The story of a tech giant overlooked by the West raises questions about streaming video, virtual currency, the digital divide, and how people use the Internet in other countries.

Ross Slutsky | Washington DC

310 million registered users. Up to 8.45 million people using the site concurrently. 421 billion minutes of voice transferred in 2011. The potential for one video to be seen by millions of viewers.

Impressive stats for a sophisticated, video-enabled digital social network. The question is: which site could it be? YouTube? Facebook? Skype? Google Hangouts?

Nope.

These are the accomplishments of Chinese social network YY.com, which takes virtual currency and streaming video to heights not yet reached by Western social networks. On YY, users can play games, talk to their friends, or use virtual coins for social deals à la Groupon.

But what really makes YY standout is the fact that it has a built in system that enables site users to earn real profit. Top karaoke singers regularly make $20,000 per month off of virtual gifts, with one college student reportedly earning an astonishing $188,000 per month by using the site to give Photoshop lessons. All by trading roses.

Here’s how it works. Say you have some type of talent; perhaps you’re a tech savvy musician or passable karaoke singer. To make money on YY, you create an artist account, put up some of your songs, and hopefully develop a following. After building up a respectable fan base, you could even schedule a live concert on the site, and for the price of one “virtual rose”, your followers would be able to watch the performance and interact with others attending the concert via video and chat. After the concert, you would be able to exchange your hard-earned virtual roses for real money.

While virtual tickets for streaming events sounds like a simple concept, there is no successful Western equivalent to YY. Western tech firms have been using virtual currency systems for years, but these systems have primarily been used in online games, rather than real world applications. The YY business model could revolutionize the way that Western musicians and educators distribute their content online.

An Unseen Giant?

While YY.com’s innovative business model is intriguing, their lack of exposure in the Western media is somewhat puzzling.

If recent reports are accurate, YY has just as many active users as Sina Weibo (China’s Twitter-like service) and has twice as many active users as RenRen (China’s equivalent of Facebook). However, while RenRen and Sina Weibo have been consistently covered in western media outlets, YY doesn’t even have a Wikipedia entry. Other than one Founders Stories video with TechCrunch and one article in Forbes a month ago, YY hasn’t gotten any mainstream media coverage in the West. How does a site that has more registered users than Google+ and Pinterest combined stay under the radar for this long?

While the answer to that question is not entirely clear, it appears that part of the explanation lies in China’s socioeconomic divide.

YY has many similarities with QQ, also known as “Tencent”, a popular Chinese social network/messaging service. Both sites target a broad, low income population within China, rather than the rising middle class. Sites which target China’s middle and upper-middle classes apparently get more press coverage than sites that focus on lower income demographics.

What will become of YY?

Unfortunately, in spite of its massive user base and innovative video functionality, YY’s future remains unclear. According to China watcher and Tea Leaf Nation blogger Elizabeth Carter:

“[F]rom discussions I’m reading, some netizens have said they doubt that YY can succeed, even if it has good ideas, because Tencent is so powerful. My take is that Tencent is like Google in this situation, in that Google can almost always either acquire such a competitor or develop its own version of whatever service is being provided to drive the less-powerful competitor out of the market.”

Furthermore, new video regulations from Chinese state administrators could further dampen the Chinese business environment and limit the scope of YY’s operations.

And what of its future elsewhere; say, in the US market?

Says Echo He, senior analyst with the Maxim Group, “If YY tried to expand into the US market, it would be unlikely to succeed. While it would be difficult for anyone to scale this business model, Western start-ups would have a better chance.”

Nonetheless, regardless of YY’s ultimate fate, the site’s innovations in video and virtual currency should serve as a wake up call to Silicon Valley, and leave us all to ponder one other question—if YY can grow as large as it has without the Western world taking notice, what else might the West be missing?

-Special thanks to Liz Carter, Jessica Stahl, FangFang Zhang, and Jessica Beinecke for making this article possible.