ByteDance will bust a softer groove without TikTok

Despite TikTok’s global success, local apps Douyin and Toutiao are the top revenue engines for ByteDance

  
A new Bytedance sign is seen on the facade of its headquarters in Beijing, China August 8, 2018. Picture taken August 8, 2018. REUTERS/Stringer

A new Bytedance sign is seen on the facade of its headquarters in Beijing, China August 8, 2018. Picture taken August 8, 2018. REUTERS/Stringer

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

HONG KONG - ByteDance will bust a softer groove without TikTok. A sale of the short-video app is one potential outcome from increased scrutiny as political fears from India to the United States grow over China’s potential misuse of customer data. That would severely curtail the global ambitions of its Chinese parent company ByteDance, which is worth between $95 billion and $140 billion based on recent private share sales, according to Reuters. Still, what’s left will retain viral appeal.

The Beijing-based tech phenom, founded by software engineer Zhang Yiming, rode the success of Chinese news aggregator Toutiao and short-video app Douyin to become one of the world’s most valuable startups. The launch of TikTok, Douyin’s separate and overseas equivalent, made Bytedance the only Chinese technology outfit to pick up a significant number of users in the West. ByteDance now has more staff than Facebook. TikTok has been installed roughly 2 billion times, and downloads grew 113% year-over-year in the last quarter, SensorTower reckons.

Despite TikTok’s global success, local apps Douyin and Toutiao are the top revenue engines for ByteDance. Both boasted over 400 million monthly active users in January. ByteDance’s advertising sales are expected to rise 60% this year to $27 billion, The Information, a technology publication, reported last week, but just $1.4 billion is expected come from TikTok. Selling the app for 17 times sales, in line with U.S. peer Snap, could raise $24 billion or more since the product is still in the early stages of monetisation, and allow the parent company to focus on growth in its home market.

Much of the enduring value of ByteDance, which operates over 20 apps from China to Japan to Singapore, will depend on how successfully it can leverage the computer code that runs its content-recommendation engine. That same technology could help the company profit from Lark, its new office collaboration-tool suite, and music-streaming app Resso, as well as online teaching, books and selfie apps. A sale of TikTok at this juncture would be a symbolic blow to China’s technology ambitions, but ByteDance will still have plenty of moves left to impress.

CONTEXT NEWS

- ByteDance, the Chinese owner of short-video app TikTok, plans to focus more on growth in China by expanding into new sectors and attempting to develop another hit app, The Information reported on July 15, citing an unnamed ByteDance investor.

- A sale of TikTok could also be in the cards, the report said, adding that ByteDance founder Zhang Yiming is open to whatever is best for the product and team.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Una Galani and Sharon Lam) ((alec.macfarlane@thomsonreuters.com; Reuters Messaging: alec.macfarlane.thomsonreuters.com@reuters.net))

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