Everyone’s talking about Tiktok, the hot short video app that has been thrust into the global spotlight on the back of an emerging US-China cold war. But outside China, few people know about Bytedance, the elusive tech unicorn behind one of the world’s biggest social media smash hits.
The company has always been reclusive. When employees run into journalists, they joke about being seen with dangerous contacts. Zhang Yiming, the company founder and CEO, rarely speaks to media directly. The mystery surrounding the world’s most valuable tech startup spurred TechNode to take a deep dive into the company last year, the results of which we published monthly in the form of our first In Focus newsletter series. Many of these articles were written by Bailey Hu, who left TechNode in May 2019. We are offering up our research in this story, with some updates.
While most international users know Bytedance as the company behind Tiktok, it isn’t just the maker of a single successful platform. In fact, the company has a lineup of virally popular apps in China, its home market. These include news aggregator Jinri Toutiao; Douyin, the domestic version of Tiktok; and Xigua Video, another video-sharing platform. In overseas markets, it operated Vigo and Topbuzz, the international versions of Xigua Video and Jinri Toutiao, respectively, both of which Bytedance shut down because of poor performance.
These stumbles have done little to slow the Beijing-based company. It is considered the world’s most valuable tech startup, according to CB Insights. The company was valued at as much as $140 billion earlier this year when state-owned carrier China Mobile, one of its shareholders, sold a small stake in a private deal, according to Reuters.
Here are eight things to know about Bytedance:
1. It’s huge
In March, Bytedance founder Zhang Yiming revealed in an internal letter to employees that the company’s global headcount had exceeded 60,000, and the number is expected to reach 100,000 this year.
Ad sales and content monitoring staff each make up a quarter of Bytedance’s workforce, according to a report by The Information in April 2019.
Bytedance now employs more people than Facebook, analyst Liu Jiehao of research group Iimedia pointed out, but average productivity still lags well behind the US titan. Facebook booked $71 billion in earnings in 2019, while Bytedance reportedly made $17 billion in revenue in the same period.
Tencent, which employed 54,000 people as of December 2018, fell between the two in terms of 2019 revenue. The company reported a total annual revenue of RMB 377 billion (around $48.5 billion) in 2019.
2. It’s all about an algorithm
Providing online news and content for millions of users in China, Bytedance’s flagship app Jinri Toutiao (which translates into “Today’s Headlines”) doesn’t require an editor-in-chief to lead its content strategy like other news platforms do, according to company founder and CEO Zhang Yiming.
The app’s editorial staff is a set of artificial intelligence and deep-learning algorithms that deliver personalized content to its users.
Like other flagship Bytedance apps, Jinri Toutiao shows users an endless feed of posts and videos recommended by its algorithms, all based on the user’s age, sex, location, and personal preferences.
As you read posts recommended by the platform, it learns what you like and don’t like by tracking your behavior: what you click to read, what you choose to dismiss, how long you spend on an article, which stories you comment on, and which stories you choose to share. The behavior recorded by the system then spits out recommendations to populate your feed. The more time you spend in the app, the more it learns about you—and the more it learns about you, the more time it can get you to spend in the app.
The company has replicated the recommendation system with other products such as Douyin and Tiktok. Its success speaks for itself.
According to a person who is familiar with Bytedance’s recommendation system, it was initially based on Google’s Wide & Deep Learning, open-source models that combine the strengths of the wide linear model and the deep neural network, two types of artificial neural networks that can perform tasks usually carried out by a human brain.
The Wide & Deep Learning system is used for recommendations on Google Play, the search engine’s popular Android mobile app store with more than 1 billion active users, and has led to “significant improvement” in app downloads, according to a paper by a group of Google researchers.
“The recommendation system is now Bytedance’s core technology that underpins everything from its news app to its short-video apps,” said the source.
In January 2018, Bytedance held a meeting to disclose how the algorithms work. The move was in response to pressure from internet watchdogs and state media, which had criticized the Jinri Toutiao app for spreading pornography and allowing machines to make content decisions (in Chinese).
At the meeting, Bytedance’s algorithm architect Cao Huanhuan explained the principles of the recommendation system used by Jinri Toutiao and many of the company’s other apps. The full text of his speech can be found here (in Chinese).
The company has moved to open up access to its recommendation algorithm to external companies in recent years after the success of Douyin and Jinri Toutiao. In September, Bytedance started to package its recommendation algorithm as a solution, known as Byteair, to its different lines of products and external partners.
3. It runs a lot of apps besides Tiktok
On its English-language website, Bytedance lists a modest ecosystem seven apps worldwide. The reality is more like a jungle, populated with hybrids, close cousins, and the occasional evolutionary dead end.
Tiktok and Douyin are the international and Chinese versions, respectively, of Bytedance’s hottest app. They don’t share any content, their features vary, and each app has different privacy policies in accordance with local regulations. Huoshan and the now-shuttered Vigo, similarly, had been the global and domestic versions of another short-video offering.
Many of Bytedance’s apps are free, and most have options for in-app purchases on Apple’s China App Store. In addition to those listed, relatively new launches like Tomato Novel are not only entirely free to use, but also offer cash incentives in return for user activity, as TechNode previously reported.
4. Tiktok vs. Douyin—the same, but different
Douyin and Tiktok are unquestionably Bytedance’s biggest successes. The two apps are often referred to as versions of one another—Douyin is the domestic Chinese version; Tiktok is the global version.
