Posted on Tuesday, Jun 27th 2017
Earlier this quarter, Chinese news aggregating site Toutiao raised a whopping $1 billion for its expansion. The round valued the company at nearly twenty times the valuation that it had secured two years ago – making its position secure in the Billion Dollar Unicorn club.
Beijing-based Jinri Toutiao is a news aggregation app owned by Beijing Bytedance Technology. Beijing Bytedance Technology was founded by a former software engineer Zhang Yiming. Jinri Toutiao, which translates to Today’s Headlines, was founded in the days when players like Sina and Sohu dominated the Chinese Internet. Mobile applications for these companies were very basic and were just transferring content from the Web to Mobile – thus compromising on user experience. Since then, a lot has changed.
Toutiao is a news aggregator that has successfully leveraged machine learning to personalize news recommendations. It integrates the most relevant content for users based on its analysis of data obtained from the user’s location, smartphone model, and click history.
Toutiao is deploying its machine learning capabilities in several other applications. Its Artificial Intelligence lab is working on projects that include the development of a mechanism that will be able to integrate human reviewers and automated analysis of posts and comments to identify fake news. It has also created an artificial reporter called Xiaoming that can automatically generate short news reports on European soccer games. It is also using machine learning to analyze its question and answer section to provide automated news summaries for articles on the website. To keep its offering attractive to young users, it also provides bite-sized, Buzzfeed-style stories, including cartoons, GIFs, live streaming shows, and interactive Q&A channels.
The app’s popularity has grown significantly over the past five years of its existence. Its servers sort and tag more than 200,000 articles and video posts every day. It has a user base of more than 600 million of which its daily active users (DAUs) are 78 million. Its DAUs have grown from 30 million at the beginning of 2016. It has over 175 million monthly active users. The average time spent on the app is about 76 minutes every day. It has tied up with more than 4,000 state-owned and independent media organizations to source its content.
Toutiao is privately held and does not disclose its detailed financials. It earns revenues primarily through advertising. It recorded RMB 6 billion (~$869 million) in advertising revenues in 2016 and is hoping to grow that to $10 billion by the year 2020.
Toutiao is looking to improve monetization of its user base. Last year, it tied up with Chinese e-commerce player JD.com to allow users to purchase products featured within the Toutiao app. Meanwhile, Toutiao’s competition is growing. Other Chinese Internet leaders including Alibaba, Baidu, and Tencent are developing their own news feeds based on the user’s search history and interests. To deal with the competition, Toutiao is looking at international markets. Earlier this year, it bought Los Angeles-based video app Flipagram for an undisclosed sum. Flipagram is an Instagram rival and allows users to create music videos through a very simple interface. Users can merge videos and images and add a soundtrack before sharing the result with their friends. The purchase is in line with the RMB 1 billion (~$144 million) investment proposed by Toutiao in the video content space. Additionally, Toutiao has also invested in India-based news aggregating app Dailyhunt and Chinese online comic artwork platform Kuaikan Manhua.
Toutiao is venture funded so far and has raised more than $1.1 billion in funding from investors including CCB International, Sequoia Capital, SIG China, Sina Weibo, Source Code Capital, and Yuri Milner. Its last round of funding was held in April this year when it raised $1 billion at a valuation of $11 billion. Prior to this round, Toutiao was valued at nearly $500 million in 2014.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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