Bytedance in focus #2: Deep dive

In this issue, we’re digging a little deeper with a graphic look at some Bytedance business figures. Rumors have swirled since last fall that they’ll make their IPO debut this year. Here, we’ll paint a picture of what’s happening with the $75 billion startup.

These past two weeks have also seen Bytedance make major advances in livestreaming and gaming as it tries to meet its RMB 100 billion revenue goal for 2019. In addition, the company has also become increasingly entangled in a legal battle with Tencent over the use of user information across apps.

The upbeat

Highlights from recent headlines

In-app purchases promising, but not enough

• Sensor Tower: Since launching in 2016, TikTok and its Chinese version Douyin (iOS users only) have grossed an estimated total of $75 million through sales of in-app currency.

The virtual currency—which users can purchase and exchange for gifts for live-streamers—has not received much attention and promotion from Bytedance. The popularity of the two short video apps has been the main driver for the in-app currency sales. However, current revenue from virtual currency falls far short of the company’s alleged 2019 revenue goal of RMB 100 billion (around $14.9 billion).

Ongoing legal disputes

• TechNode: “Tianjin Binhai New Area People’s Court issued a ruling on Wednesday to stop Bytedance from using user information taken from WeChat and QQ on two of its apps.”

Bytedance and Tencent engaged in some acrimonious exchanges on Mar. 24, taking turns calling each other’s claims “nonsense.” After the ruling came out, Bytedance said it respected the ruling but had requested a review. Meanwhile, Tencent seems to have made progress in efforts to curb—if not stifle—the growth of Douyin and chat app Duoshan. Prior to this case, Tencent had banned links from Douyin and Duoshan on WeChat and stopped users from registering accounts for Bytedance apps using WeChat.

Another court ruling on a similar issue was made on Mar. 12, this time in favor of an individual plaintiff. However, Bytedance said that it had not been notified of the ruling and only learned about it in news reports.

• Techweb (our translation): “If the report from Yicai [the media outlet that broke the news] is real, then the court didn’t follow the basic legal procedures and jumped to the ruling. Normally, courts aren’t so rash,” said Li Liang, vice president of Bytedance.

Strategic shifts

• 36Kr: Bytedance has reportedly formed an internal platform to better support its livestreaming services, combining the technical and operations teams related to livestreaming from three of its short video apps: Douyin, Xigua, and Vigo.

The internal platform is referred to as the live-streaming “big platform,” or dazhongtai in Chinese. It’s intended to systematize repeatable processes—user acquisition, technical support, and commercialization—to boost efficiency. Its formation indicates that Bytedance is moving to treat livestreaming as a much more important business rather than an in-app feature. Prior to this, Bytedance already had a platform that aided user acquisition and retention on Douyin and news app Jinri Toutiao.

• Jiemian: Mokun Technology, a mobile game subsidiary of gaming firm 37 Interactive Entertainment, has updated its profile on the company database website Qichacha.com to list Bytedance as its holding company.

The acquisition marks Bytedance’s push into the gaming market and efforts to diversify its revenue streams. Just a month earlier, the company launched Douyin’s first mini-game and established a support system for mini-game developers. Although Mokun Technology is not a top-tier studio and saw lackluster growth in 2018, it could still help Bytedance cash in on traffic from Douyin, Jinri Toutiao, and other apps.

Internationally, Bytedance made a small acquisition of the assets from a defunct startup that made location-specific stickers for videos, TechCrunch reported. Bytedance confirmed that the features will be included in TikTok.

In-app changes

• iFeng.com: Douyin has launched a campaign to encourage uploads of videos about popular science, recruiting 13 renowned academics from the Chinese Academy of Sciences and Chinese Academy of Engineering as consultants.

While Douyin has been censured a number of times by Chinese state media for lowbrow content, the involvement of academics in the recent campaign indicates the platform’s intention of appeasing regulators and changing its image. It is unclear, however, whether the campaign will have a lasting effect.

Bytedance also redesigned the interface for mini-programs on its news aggregator app, Jinri Toutiao, KrAsia reported. The revamp has made the mini-program feature more similar to that of Tencent’s WeChat.

Bytedance by the numbers

1. Exponential growth

Since its first valuation at $10 million in July 2012, Bytedance’s value has soared. The last few years—marked by Douyin/TikTok’s launch (2016) and the acquisition of Musical.ly (2017)—have seen particularly rapid growth. Two rounds of Series D in 2017 nearly doubled the company’s valuation.

2. Fighting for attention

Bytedance’s first hit was news app Jinri Toutiao. Here’s how it compares to similar offerings in China’s mobile market, based on monthly active user (MAU) count in December 2018. (Do-it-all app WeChat, in comparison, reached over 1 billion MAU.)

3. Short video offering

In addition to its hit Douyin, Bytedance has also spun off Xigua Video and Vigo Video, whose small-town users overlap more with Toutiao’s audience. In terms of MAU in December 2018, here’s how they measured up to each other as well as competitor Kuaishou. Together, the four apps dominate the short video sphere in China.

4. Who Bytedance is suing

According to media reports, Bytedance and Tencent have a storied rivalry. That’s reflected in the more than 70 lawsuits that Beijing Bytedance Technology has filed from 2015 to 2019: Tencent has featured in 27% of cases brought against companies.

5. TikTok around the world

The top 10 countries where TikTok, the international version of Douyin, was downloaded last year are spread out geographically. India led with 119.3 million downloads, while no other country surpassed 40 million.