What Does Agora ($API) Do?

(An audio, live-discussion version of this post can be found on the Interconnected YouTube channel):

Agora is a platform-as-a-service (PaaS) company for developers to build apps with real-time audio and video capabilities. As a high-growth developer-focused firm, it’s a company I’ve been tracking for quite some time and briefly wrote about before.

Given its connection with Clubhouse (it’s built on Agora), the hottest social media app in Silicon Valley since perhaps Snapchat, Agora’s brand recognition may become more recognized and more people may want to know what it actually does. Thus, it more than deserves its own deep dive. (FYI, you can follow me on Chubhouse: @kevinsxu, for more Interconnected audio events there.)

Agora’s founding story, core technology, API product model, and global market reach are also representative of a larger trend, where platforms built for developers will thrive, because the number of developers worldwide will double in the next five years.

[For my updated thoughts on Agora, in light of new regulatory measures from both the US and China, please see "Revisiting Agora" published on August 1, 2021.]

Origin Story

Agora was founded in 2012. Its founder and CEO, Tony Zhao, has been a veteran technologist of the video and audio networking space for more than 15 years before starting Agora. He was a founding engineer at Webex and worked with Eric Yuan, who founded Zoom. Instead of building a better Webex like Zoom, Zhao wanted to build a better networking infrastructure for audio and video workloads, so more developers can build their own Zoom, Clubhouse, or virtual classrooms, concerts, doctor visits, and even places of worship -- all of which are now real use cases on Agora.

Side note: last year when there was a real possibility that WeChat might be banned in the US, I spent half a day spinning up an Agora instance that can be used for video chatting with family in China. While I didn’t end up needing to use my makeshift video chat tool, learning how to use Agora was easy and straightforward.

Zhao’s insight to enable “living real life online” (analogous to the Metaverse, except in a Metavase your identity is a fictional avatar) came from his time as the CTO of YY.com. He found his way to the CTO position by selling his first company to YY. While most of the US investment community probably have never heard of YY until Muddy Waters’ short report on the company published last November, it is one of the first livestreaming platforms to reach scale in China, if not the world. It is arguably one of the first instances, where people were “living real life online.” To fully appreciate YY’s cultural impact, I recommend watching the documentary “People’s Republic of Desire”. Understanding YY, and livestreaming in general, is also a crystal ball into how people will live post-COVID; livestream e-commerce is already broadcasting from China to Eastern Europe.

YY is not only culturally consequential, but also technologically important, because scaling a system to handle real-time livestream feeds concurrently with millions of users, while also enabling features like gifting or tipping with virtual goods or real money is no easy feat.

That’s what gave Zhao the inspiration (or maybe desire?) to build Agora -- solving the problems he had to solve for YY for developers everywhere.

(There’s not much biographical information on Zhao available in English. For a glimpse into his thinking and personality, I recommend listening to this GGV Capital’s podcast interview with him.)

Technology

So how is Agora’s technology an improvement?

Without getting too deep into the technical mumbo-jumbo, Agora provides a so-called Software-Defined Networking (SDN) solution. This approach improves the existing Internet infrastructure, because the Internet operates as a “best effort” network. It means pretty much what it sounds like. The Internet will try its best to deliver some data (a piece of file, text, audio, or video), but it can’t guarantee delivery nor that the quality of the data when delivered would be the same. You can see how this “best effort” approach would make the user experience of an audio or video chat terrible, especially during the 90s when Zhao was working on Webex and when most of the Internet was still dial-up.

This was a hard technical problem to tackle, because the data that flows through the Internet (technical term: data plane) and the network control of that data flow (technical term: control plane) used to be together. SDN is a game changer, because it separates them into two layers. Now engineers can use software to build algorithms to control the Internet’s data flow without touching the hardware that’s delivering all that data (e.g. servers, routers, and switches in cloud data centers). More control, more flexibility.

Agora is one of these SDNs, but built specifically to make sure audio and video data is delivered with good quality, no matter how good or bad your Internet situation is. So whether you are at home connected to strong wifi, jogging outside and connected to a 4G or LTE network, or traveling to a developing country where the network may be 3G or worse, the audio quality of listening to your favorite Clubhouse rooms should be about the same.

That’s really hard to do, but it looks like Agora’s technology is meeting this challenge and need. Clubhouse is gaining users not just in the US, but also Nigeria, Germany, India, and Australia, according to its release notes. Enabling Clubhouse’s global growth is possible, because Agora’s solution is distributed in more than 200 data centers on most continents, as this map from one of its whitepapers shows.