Bytedance once presented Tiktok and Douyin as two versions of the same product, at least until Tiktok began attracting scrutiny overseas because of its Chinese ties. The two apps share the same logo, layout, and even some stickers and filters, but they are strictly segregated in accounts and content. This means it’s impossible for a Tiktok user to log in to the Douyin app using their Tiktok credentials, and vice versa.
Now, Bytedance is trying hard to shake off Tiktok’s ties to China. It named an American CEO in May and reportedly cut off Chinese employee access to Tiktok in June. But the efforts didn’t pay off. India banned the app in June after a border clash with China in the same month and Japan is seeking to restrict Chinese-made apps including Tiktok. This month, the Trump administration signed an executive order that would effectively ban the app in the US on Sept. 15.
Content recommendations are not always entirely dependent on algorithms, at least in regards to the Douyin app. Douyin has promoted a fair amount of content produced by state-run media and government agencies for propaganda purposes. This content features recent news or stories with “positive energy,” a phrase that describes topics that align with government policies.
Conversely, on the Tiktok platform, recommended content featuring news or politics is minimal. Everything in the app is designed to be fun. A commentary published in The New York Times said that Tiktok might be “the only truly pleasant social network in existence.”
Bytedance’s account segregation of Tiktok and Douyin differs from the way that tech titan Tencent has constructed the domestic and international versions of its mega messaging app Weixin (known as Wechat abroad).
By comparison, Tiktok and Douyin users exist in different worlds, meaning that content cannot be accessed across platforms. For example, one of Tiktok’s most popular accounts is Jacob Sartorius, an American singer who has 20.9 million followers on the platform. However, the “Jacob Sartorius” found on Douyin is an “unofficial” account with 36 followers.
Under pressure from authorities, Bytedance has completely segregated the Tiktok and Douyin platforms, freeing the company from any potential breach of China’s internet controls while providing its international users with a relatively censorship-free platform.
5. It’s also an experienced VC investor
Bytedance was founded in 2013, but it started to make investments as early as 2014. It kicked off its VC activity by investing in a series of blogs and media companies such as artificial intelligence-focused blog Xinzhiyuan, and Caixin Globus, an international news site founded by Chinese finance news outlet Caixin.
Bytedance started to expand its investment portfolio outside of China in 2017 as overseas markets became more and more important to the company, but it tended to make acquisitions rather than simply investing.
By far the most successful example of Bytedance’s global expansion was its acquisition of lip-syncing app Musical.ly in 2017, which was later rebranded to Tiktok and became a global hit.
In recent years, Bytedance pivoted to invest in enterprise services and online education companies such as edtech company Fclassroom in 2019 and online word processor Shimo in 2018. In April, Bytedance co-led a Series B of nearly $14 million into Chinese cleaning robot maker Narwal Robotics.
Based on disclosed figures, Bytedance tends to favor certain tech sectors over others.
Here are some of Bytedance’s biggest investment deals from 2015 to 2019.
6. Bytedance has got big plans for gaming
In June 2018, we reported that longstanding Bytedance app Jinri Toutiao had launched “Jinri Games,” its own version of Wechat mini games, or lightweight apps which run on a large platform without requiring users to leave the app.
Within Toutiao’s selection of in-app mini programs—another adaptation of a Wechat innovation—Android users could for the first time choose from a variety of casual games.
Since then, mini games have become available in Bytedance’s humor app Pipixia and most recently, Douyin. The additions allow independent gamemakers to adapt or develop 10-megabyte programs for each platform.
In March, the Bytedance obtained its first mobile games license from Chinese regulators, allowing it to publish a game legally to China’s multi-billion-dollar gaming market. Bloomberg reported in January that the company is also building a gaming division that will hire more than 1,000 employees, and there were already two games in the pipeline. The company’s casual mobile game “Combat of Hero” became the most-downloaded free iOS title in Japan for four consecutive days beginning March 7, the South China Morning Post reported.
7. Edtech is a sector it just can’t quit
Bytedance may have made its name with short-video and news aggregator apps, but it seems unusually determined to break into the online education sector.
Over the past two years, the company has made several attempts to gain a foothold in online education through the launch of new apps, acquisitions, and investments. Underperforming apps are abandoned as new ones keep appearing, fresh off the production line.
- In March 2018, Bytedance acquired Open Language, an online English course provider.
- In May 2018, it launched Gogokid, a one-to-one tutoring platform for Chinese children to learn English online with foreign teachers.
- In July 2018, it launched Haohao Xuexi, a knowledge-sharing app that features content covering career advice, parenting, culture, and wealth management.
- In August 2018, Bytedance led a $49.5 million Series C funding round in San Francisco-based education technology company, Minerva Project.
- In December 2018, it launched AiKID, a foreign teacher live-streaming platform.
- Bytedance licensed some patents in January 2019 from now-defunct smartphone maker Smartisan, which the company indicated was to expand and develop its online education business.
- In May 2019, it launched a K-12 online education platform Dali Ketang, which offers courses from primary school to high school. Chinese tech news outlet 36Kr reported that Bytedance acquired another online teaching platform named Qingbei Wangxiao to help with the development of Dali Ketang.
- In July 2019, it was reported that Bytedance was testing a short-video-based English-learning app named “Tangyuan English.”
Bytedance’s education apps:
8. If it loses Tiktok, it’ll still scare Tencent
In a lot of ways, Bytedance is something totally new. It’s the first Chinese tech company that’s really based on a new algorithm, and the first Chinese company ever to get a big hit in the global app space. It often terrifies its Chinese competitors as much as it seems to terrify American policy-makers.
If it’s forced to sell Tiktok, it could lose one of those strengths: the global hit. But it’ll remain a huge, disruptive force in Chinese tech.