According to Statista, the digital media market is expected to grow from $38.06 billion in 2018 to $42.56 billion by the year 2022. Recently, Chinese content aggregator ByteDance shot into prominence with its acquisition announcement. The Billion Dollar Unicorn club member is also expected to list this year.
Beijing-based ByteDance was founded by former software engineer Zhang Yiming in 2012. ByteDance was founded in 2012 as Yiming saw an opportunity to leverage artificial intelligence and mobile Internet to revolutionize the way people consume and receive information. It is working on building a platform that will not only deliver information, but also serve as a creative hub to host and promote creators.
ByteDance’s key offering is its flagship product Toutiao, which is the largest content discovery and creation platform in China. It is a news aggregator site that uses machine learning to personalize news recommendations. It integrates relevant content for users based on the learning it gathers through analysis on data obtained from the user’s location, smartphone model, and click history. Toutiao boasts of more than 120 million daily active users in China, who spend an average of 74 minutes per day on the service.
While Toutiao is a China-focused app, ByteDance also has an international market app called TopBuzz. Similar to Toutiao, TopBuzz predicts what the user will be interested in and uses a clickbait model to attract the user into clicking on other content.
More recently, ByteDance was in the news for its acquisition of Musical.ly. Musical.ly is a video sharing app with over 100 million users worldwide. It was founded nearly three years ago in China itself. The app is very popular among teens who use the app to share videos of themselves lip-syncing to songs. Users can also live stream themselves while doing so. The acquisition is expected to cost ByteDance $1 billion.
Earlier, ByteDance had announced the acquisition of social media platform Flipagram for an undisclosed sum. Flipagram allows users to create music videos in just a few taps by combining videos, photos and a soundtrack, and share these soundtracks with their friends.
Last year, ByteDance also acquired News Republic, a news aggregator, from Cheetah Mobile for an estimated $86 million. News Republic, based in France, operates as an aggregator of online news. China’s regulatory restrictions will prohibit News Republic from allowing people in China to use its website. But ByteDance has acquired News Republic to expand its international presence.
Besides acquisitions, ByteDance is also looking at partnerships. It recently entered into a content licensing agreement with BuzzFeed. BuzzFeed, like TopBuzz, also operates a clickbait model. As part of the agreement, ByteDance will distribute BuzzFeed’s content and videos on its platforms in China. The move will help BuzzFeed expand in China, a market where US based companies find difficult to expand.
ByteDance earns revenues primarily through advertising. Toutiao alone was expected to earn $2.5 billion in revenues last year. For the current year, ByteDance had forecast revenues of $7.6 billion. Its profitability figures are not known.
ByteDance is privately held and does not disclose details of its funding or investors. However, analysts estimate that the company is valued at $20 billion. Many believe that ByteDance may be looking to go public this year on the US stock exchange.
Questions for ByteDance’s Board
ByteDance is focused on growing in international markets in the near future. In fact, it is targeting to earn more than half of its revenues from international operations in the next five years. The recent tie-ups with BuzzFeed and the acquisition of Musical.ly and News Republic will surely help it achieve that goal. The restrictions levied by China’s authorities are no secret. How does ByteDance plan on bringing the massive content that services like News Republic, BuzzFeed, and Muscial.ly offer to its users in China? Also, is ByteDance looking at other revenue models? Muscial.ly may have been a widely used karaoke app, but it did not do too well in monetizing its user base. What is ByteDance planning to change that trend?
Internationally, content doesn’t monetize well. In China, it appears, it does. So why chase international markets?
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : 2018 IPO Prospects