What’s Next for ByteDance?

5 min read.

There is a possibility for ByteDance to be the new “B” in BAT—which stands for Baidu, Alibaba, and Tencent, the three most renowned tech companies in China. ByteDance is on track to transform itself from a humble news aggregator to the next tech giant, given that it is one of the world’s most valuable technology startups with a valuation exceeding US$100 billion.

ByteDance has become an important investor in China’s market and has been actively diversifying in recent years. From 2015 to 2020, ByteDance’s areas of investment range from online novel reading platforms such as Dudiangushi to Internet of Vehicles (IoV), which includes Beijing-based car video and podcast platform, 30sche.

Credit: Sealand Securities Co., Ltd. 

In the last two years, the investment action of ByteDance has escalated significantly. 2019 was the year the organization reached the peak of its investments, with 17 of these in the whole year reaching a total of 1.26 billion yuan (about US$181 million). This year, ByteDance has a track record of frequent investments in areas such as Education, Games, Entertainment and Media.

At a glance: A few of ByteDance’s key investments as of 1 Aug 2020

This trend of making huge investments is typical of tech giants, suggesting that ByteDance has laid a solid foundation for itself to grow and is poised to widen its horizons. It would be of no surprise if ByteDance’s next steps are into new uncharted waters. We explore the plethora of fields the company is making headway in.

  1. B2B Enterprise

Lark, an online collaborative platform similar to the well-known Google Suite, is ByteDance’s earlier prominent foray into B2B. (We talk more about Lark in this article, which includes how Lark compares with its competitors such as Google Suite and Slack.)

To further reinforce its position in the B2B space, ByteDance launched Huoshan Yinqing (“Volcano Engine”), just two months ago. This B2B platform offers a burgeoning array of features companies can choose from to improve their businesses and be more well equipped to battle against their competitors. One of the tools is intelligent recommendation service which offers internal company database optimization, tailored algorithms such as product discovery, and many others. Volcano Engine is also capable of identifying and following hand positions and limb movements via its visual intelligence systems.

As this is a recent launch and ByteDance has already attained sizable initial success, it is very likely that  ByteDance will move forward in this space more aggressively, creating another source of revenue stream. It is also possible that ByteDance will work on business partnerships to strengthen its presence in this sector. 

  1. Ecommerce

Interested to send virtual gifts on TikTok? ByteDance has got you covered. ByteDance formed an ecommerce business unit and is already testing it on the popular video app. Called ‘Small Gestures’, this new initiative enables users to send each other free, virtual presents from a range of brand partners within the app. 

As of the date of publication in June 2020, Jing Daily observed that the company has over 300 openings with the word “ecommerce” in China, and about a dozen of these positions are for livestreaming ecommerce. With the growing livestreaming sector in China with a market size of US$10.6 billion in 2019, this is a tactical move by the company to diversify its sources of revenue.

  1. Education

The education sector  became an industry that the previous CEO of Jinri Toutiao, Chen Lin, and his team eyed on when he was relocated to be responsible for innovation: to build a new app with 100 million daily active users. In its current pipeline, ByteDance has two educational products, GuaGuaLong English and GuaGuaLong Mind, which teach students English and Math, respectively. These two AI-based apps even share its unofficial mascot—a cute orange dragon, Guagualong that guides pre-school and early primary school children through lessons.

Even before Guagualong, ByteDance had self-developed, invested, and acquired a variety of education applications such as Gogokid, aiKID and The Minerva Project. 

A list of educational products self-developed, acquired and invested by ByteDance.
Credit: Quantianhou Technology

During an internal meeting in July this year, Chen Lin mentioned that the company will continue to double down and invest a vast amount of capital in the EdTech industry. To put theory into practice, ByteDance is reportedly in discussions with Indian EdTech startup, Lido Learning, for a potential investment opportunity. This is a strategic move by the company to reinforce its presence in India after the recent TikTok ban, and also pave the way to test the waters of the international education market, killing two birds with one stone.

  1. Gaming

This is a bold move made by ByteDance. According to Niko Partners, the Chinese domestic game market is expected to grow to $41.5 billion by 2023. However, the top game publishers in China such as Tencent and Netease, when combined, already own two-third of the pie. 

