How a Chinese tech company conquered markets overseas

He created a rare Chinese tech company that generates more revenue abroad than in its domestic market. In order to explain how he did it, Fu Sheng, founder of Cheetah Mobile, reaches for an analogy from communist military history.

When the communists led by Mao Zedong were fighting Chiang Kai-shek’s nationalists in 1948, Mao ordered an assault on the northeastern city of Jinzhou. Taking the city led to the communist’s national victory a year later.

For Mr. Fu, a softly spoken 40-year-old former software designer who has led Cheetah since its 2010 foundation, the battle was a “breakthrough point,” which he employs to illustrate how to focus a company’s energy. “Clean Master was our Jinzhou,” he says.

Clean Master, an app that removes junk files from phones, was the secret to Mr. Fu’s overseas success. Utility apps that make phones run faster, avoid viruses and reduce clutter, had been neglected by US and European developers — so when Clean Master launched in the US in 2012 it became the sixth most-downloaded app on Google’s store the following year. About 450 million people use the company’s free-to-download apps outside China, most of them in the US.

“In China there are more alternatives. The core was that the competition was less intense,” he says.

Mr. Fu says the chief executive’s role is to set a clear goal. In Cheetah’s case the target was globalization. “My aim was to have a worldwide number one software product,” he says.

Overseas users generated 67% of Cheetah’s Rmb4.97 billion ($731 million) revenues last year. That achievement sets the company, valued at $1.3 billion on the New York Stock Exchange, apart from Chinese tech giants such as Tencent, Alibaba and Baidu, for whom overseas income is a small proportion of revenues.

Cheetah’s strategy has been mimicked by a wave of Chinese software companies. Chinese apps generated about $370 million outside the country in the first quarter of this year, according to consultancy Sensor Tower.

Several such apps have been backed by Mr. Fu. Cheetah was an early investor in Musical.ly, a lipsyncing app developed in Shanghai that gained 60 million users in the US and Europe, mostly by appealing to teenagers. Cheetah sold its stake to Chinese group Bytedance last year in a deal that valued close to $1 billion, netting $120 million.

Mr. Fu’s push overseas came after a difficult period during which Cheetah was still focused on making apps for the Chinese market. Then in 2009, he visited Silicon Valley.

The main difference he observed between US and Chinese tech companies was strategy and ambition, rather than technical ability, he concluded. “They are not too far ahead, especially when it comes to Android,” he says.

Mr. Fu has a background working for China’s biggest anti-virus software company Qihoo360, but launched a junk removal app as the company’s first international offering after a member of Cheetah’s development team found more searches on Google’s store for “cleaning” than “security.”

The company conquered foreign markets with hardly any staff overseas. Mr. Fu, who speaks English but is not fluent, says he hired students from a Beijing university to help translate the Chinese product, and comb through feedback left on Google’s store by users to guide improvements.

Cheetah’s huge overseas user base prompted excitement around its IPO in New York in 2014. But although most of its customers were outside China at the time of listing, they accounted for less than 15% of company revenues.

The company focused on increasing advertising aimed at overseas users on its apps working with platforms such as Google and Facebook — and overseas revenues equalled domestic revenues for the first time in 2015. Markets rewarded the company by doubling its share price.

But Cheetah has since struggled to increase revenue, with top-line growth slowing to just 6% last year, even as its profit margin grew to nearly 70%, shares slumped and are currently down a third from the original IPO price.

The company has been hampered by limitations to the amount of time users spend on utility apps compared with those which deliver content such as music and films, analysts say. Mr. Fu says gaining new users is becoming harder, while competition overseas has become more intense.

Facebook in 2015 adjusted its algorithms to help advertisers know how ads are performing on third-party apps such as Cheetah’s — a move that hit the company’s attractiveness to advertisers. Last year, Google tightened restrictions on intrusive advertising, such as on user’s locked phone screens.