Chapter Seven: The Rise of the Penguin Empire

At the end of June, as soon as she got home and put down her things, Lin Zhi headed straight to her own company. The company was still in a period of rapid growth; if she hadn’t been worried about her son and their hard-earned money, she would never have left Shenwan for a whole week. This trip to Hangzhou had brought her not only leisure but also significant gains.

During her stay, she had a long conversation with Ma Chuan. With his silver tongue and unmatched eloquence, Ma’s father managed to completely persuade Lin Zhi, making her fully trust her son’s judgment. She came to understand what “Internet thinking” meant and began to entertain some new ideas about her company’s future.

“The Internet is the future!”

That’s what Gu Zhi said to her on the plane back as they chatted. After these transformative days, Gu Zhi was confident that, thanks to his mother’s wisdom, she now knew how to steer the company’s development.

In the days that followed, Lin Zhi was busy with company affairs, but Gu Wenzhi brought some new developments.

“Xiao Zhi, I’ve gotten in touch with that Ma Hua Teng fellow. He graduated from our school in 1993, was indeed my student, a rather handsome young man.”

It was evening. After finishing a meal of tomato and egg fried rice, Gu Wenzhi and Gu Zhi sat on the sofa, chatting. Lin Zhi was so busy that she rarely came home before nine at night; if not for the family car, Gu Wenzhi wouldn’t feel safe letting his wife come home alone so late.

Last December, they bought a Chinese-made sedan—a Hongqi New Star, produced in 1998 as a civilian vehicle. When buying the car, they factored in that Gu Wenzhi worked in the public sector and shouldn’t be too ostentatious; they also wanted to support domestic brands, so they chose Hongqi over German or Japanese cars.

Gu Zhi, still holding the half-eaten apple, quickly asked, “Well, have you set a meeting time with Brother Ma yet?”

He could hardly wait to meet Brother Ma—such a legendary figure was almost within reach, and he couldn’t help but feel excited.

Gu Wenzhi shook his head in response to Gu Zhi’s eager gaze, gently fanning himself with a small bamboo fan.

“I called him at the school. He’s busy with some project called O... O something IQ. It seems to be an instant messaging software, similar to MSN. He said he really doesn’t have time right now; every day he needs to handle massive amounts of data and can’t get away. He asked me to give you a number so you can chat with him online using his software.”

As he spoke, Gu Wenzhi handed Gu Zhi a small slip of paper. On it was an English nickname and a simple string of numbers: pony, 10001.

“‘Pony’ is his online name. You’ll need to download the software he made to chat with him. What was it called again? The name was quite a mouthful…”

“OICQ!” Gu Zhi said, clutching the slip in his palm, smiling at his father.

“That’s right! O-I-C-Q, that’s the name. Hey, Xiao Zhi, how did you know?”

“All the young people are using it now. I installed it on our computer a couple of days ago. Dad, you should try it too when you have time—don’t fall behind the times.”

Gu Wenzhi didn’t take his son’s words to heart and had no interest in trying OICQ. He was a staunch email user; when work could be handled by email, that’s what he used. He rarely touched MSN, let alone this new OICQ.

Gu Zhi, unable to wait any longer, rushed to his room and turned on the computer. He’d spent quite some time saving up his allowance to assemble this machine himself last year, at a total cost of around three thousand yuan. The boys in his high school class were all fond of tinkering with computers—those who were handy built their own, then compared performance with each other.

Around this time, home computers were becoming more common in many households, and internet cafes were popping up across China. Trendy students preferred computers over other hobbies.

Gu Zhi deftly opened the penguin icon on the desktop, added Brother Ma’s QQ number, and waited for him to accept. He hadn’t expected Brother Ma’s QQ number to really be 10001—the very first user of Penguin, as expected.

Brother Ma had founded Penguin in November 1998; in February 1999, OICQ was born, later renamed QQ. Originally, QQ was just a small program within Penguin; Brother Ma’s intention was simply to make a bit of money from it. However, QQ was so much more convenient than Microsoft’s MSN at the time that it quickly surpassed MSN, seizing a substantial market share.

