Islands, a tax haven, with all its attendant details.

Wu Xiang laid everything out: here’s the money, I support you, go forth boldly!

Ma Huateng was dumbfounded. He hadn’t expected this young filmmaker to have such faith in his company. In fact, Ma Huateng had initially planned to sell the company!

“I don’t want much, just a million!” That was Ma Huateng’s original intention, but Wu Xiang struck first, sticking to their bet and investing—leaving Ma Huateng no room to negotiate. How could he sell Penguin now? He wasn’t an idiot.

Wu Xiang had no idea Ma Huateng had been considering this. He simply saw it as a great opportunity to snag more Penguin shares—wouldn’t that make him even more impressive in the future?

And so, Wu Xiang missed the chance to own Penguin outright—a chance to become the richest man in the country!

The direct reason for this bizarre outcome was that Wu Xiang was a man reborn!

Because he had lived this life before, he knew Penguin’s future value; because he was reborn, he never imagined that Ma Huateng, future IT titan, might ever think of selling the goose that lays golden eggs—the mother Penguin.

It was inconceivable. Didn’t Ma Huateng know what his company would become? Didn’t he know how powerful it would be? Wu Xiang did.

This was a case of fixed thinking—even someone as clever as Wu Xiang couldn’t escape it at times.

He was just focused on getting more shares, never thinking he could own them all.

But then again, even if Wu Xiang stopped making films to run Penguin, he couldn’t do it—he wasn’t cut out for it, didn’t understand the technology. He only knew the trends; when it came to actual operations, he’d be like a blind man feeling an elephant.

If he couldn’t do it full-time, he certainly couldn’t do it while still making films. Giving up filmmaking? That would be almost impossible—he loved it to the core.

After all was settled, Ma Huateng truly admired Wu Xiang—admired this young director for keeping his word, for having more nerve than he did. But honestly, going public? At this stage, it sounded like pure fantasy.

“Director Wu, may I ask—why are you so keen to invest in my Penguin?”

Wu Xiang could finally be candid, “It’s simple. I believe in you—your future development will astonish everyone.”

A conventional answer. What Wu Xiang left unsaid was that they would become incredibly wealthy. Ma Huateng, too, kept something to himself: he’d been ready to sell the company.

Had they both spoken their minds, who knows who would have regretted it more.

“But we still haven’t found a way to make money,” Ma Huateng admitted. As partners now, there was no need for pretense.

“Make money? None of you can figure out how?” Wu Xiang’s expression dripped with mockery—but that was deliberate.

“Well, we...” Ma Huateng stammered. Penguin had started as free software, and its popularity was built on being free—so how to profit from it?

Bear in mind, those notorious so-called free online games hadn’t appeared yet.

“I know Penguin is free, and that’s exactly right. Old Ma, you must stick to that free principle. Only then can you build your foundation—your user base, your potential customers!” Wu Xiang was about to reveal his real thoughts.

“Potential customers?” Ma Huateng was intrigued.

“Exactly! You have a hundred thousand concurrent users now?” Wu Xiang asked.

“We hit that last month,” Ma Huateng nodded.

In history, Penguin first broke the hundred-thousand concurrent users mark in May, even making headlines in the People’s Daily, showing how significant the number was. But thanks to Wu Xiang’s film, that milestone came earlier.

“A hundred thousand isn’t nearly enough! You need more—more users! A million, ten million, even a hundred million! That’s—” Wu Xiang was about to paint a vision of the future, but Ma Huateng interrupted.

“No way! If I have a hundred million free users, just the servers alone would eat up your ten million investment!”

Wu Xiang was exasperated—“Shortsighted!”—but he was here to persuade, so he kept his tone civil.

“Don’t just see ‘free’—realize that these are all potential customers. Think about it: if you have ten million potential customers, can’t you do something with that? Even if only one in ten is willing to pay, that’s a million customers! If you earn just one yuan from each, what’s that add up to? What if you have a hundred million?”

“That makes sense,” Ma Huateng was coming around.

Seeing progress, Wu Xiang pressed on: “So go after more customers! This is a communication tool, right? What’s the hottest communication device now? Mobile phones, right? Go after them—Mobile, Unicom, Telecom, doesn’t matter. Just get Penguin onto their phones! Do whatever it takes!”

“Would they agree?”

“Pay them! If not, develop a mobile version of Penguin—let phone users install it themselves.”

“Would users install Penguin?”

“If it doesn’t use up their call minutes, do you think they would?”

“Right!” But after all that, it was still free—how to make money? “So, how do we earn revenue?”

Wu Xiang had thought this through. Back when they did viral marketing, Penguin couldn’t even display animated images, which got him thinking.

Wu Xiang recalled his own experience with Penguin and remembered their first real profit came from something called Penguin Show.

He didn’t know much about the technical side, but he did his research and found that Penguin Show was essentially a paper doll system.

So, Wu Xiang fired up his computer, pulled out his research, and found an introduction to the paper doll system.

This system already existed, widely used in online games—like the well-known “Ultima Online”—but mostly by Japanese or Korean companies.

“Avatar?” Ma Huateng blurted out upon seeing the info.

Because the paper doll system was called ‘avatar’ in English—a word not yet linked to that future blockbuster director.

“Exactly, Avatar!” Wu Xiang could barely contain his laughter—maybe Avatar wasn’t as clever as Afanti, but it would save a penguin.

The paper doll system would later become Penguin Show, letting users dress up their avatars and earning Penguin a fortune. Ma Huateng immediately saw its appeal—fun, stylish, and sure to attract young users.

But there was a problem: the technology was dominated by Japanese and Korean companies, which meant the intellectual property belonged to them. If they wanted to do it, there were only two options.

One, buy an existing system—costly, with technical limitations and ongoing maintenance fees.

Two, innovate from scratch, develop a completely new engine for a new paper doll system. That meant creating an entirely new engine.

The first was borrowing, the second was innovation. Which would Ma Huateng choose?

“If we develop it ourselves, we save money but lose time. If we buy, Korea is doable, but Japan is too expensive. I think buying from Korea is best—it saves time and is most cost-effective,” Ma Huateng decided.

But would Wu Xiang be satisfied with that answer?

Damn!