Monday Tech Briefing: Banma, Qutoutiao, ByteDance

DEALS AND FUNDRAISING

1. Alibaba-Backed Smart Car Software Maker Raises $233 Million

What: Alibaba-backed Banma Network Technology Co. Ltd., which provides software that allows vehicles to offer smartphone-like services, has raised over 1.6 billion yuan ($233 million) in its first financing round. The fundraising was led by the state-backed SDIC Fund Management Company Ltd., along with Shang Qi Capital and Yunfeng Capital, a venture capital fund co-founded by Alibaba Group Holding Ltd. founder Jack Ma, Banma announced Thursday. The company said that the fundraising gave it a valuation of over $1 billion, but did not disclose the exact figure.

Big picture: Banma has been a major Chinese player in this space with its Alibaba-developed AliOS offering — unveiled late last year as a rebranded version of Alibaba’s original YunOS operating system. Other Chinese internet giants, including Tencent Holdings Ltd. and Baidu Inc., have also entered the auto industry. It’s still unclear if tech companies will be embraced by the industry. (Source: Caixin)

BIG TECH COMPANIES

2. Xiaomi Puts Younger Executives in Leadership Spots

What: Xiaomi, the world’s fourth-largest smartphone company, said Thursday it has appointed over 10 new general managers — most of whom were born after 1980 — to head its major business divisions as part of a broader organizational restructuring that has followed its public listing in July. This move comes in the wake of Alibaba founder Jack Ma’s Monday announcement that he will step down from his chairman’s role on Sept. 10, 2019.

Why it’s important: Many of China’s other top internet firms, including Alibaba, are closely linked with their founders, leading some to worry that their performance could suffer when those founders eventually leave. A recent scandal involving Alibaba’s chief rival, JD.com Inc., spotlighted the importance of that relationship, with the company’s shares falling 14% last week after news broke that founder and CEO Richard Liu is under investigation for rape allegations in the U.S. (Source: Caixin)

3. Meituan Prices Hong Kong IPO Near Top of Range

What: Meituan-Dianping, an on-demand services provider and China’s largest group buying platform, priced its Hong Kong initial public offering (IPO) target price at HK$69 ($8.79) a share Thursday, near the top of its estimated range of HK$62 to HK$70. The offering will raise about $4.2 billion in one of this year’s biggest internet IPOs in Hong Kong. If the offering’s underwriters exercise an overallotment option, the final fundraising figure could rise as high as $4.9 billion. The IPO would put Meituan’s value at $53.4 billion, much higher than during Meituan’s latest funding round less than a year ago.

Big picture: The Meituan IPO is being closely watched after Chinese cellphone-maker Xiaomi Corp.’s highly anticipated debut in July turned out to be lackluster. Unlike Xiaomi’s IPO, there hasn’t been much discussion of whether Meituan’s valuation is justified. Instead, observers are following closely the company’s business model. Once a group buying platform, Meituan has now expanded into a wide range of services from hotel and travel booking to ride-hailing, bike-sharing and retailing. (Source: Caixin)

4. News Aggregator Qutoutiao’s Share Price More Than Doubles in U.S. Debut

What: Shares in Chinese content and news aggregator Qutoutiao Inc. closed at $15.97 Friday, up 128% from their $7 initial offering price, after the company cut the size of its initial offering size due to concerns about investors’ recent tepid response toward Chinese stocks. The strong closing level came after the price had almost tripled earlier the day, with trading halted four times during early trading due to the stock’s surging price.

Why it’s important: Qutoutiao is the second Chinese company to list in the U.S. this week. The company’s initial public offering price was just 1 cent above the bottom of its $6.25-to-$8.25 target price range amid a growing wave of investor skepticism over new listings by money-losing Chinese startups.

Big picture: Founded in June 2016, Shanghai-based Qutoutiao aggregates news and short videos from professional media and freelancers and then delivers the content to users using AI-based curation. Qutoutiao said it now has an average of 17.1 million daily active users, mostly based in smaller Chinese cities, who spent an average of one hour each day on its mobile app. It is China’s third-largest news platform, trailing only Beijing ByteDance’s Jinri Toutiao and Tencent News, according to the chief strategy officer of the company. (Source: Caixin)

5. ByteDance to Enter China’s Long-form Streaming Video Market

What: “Beijing ByteDance Technology, operator of popular news aggregator Jinri Toutiao and short video app Tik Tok, plans to bring long-form content in China’s streaming video market and compete head-to-head with industry leaders iQiyi, Tencent Video and Youku Tudou,” SCMP reports.

“The fast-growing start-up is developing new film and television drama segments for its Xigua Video app, which will be launched either at the end of this year or early next year, according to people familiar with the initiative. It plans to buy the exclusive digital rights for selected films and TV shows, as well as finance the development of a number of original film and TV projects and was looking at a paid subscription business model.”

Why it’s important: “The plan to build a streaming video service with long-form content has come at a time when ByteDance is said to be looking to raise as much as US$3 billion in a new funding round. ByteDance’s foray into China’s online streaming video market would see the start-up compete in a market dominated by three major players — iQiyi, Tencent Video and Youku Tudou,” SCMP says.

Big picture: In a shift from the era of pirated downloads, Chinese consumers are increasingly paying for online video content. “That shift, driven by a demographic change with the coming of age of the more online-savvy millennial generation, has contributed to the explosive growth in paying subscribers, with iResearch projecting the market will triple in size to 73 billion yuan in the five years through 2022.” (Source: SCMP)

PRODUCTS

6. iQiyi to Capture a Slice of China’s Silver Economy with Short Video App Jin Shi

What: iQiyi, China’s alternative to Netflix, is soft-launching a new short video app called Jin Shi aiming at drawing the country’s senior citizens to the live-streaming boom. “The app resembles Beijing Bytedance’s popular short video app Tik Tok although the content is very different — featuring short clips with advice on how to deal with difficult family relationships and how to eat a healthy diet. Users can also switch to audio only,” SCMP reports.

Why it’s important: About 36 million among the country’s online population are aged 60 or above. “Consumption by the country's elderly is expected to surge to 106 trillion yuan (US$15.5 trillion) in 2050 from 4 trillion yuan in 2014, according to a report by the China Research Centre on Ageing, offering age-savvy companies a host of business opportunities.” (Source: SCMP)

Compiled by Isabelle Li