Developer-Focused API Model

We all know the best technology, unfortunately, rarely wins in the market without a good business model. While Agora’s technology looks pretty solid, I think it's developer-focused API model may be what sets it apart from the crowd.

As Zhao somewhat shyly admitted on the GGV podcast episode, in the early days of Agora, there was no revenue or business model. The company just opened its SDN via a layer of APIs for developers to use with 10,000 free minutes every month. If a developer’s usage exceeds that limit, then charge something. The goal is just to encourage developers to try its service. This deceptively nonchalant approach to making money happens to exhibit the two hallmarks of a well-designed, developer-friendly API product: self-service and pay-as-you-use, which I discussed in-depth in Part II of my Global by Nature series.

By supporting a wide range of developer platforms (Android, iOS, macOS, Web, Windows, Linux) and frameworks (Electron, Unity, Flutter, React Native, Cocos Creator), most developers can use Agora to hack on an idea -- say hosting a virtual audio dinner party -- for free.

Developers can self-service by building something functional on Agora just by reading the product’s documentation (like I did to build my video chat clone) without talking to any sales people. And no developer likes to talk to salespeople.

Because Agora is distributed via APIs - a very convenient distribution model of technology -- it can generate revenue on a pay-as-you-use basis. If your crazy virtual dinner party idea takes off like a rocketship (Clubhouse), pay Agora more money to support the growth. If the idea is a dud, no big cost and no big deal. In this model, the customer-vendor relationship is very aligned. Agora only succeeds if the developers succeed. That’s why all of Agora’s services are priced on a “per 1,000 minutes” basis. The prices only vary depending on how heavy and complex the workload is on Agora’s SDN, e.g. live video streaming is more expensive than live audio streaming.

It’s kind of like angel investing, except with APIs.

One last twist to Agora’s model is its Experience Level Agreement or XLA, announced in Q4 of 2020. It's a clever spin to Service Level Agreement or SLA, a concept that’s already familiar with most developers. A typical example of a SLA is when a cloud vendor, say AWS or Azure, guarantees uptime and availability up to a threshold, like 99.99% of the time per year. If that uptime was not delivered due to server outage or other problems, the cloud vendor would have to compensate its customers somehow. Some form of SLA exists between almost every kind of enterprise tech company and its customers.

In the world of delivering audio and video streaming, just keeping the service up and available may not be enough. The data could be technically delivered but the quality would be so bad the receiving end could barely hear or see it. So this XLA goes one step beyond a SLA to guarantee that services are both delivered and done at some level of guaranteed quality.

To be clear, this XLA is still in pilot phase, so who knows if it will end up helping or hurting Agora. The worst thing you can do in infrastructure technology is over-promise and under-deliver. But this move does communicate a high level of confidence Agora has in its own core product.

Clubhouse + Agora: a Classic “Global by Nature” Story

Having started in China, roughly 80% of Agora’s revenue comes from China, according to its most recent Q3 2020 earnings call. The Chinese Internet market also has more demanding workloads for real-time audio and video features, from livestream entertainment to online education. One of Agora’s largest customers in the education space, New Oriental, had to bring all class activities online during the height of the pandemic in China. Agora’s technology supported classrooms that had up to 20,000 students in one session, streaming and interacting to learn. In a way, China is a better market than the US to battle-test real-time infrastructure technology of all kinds.

Since an API is just a common way to get some resources or tools to build things, Agora’s APIs can be used by any developer in the world. That’s what gave birth to Clubhouse. When Clubhouse released its first version in March 2020, Agora was already an established, soon-to-be-public company (its IPO happened in June 2020). Without the flexibility, affordability, and maturity of Agora’s APIs, Clubhouse may not have been created or would at least have taken a much longer time to build.

Agora’s non-China revenue is already growing. Since the model is pay-as-you-use, Clubhouse will no doubt contribute to that growth as its usage skyrockets. It’s a case of Agora’s “angel investing” working out. It’s also a story we will see more in the future -- a battle-tested, well-designed, and well-documented API product from one market giving birth to the next rocket ship in a totally different market.

Agora is only eight years old -- a young company with many operational, strategic, and execution challenges ahead. I’ve personally had a subpar experience with its sales team (still waiting for a demo of its App Builder product). But overall, Agora’s core technology, model, and problem space are all promising. So full disclosure: I do own shares in Agora. Some of you may view this as a conflict of interest, which I fully understand and appreciate, but I also believe strongly in having “skin in the game.”

The word, Agora, is an ancient Greek term that refers to a public “gathering place”. The technology, Agora, of the 21st century has the potential to become a “gathering place” to build many “gathering places.”

Clubhouse is simply one among many.

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