"Good morning, President Chen!" Li Wanqiang said with a smile, walking over to greet Chen Yansen as he entered.
"President Li, sorry to have kept you waiting. Should we discuss the partnership first, or would you like to start with the tour?" Chen Yansen asked, stepping forward to exchange pleasantries.
"Let’s settle the ga co-publishing matter first. President Lei is in a eting and will be here later," Li Wanqiang explained.
"Alright," Chen Yansen replied with a nod.
They stepped into an elevator, which took them directly to the Market Departnt’s floor.
Afterward, they went into Li Wanqiang’s office. He had his assistant call over an employee responsible for channel partnerships, who then handed Song Yuncheng the information on Xiaomi’s revenue sharing model for third-party promotional channels.
Xiaomi was acting as the publisher. The docunts listed hundreds of popular gas, each one negotiated individually by the Market Departnt. For so gas, the revenue share could reach 70-80% of the recharge amount, with a commission of 5-12 yuan for every new registered user acquired.
Of course, FoxTao wouldn’t get a rate that high, but Li Wanqiang’s offer of a 40-50% base rate showed just how much he valued them as a channel.
The settlent period was semi-monthly, which was a very generous offer.
Chen Yansen didn’t dwell on the revenue split. With a subtle nod to Song Yuncheng, he had the digital contract sent to their legal departnt for review.
If there were no issues, they would sign it that very day.
"The R&D center is upstairs. Shall I show you around, President Chen?" Li Wanqiang proposed.
"Then I’d appreciate that, President Li," Chen Yansen said with a smile, walking with Li Wanqiang toward the elevators.
Song Yuncheng stayed behind to manage the follow-up process for the partnership.
DING!
The elevator doors opened!
An office area of several hundred square ters appeared before them. Li Wanqiang pointed ahead and said, "This is the MIUI developnt team. We update the system every week based on user feedback."
Chen Yansen only knew the basics of developnt, but he understood that to develop a mobile phone OS, you had to know what kind of talent to recruit.
He was incredibly detailed in his questions on this topic. Whenever Li Wanqiang introduced a core mber of the R&D team, Chen Yansen would ask what programming languages and system fraworks were required for their job.
He even managed to find out which programming languages and developnt tools they used.
Li Wanqiang looked baffled. He couldn’t understand why an entrepreneur in the e-comrce referral space like Chen Yansen would be asking such technical questions.
If Lei Yijun had been there, he would have recognized the look on Chen Yansen’s face—it was the sa one he’d worn back when he visited izu.
Li Wanqiang mulled it over for a mont, but ultimately just chalked it up to Chen Yansen’s curiosity about technology and didn’t give it any more thought.
Next, he showed him the industrial design sketches for the Xiaomi Mobile Phone, but the only information that could be gleaned was about its appearance, materials, and color.
At this stage, Xiaomi was still consolidating its supply chain. Core components like the screen, processor, and battery were mostly undecided, so there was very little information for Chen Yansen to uncover.
However, the visit gave Chen Yansen a clear picture of what it took to build a phone. From industrial, structural, and hardware design to software developnt, supply chain managent, and finally, establishing sales channels—the process was incredibly complex.
Sales was Chen Yansen’s forte, so he wasn’t too worried about that part.
But in terms of technology, Li Wanqiang was the real expert. From software to hardware, Chen Yansen listened attentively and morized the gist of it.
He ca to a conclusion: if he wanted to make a phone himself, he would have to poach an experienced expert from the industry to have any chance of success.
You needed reliable people in charge of both product and procurent for the project to advance smoothly.
Otherwise, if the supply chain ran into problems, the whole project would fall through.
Lei Yijun didn’t arrive until eleven, accompanied by a slim, middle-aged man wearing glasses. Through introductions, Chen Yansen learned this was Xiaomi’s co-founder, Lin Bing.
The group found a eting room and sat down to talk in detail.
At one point, Lei Yijun made a point of ntioning that he wanted to hold a brand-exclusive event on FoxTao once the Xiaomi Mobile Phone was released.
"Looks like Yijun lacks confidence in his own product."
Chen Yansen thought to himself, finding it rather amusing.
After all, once the Xiaomi Mobile Phone launched, it would rack up 300,000 pre-orders in just 34 hours, far exceeding Xiaomi’s production capacity at the ti.
"President Lei, why don’t we sign the contract first?" Chen Yansen suggested with a smile.
’The profit margin on phones is limited, but it’ll boost FoxTao’s revenue, which will be a great help in our next valuation round.’
"But we don’t even have an engineering prototype for the Xiaomi Mobile Phone yet," Lei Yijun said with an abashed smile, his heart ward by Chen Yansen’s enthusiasm.
"Don’t worry about it. I trust you, President Lei," Chen Yansen said, waving a hand dismissively and not giving Lei Yijun a chance to hesitate.
When Chen Yansen left Xiaomi, he had a 10 million yuan brand promotion contract in hand. Four million of it was for hard advertising placents, and the other six million was for handset commissions. The contract stipulated that Xiaomi had to supply an inventory of 100,000 units within six months.
Lei Yijun did a quick calculation and realized the return on investnt was at least twenty-fold.
This made him feel a bit guilty, as if he were taking advantage of Chen Yansen. As he walked Chen Yansen to the door, he kept calling him "younger brother."
"If Yijun can’t deliver the phones when the ti cos, I’ll let the contract do the talking. I wonder if he’ll turn on then."
Chen Yansen’s eyes narrowed as he waved goodbye to Lei Yijun.
After the two of them left, sothing occurred to Li Wanqiang. He lowered his voice and reminded Lei Yijun, "President Lei, when I showed Chen Yansen around the R&D center this morning, his questions were extrely detailed."
"You think he’s going to build his own phone?" Lei Yijun retorted, clearly not taking the matter seriously.
The mobile phone industry was a world away from referral e-comrce. Phone manufacturing was a capital-intensive, technology-heavy business, whereas referral e-comrce was an asset-light model.
The industrial design and supply chain integration alone typically took a full year.
For an outsider like Chen Yansen, who had no technical background or supply chain connections, building a smartphone was out of the question. He’d have a hard ti building even a cheap knockoff with tacky LED lights.
The year was 2011. China’s mobile phone market was in an era where knockoffs and brand-na devices coexisted.
Chen Yansen recalled the brands of that ti: Celestial Language, Boguide, Newman, Da Kele, Da Boluo, and Doov. Even the "God of Songs," Jacky Cheung, had endorsed a dostic phone called Gaoxinqi.
But very few of them would ultimately survive. Most ended up in the gutters of ti, fading into complete obscurity.
Chen Yansen sat in the car, pondering Xiaomi’s path to success. Unlike other phone manufacturers, Lei Yijun never intended to profit from hardware from the very beginning.
He focused his profit strategy on three areas: pre-installed apps on new phones, the app store, and ga co-publishing—making money from the software side.
Take pre-installed apps, for instance. The price for each was between 0.5 and 2 yuan. A phone with a few dozen apps could earn 20-50 yuan.
The revenue from app store ads and revenue sharing was also not to be underestimated.
Ga co-publishing was even more lucrative; the cut for so gas reached as high as 70-80%.
For a smartphone that sold for 2,000 yuan, assuming a three-year lifespan, the software revenue alone could exceed 200 yuan. It was a much easier way to make a profit than hardware.
After all, custors notice when a phone is too expensive.
"A damn sha I’m broke!"
After thinking for a long while, Chen Yansen sighed and muttered with self-mockery.
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