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ByteDance: The Lesser Known AI-based Chinese Tech Start-up

Professor of Financial Economics and Part-time Value Investor, Transfin.
Nov 1, 2018 5:31 AM 3 min read
Editorial

ByteDance is a Chinese Internet technology company with content platforms that are backed by machine learning and natural language processing. The technology embedded in the platforms learns about user's interests and preferences through their interactions with content such as taps, swipes, time spent on each article, time of the day a piece of content was read, pauses, comments, dislikes, favorites, etc. This is aimed to ultimately create a personalized and customized content feed. As such this appears to be a much cleaner approach compared to other platforms in the space, which tend to rely on social graph inputs to drive content customization. At an estimated $75bn valuation, it stands as the world's biggest privately backed start-up.

 

ByteDance is a Beijing-based Chinese Internet technology company operating a portfolio of machine-learning enabled content platforms. At a lofty $75bn valuation, it stands as the world’s biggest privately backed start-up.

Earlier in the week, ByteDance closed $3bn in funding from a group of investors including SoftBank among other heavyweights, somewhat attesting the aforementioned $75bn valuation. At $75bn, ByteDance appears to have dethroned Uber as the number one privately backed start-up, which itself carries a towering $72bn in estimated valuation.

 

[Listen in from 15:00 onwards to learn more on ByteDance]

 

ByteDance’s flagship and initial product Toutiao meaning “Today’s Headlines” is a content platform backed by an AI recommendation engine, which delivers content in a plethora of formats. 

ByteDance was founded by Yiming Zhang in 2012 with the underlying premise of using artificial intelligence to drive push-based consumption of news and information via Toutiao app. With increasing traffic and engagement from users, the recommendation engine was further refined, allowing delivery of customizable content to users and within four months of launch, Toutiao had 1mn Daily Active Users.

 

The company has its own video-sharing platform TikTok and its Chinese version Douyin. According to the company, more than 500mn people worldwide, use one of these products at least once a month.

Given China’s tough rules on content, which is an impediment for US and other international companies, the Chinese Internet is clearly ring-fenced from the internet that the rest of the world is akin to. In that context, TikTok and Douyin users are entirely walled of from each other despite being largely same products. TikTok is the international version while Douyin is its Chinese counterpart available only in China. At its core, it is essentially a social media app for creating and sharing of videos as well as live broadcasting.      

 

An estimated $1bn deal to buy Musical.ly – a platform where users share and create short-form video helped ByteDance to combine it into a single app i.e. TikTok and strengthen its overall value proposition.

Musical.ly was already a popular video creating and sharing app in the North American landscape. In 2015, Musical.ly gained meaningful traction onboarding millions of users climbing to No. 1 position on the iOS App Store and becoming the most-downloaded free app in over 30 countries. By May 2017, the app had an estimated 200mn users. Combining Musical.ly with TikTok allowed TikTok to gain further traction in a user base generally characterised as young and millennial while providing access to key international markets.

 

India based Dailyhunt, US video app Flipagram and live streaming platform Live.me are other meaningful investments made by ByteDance adding notable dimensions to ByteDance’s end-to-end media play.

Many believe that the user experience of ByteDance products is a cross between Google and Facebook. While that being more of an anecdotal comparison, what’s interesting is the rise of ByteDance into mobile video by a series of tactful acquisitions and investments and without the financial backing of the two Chinese Internet Superstars Alibaba and Tencent. With mobile content experiencing swift industry-wide tailwinds, ByteDance appears to be nicely positioned to gain further traction.  

 

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