When MSN entered China, it had done little research or preparation for localization. As instant messaging software, all contacts and chat records were stored on the computer where you logged in. If you switched computers, none of your account data would be accessible. In America, nearly every family had their own personal computer, so MSN’s approach worked there.

Microsoft, however, overlooked the fact that personal computers were only just becoming popular in China. Most people got online at work or in internet cafes; it was rare to use the same computer every time. In contrast, QQ stored all data on the server, so users could log in from any computer and instantly find their friends.

Thus, QQ defeated MSN head-on, not because of any supposed domestic protectionist policies as rumors claimed. The speed of QQ’s growth quickly surpassed Brother Ma’s expectations; by October 1999, QQ had reached over a million users. The massive number of users online at the same time overwhelmed their servers, and at that time, QQ brought no income to Penguin. Without funds to buy more servers, the company faced a severe financial crisis.

Strapped for cash, Brother Ma even considered selling QQ, with the asking price dropping from three million, to two million, and finally below his expectations at six hundred thousand. He approached Ding Sanshi of the pig farm, the computer giant FaceThink, and finally Guangzhou Telecom, which offered six hundred thousand. Yet he couldn’t bear to sell his brainchild, so he borrowed money while desperately seeking investors.

Eventually, the International Data Group (IDG) from America and Yingke Capital, owned by Li Zekai, son of Richard Li, each invested $1.1 million in exchange for a 20% stake in Penguin. By 2001, these two investors began wavering in their support for Penguin and decided to withdraw, selling their shares to the South African investment firm MIH. In the end, Penguin’s largest shareholder became MIH.

Sadly, when Penguin was just taking off, domestic investors generally didn’t think much of it, missing out on this golden opportunity and once again allowing a foreign company to acquire a significant stake in a future internet giant, a lamentable outcome.

Currently, Gu Zhi had already secured Alibaba; even if SoftBank invested later, he would remain Alibaba’s largest shareholder. As long as he succeeded in investing in Penguin, his early-stage capital deployment would be complete.

Brother Ma’s QQ avatar remained inactive—no response to Gu Zhi’s friend request. He wasn’t in a rush, simply added him again and sent a message stating his interest in the QQ project and his hope to meet and discuss it.

It was still only the end of June; QQ was growing rapidly, and Brother Ma had yet to face funding problems. By September or October, he wouldn’t be able to sit still. When the time came, Gu Zhi would appear ahead of IDG and Yingke Capital with funding in hand, and given his father’s teacher-student relationship with Brother Ma, the offer would be hard to refuse.

Compared to investing in Alibaba, investing early in Penguin would be much easier.

In a word—absolutely secure!

Gu Zhi had considered waiting a few more months, letting Brother Ma run out of options, then swooping in to buy QQ outright and make himself the future head of Penguin. But he quickly dismissed the idea.

First, it wasn’t his ambition. His goal was the entertainment industry; all this maneuvering in the capital market was ultimately to build a solid financial foundation for himself. Capital was a tool to serve him, not to tie him down.

If he took over Penguin himself, he’d have no time left to pursue his true goals. Forget about entering the entertainment industry; he’d be lucky to find time to watch a movie.

Second, he lacked confidence. Penguin was, after all, Brother Ma’s creation. Without him, it was uncertain whether Penguin could become China’s internet giant. Even with Gu Zhi’s grasp of the overall trends, it was impossible for Penguin to grow from a small enterprise into a behemoth without a core leadership team. Brother Ma and his founding team were crucial to Penguin’s rise; Gu Zhi alone could not achieve the same.

So he quickly abandoned the notion and waited quietly for Brother Ma’s reply.

Meanwhile, he kept himself busy. Opening Office Word 98 on his desktop, he pondered for a moment, then typed three words on the first line:

Wukong Chronicle.