Caixin
Aug 05, 2021 06:05 AM
BUSINESS

Kuaishou Makes U.S. Market Retreat by Shutting Down Rival App to TikTok

Kuaishou claims 1 billion monthly active users globally, compared with ByteDance’s 1.9 billion.
Kuaishou claims 1 billion monthly active users globally, compared with ByteDance’s 1.9 billion.

Kuaishou Technology Co. Ltd. plans to shut down its overseas app Zynn later this month, ending an attempt to challenge rival ByteDance Ltd.’s dominant TikTok short-video app in the U.S., the Chinese company said Wednesday.

Kuaishou told Zynn users that it would stopped providing services Aug. 20 and all users’ data will be deleted within 45 days, the company confirmed with Caixin, without citing a reason.

At the same time, Kuaishou is doubling down on other efforts to expand outside China to better compete with TikTok, which has maintained its crown as the world’s most-downloaded nongame app for the past year despite a growing backlash in some international markets. Kuaishou said it plans to spend $1 billion to increase its overseas user base this year.

Aside from Zynn, Kuaishou has Kwai, which gained some popularity among Russian teenagers and is now targeting Latin America, as well as SnackVideo in Southeast Asia. Other international products include social media site Lolita, video editing toolkit MVMaster, and short video communities UVideo and VStatus. Kuaishou told Caixin that there’s no change to its overseas strategy.

Zynn, released in May last year in the U.S. and Canada, has similar features to those of TikTok, but it offers rewards to users for watching videos or referring friends to download the app.

With the help of cash rewards, Zynn quickly rocketed into the top three most-downloaded apps in Apple’s App Store. In June, Google removed the app from its Play Store amid accusations of plagiarism. A number of high-profile TikTok users alleged that their content was uploaded to Zynn without consent. Zynn was later removed from Apple’s App Store also for plagiarism.

Meanwhile, Zynn came under attack from U.S. Senator Josh Hawley, who introduced a bill to ban TikTok on government devices. Hawley sent a letter in June 2020 to the Federal Trade Commission asking for an investigation into Zynn on national security grounds. In the letter, the Missouri Republican raised concerns that the app’s rapid rise might drive competitors out of the market, that Kuaishou has ties to the Chinese Communist Party and that it engaged in promoting propaganda and suppressing criticism.

The app returned to Google’s Play Store and Apple’s App Store in July last year after changing its reward system. Instead of offering cash to users, now the app offers “Zynncheers” points. But apparently users are not happy with the change.

Zynn dropped out of the 300 most-downloaded apps in both stores, according to Sensor Tower. In the first half of this year, Zynn had fewer than half a million downloads, compared with the 455 million installs TikTok recorded globally, according to Bloomberg based on data from Sensor Tower.

Zynn’s official website is no longer accessible. Its download page on Google Play shows it is still available, but the app is no longer on Apple’s App Store. Zynn’s Twitter account has not been updated since Jan. 17.

Kuaishou’s overseas monthly active users exceeded 100 million in the first quarter and rose to 150 million in April, compared with TikTok’s more than 200 million monthly active users in the U.S. and Europe.

To compete with TikTok, Kuaishou has invested heavily in overseas operations, and even sought to poach ByteDance employees by offering to double salaries, a member of ByteDance’s overseas team told Caixin.

Kuaishou’s global team has also experienced frequent personnel changes. Last August, Kuaishou hired Tony Qiu, the head of Chinese ride-hailing giant Didi’s international operations, to lead its global business team.

Kuaishou won the broadcast rights to the Tokyo 2020 Olympics and Beijing 2022 Winter Olympic. At a press conference in June announcing the Olympics deal, Kuaishou CEO Su Hua, a former Google employee, said Kuaishou amassed 1 billion monthly active users globally, compared with ByteDance’s 1.9 billion.

Kuaishou completed a $5.4 billion initial public offering in February in Hong Kong, the world’s biggest internet IPO since the $8.1 billion U.S. share sale of Uber Technologies Inc. in May 2019.

Kuaishou also faces tougher antitrust scrutiny at home. It was among 34 leading Chinese internet businesses ordered to comply with anti-monopoly rules in April, and the company was recently rapped by China’s cyberspace regulator for its data-collection policies.

Kuaishou reported a 37% gain in revenue to 17 billion yuan ($2.65 billion) for the three months ended in March, compared with a projection of 16.9 billion yuan by China Renaissance. The net loss widened to 57.8 billion yuan from a loss of 30.5 billion yuan a year earlier as sales and marketing expenses surged to roughly 69% of revenue.

The company’s Hong Kong-listed shares closed at HK$105.2 ($13.53) Wednesday, down 8.4% from the IPO price.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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