Tencent aims to challenge Douyin with $1.5 billion investment in Kuaishou

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Tencent is in talks with short video app Kuaishou, known as Kwai in English, about investing between $1 billion and $1.5 billion in the platform. Details of a potential deal have already emerged on Chinese financial blog IPO Zaozhidao.

Why it matters: With its own short video platform Weishi underperforming and Douyin’s market share increasing, Tencent could leverage Kuaishou to compete more effectively with Bytedance.

  • Daily active users (DAU) on Weishi, known as WeSee in English, rose by one-quarter month on month to hit 7.5 million in June, though IPO Zaozhidao said the growth only came thanks to “the support of half of the company,” indicating that significant resources have been poured in.
  • Douyin’s DAU for June was 320 million.

Details: Tencent was not the only heavyweight investor to express an interest in joining the round. But the unnamed international player was put off due to the Tencent’s push for a significant stake in Kuaishou, between 30% and 40%, reported Beijing News.

  • Although negotiations are still ongoing, the discussions are unlikely to see the international player get involved.
  • The investment could push Kuaishou’s valuation to $26 billion.

Context: Over the weekend, Tencent removed restrictions on using Kuaishou within its WeChat app. Users can now share videos directly to WeChat’s ‘Top Stories’ feed, and their contacts can repost them at will.

  • The unblocking came just a month after Tencent allowed users to share Kuaishou links on WeChat Moments as embedded videos.
  • Tencent first invested $350 million in Kuaishou in March 2017, pushing its valuation to $2.5 billion.
  • Kuaishou’s DAU in May was 200 million and in June, founders Su Hua and Cheng Yixiao set a target of 300 million by January 2020.
  • Kuaishou is likely to gross more than RMB 40 billion revenue in 2019, an investor close to Kuaishou told IPO Zaozhidao.