‘They’re Everywhere’: China’s ByteDance Serenades With Addictive Content
Move over, Baidu. That could well be the message playing soon if the hot startup known as ByteDance Ltd. gets the valuation it’s seeking in a new funding round that’s all the talk in Chinese cyberspace. More precisely, the $75 billion valuation ByteDance is seeking would put it ahead of Baidu as China’s third biggest internet company, behind only the much larger Alibaba Group Holding Ltd. and Tencent Holdings Ltd.
Truth be told, nobody on China’s internet wants to talk too much about valuation these days, except perhaps a privately-held company like ByteDance. That’s because the bloodbath taking place on China’s stock markets this year has infected most of the nation’s offshore-traded companies as well, including the largest internet names that are all traded in New York and Hong Kong.
Alibaba and Tencent are down 20% and 29%, respectively, over just the last five or six weeks, collectively wiping out more than $200 billion in market value – more than the size of many small countries annual GDPs. Even after those sell-offs, the pair of giants is each worth well over $300 billion, meaning Bytedance won’t challenge them in the immediate future. But the way this company is growing, it could only be a matter of time.
By comparison, Baidu has been stuck at the distant No. 3 position on China’s most valuable internet company list for quite some time. The recent sell-off has seen Baidu shares lose about 15% of their value over the last five or six weeks, making the company worth about $66 billion. That would leave more than enough room for ByteDance to sidle in as the new No. 3 if it achieves its $75 billion watermark.
The latest reports say ByteDance, which was founded just six years ago, is close to closing a new $3 billion funding round that could give it the coveted $75 billion valuation. The latest round would be mostly underwritten by foreign investors like SoftBank, KKR and General Atlantic, as ByteDance looks for partner to help taking its act into overseas markets that until now have been mostly inaccessible to China’s current internet leaders.
All that said, let’s take a closer look at this company that has yet to dance its way into most Westerners’ consciousness, even as it’s quietly wormed its way into the daily routines of many of China’s more than 800 million web surfers. One of my contacts who follows the Chinese internet summed up the situation quite nicely with a single thought: “They’re everywhere.”
That may sound like an exaggeration, and perhaps more apt for describing something sinister like a locust plague than the latest hot internet company. But the truth is that ByteDance really is just about anywhere there’s an internet connection, thanks to its diverse range of news and entertainment offerings targeting people who like to fill their every idle second gazing at a smartphone screen.
The company was founded in 2012 by a low-key-looking, bespectacled 35-year-old man named Zhang Yiming. It first burst onto the China internet scene not long afterwards with Jinri Toutiao, its signature news aggregating app whose name translates to “Today’s Headlines”. That app now has more than 200 million users, including many of my younger local friends.
The ‘secret sauce’ that Zhang discovered early, and which is a pillar of many of his later offerings, is algorithms that can quickly determine a user’s preferences, and use those to push relevant content in that person’s direction. ByteDance uses a similar formula behind one of its most successful newer ventures, a short video service called Tik Tok, or Douyin, launched just two years ago.
One of my earlier impressions of Tik Tok comes from a day at work earlier this year when I discovered one of my younger colleagues napping at her desk. After disturbing her from the rest, she explained she was tired because she had discovered Douyin the previous evening and stayed up late into the night watching short video after short video, as the service’s fast-learning algorithms quickly got her addicted to its user-generated offerings.
The fact that it offers mostly third-party content on its platforms is probably the company’s biggest Achilles Heel. In its early days, I remember Jinri Toutiao getting constantly sued by just about every major news outlet here in China, including many that were guilty of similar transgressions. Some of my industry friends said the contradictory behavior stemmed from a couple of elements: envy at Toutiao’s rapid success, and also resentment at the company’s parasitic nature because it sucked up other media’s content without offering any of its own in return.
I suspect that copyright issues could ultimately be an even bigger Achilles Heel for ByteDance as it tries to take its act abroad, since Western content owners are a far more litigious bunch than their Chinese counterparts. But that said, the broader media world in general does seem to be moving towards a new landscape where everyone sells their content to everyone else, and the most successful companies are platform operators like Toutiao that can find the best way to give users what they want, when they want it.
I haven’t given many of my own views on ByteDance up to this point, so thought I’d close on a more personal note with some of that. I don’t often get caught up in hype, but I have to say that in ByteDance I do see a bit of a rare Chinese Facebook in the making. That’s because this seems to be one of the few times I’ve seen a Chinese company come out with something that wasn’t just a knockoff of a Western concept, even though obviously there are Western-developed content-sharing platforms. But ByteDance seems to be executing particularly well across a wide range of media in its specialty zone, leading me to speculate that perhaps Zhang Yiming could become China’s next equivalent of someone like Facebook founder Mark Zuckerberg.
Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com
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