Chinese internet giant ByteDance has decided to stop hosting TikTok and other overseas apps on Alibaba Cloud, Chinese financial media Caixin (in Chinese) reported. Global hit app TikTok has an estimated 700 million monthly active users worldwide.

Why it matters: The decision by ByteDance is a blow to the e-commerce giant’s cloud-computing branch. Alibaba saw a significantly slower quarterly revenue growth rate in the first quarter, which the company attributed to the loss of “a top-class customer in the internet industry.”

  • ByteDance also appears to be responding to mounting regulatory pressure from the US and the European Union related to personal data concerns.

Details: ByteDance decided to move its servers for TikTok from Alibaba Cloud to Amazon Web Service and Oracle, Caixin reported last week, citing two anonymous sources. 

  • The contract is worth approximately $800 million per year, said the sources.
  • Alibaba has seen its cloud business grow at a slow pace in the first quarter apparently because of the loss of ByteDance’s contract. The company said last week its revenue from its cloud business grew 37% year on year to RMB 16.7 billion (around $2.6 billion) in the first quarter. The growth for its cloud business in the first quarter last year was 58%. The segment grew 50% in 2020 from the previous year.
  • Maggie Wu, chief financial officer of Alibaba said last week in an earnings call with investors that the slower growth rate was “due to a change in our relationship with a top-class customer in the internet industry.”
  • “This customer has a sizable presence outside of China that used our overseas cost services. They have decided to terminate their relationship with us with respect to their international business due to non-product-related requirements,” said Wu.
  • While Wu didn’t mention the name of the company, two sources told Caixin that it was ByteDance. They said that TikTok had used Alibaba Cloud’s data centers in Singapore to back up user data in the US and serve the South East Asian market.
  • Both companies refused to comment when contacted by TechNode on Tuesday.

Context: Alibaba is China’s largest cloud service provider, with more than 40% of the market, according to market research firm IDC (in Chinese). It is also the world’s third-larger cloud service provider after Amazon and Microsoft.

  • Alibaba made its foray into the US market in 2014. It now runs two data centers in the country.
  • ByteDance runs most of its domestic services on its in-house data centers in northern China’s Hebei province, according to local media reports.

Writing about semiconductors and telecommunications.