ByteDance started to push its way into the competition when it registered for more than 2,000 game trademarks in 2014. In 2018, the company decided to integrate the gaming element in its star products: Jinri Toutiao and Douyin. In 2019, ByteDance self-developed and also acted on behalf of a number of games in terms of operations and management. Among them, 13 games which comprise Quanmin Piaoyi (car-racing game) and Yinyue Qiuqiu (music game), were ranked top 10 on the iOS free games chart. 

To up its games against its incumbents, the company acquired game studios which include Shanghai Mokun Digital Technology, Beijing-based Levelup.ai and Pangu Game Global. Moreover, it recruited an army of more than 1,000 employees to double down on developing games. Among the people hired, there were talents poached from the current giants in the field such as Tencent and NetEase.

This year, the company worked hand in hand with the three leading companies in the development of mobile games—CMGE Technology, Shanghai Yaoji Technology and Kaiser China Culture Co.—to secure deals and expedite its expansion into this lucrative market. For example, the company acquired the rights from Kaiser and CMGE to distribute a 3D Naruto mobile game: Slugfest, and One Piece: The Voyage, respectively.

Earlier this year, ByteDance also obtained its first game license, a move to set the scene for its first self-developed casual mobile game—Warrior Girl Parkour, a 3D game in which characters can run, jump, slide, and ride walls—which was officially launched in July this year. 

The company started to see the light as its efforts paid off for both the domestic and international markets. On the domestic front, Xiaomei Doudizhu (card game) and Naodong Dashi (puzzle game)—developed by ByteDance and its collaborating game developers—gained tremendous traction and made it to the top 10 of free Chinese games on Apple’s App Store. As for the international side, its Combat of Hero (martial arts game), secured the title of Most Popular Download for iPhone users in Japan.

Once again, ByteDance proved to the world its capabilities in establishing a presence in both the domestic and international arenas. Considering the amount of effort the company invested, it is evident that this ambitious unicorn will not just stop here. Looking forward, the team will focus on categories such as massively multiplayer online games (MMO) and action role playing games to further fortify its position in this highly competitive market. Having already achieved initial success, how would this relatively nascent company rival the existing tech giants?

  1. Music Streaming

ByteDance’s Resso, a social music streaming app, made its debut in Indonesia and India in March this year. The app goes up against behemoths such as Spotify and Apple Music. The unique selling points of Resso are its real-time lyrics, function to comment on songs, generate videos using music in the app, and produce “vibes”, which are essentially any GIFs, photos, or videos that run in the background automatically when you play a piece of music. 

On top of all these special features, the app charges a monthly subscription of about US$1.30 per individual, which is either on par or even cheaper than its rivals by at least two times, as illustrated below: 

Price comparisons of Resso with its competitors in the Indian and Indonesian market as of July 2020

Despite having attained such astounding results — number of installs on Apple’s App Store and Google Play totals about 11 million, with about 74 percent and 26 percent of its downloads contributed by users from India and Indonesia, respectively — this venture may not be as smooth-sailing as it seems in light of the recent India ban. Though Resso is currently in safe hands, will it eventually share the same fate as TikTok? 

Just like ByteDance’s typical way of creating apps, the company also developed a domestic version of Resso. Yinyuebang, is an online music platform which also includes the social networking factor. However, there is currently no mobile application version of it and has very basic features such as “discover music,” “music categories,” and “trending music.” Will the company continue to revamp and up its ante for the domestic version in order to have a finger in the music streaming pie?

  1. Smartphone

To disrupt the smartphone market, ByteDance snapped up staff and patents from the struggling phone maker, Smartisan, in early 2019. Later in the same year, the company showcased its first smartphone — Smartisan Nut Pro 3 — with a starting price of US$389, which is more costly than some of the phone models its competitors such as Huawei, Oppo, and Vivo have to offer. Despite this, it was still a strategic move by the company that helped avoid the hassle and hefty costs of developing a smartphone from scratch. ByteDance also seized the opportunity to preload its apps on the phone — including its well-known product, Douyin — creating the perfect platform to testbed its ever-expanding apps universe.

As this is a recent move by ByteDance, the company is probably  still experimenting and finding its footing in the smartphone industry. Similar to other market leaders, we should be able to look forward to a more evolved version of the Smartisan Nut Pro model. 

Conclusion

As ByteDance is facing global headwinds due to its Chinese origin, the company is estimated to suffer a huge loss. In order to fight this battle, the company has, so far, not hesitated in reshuffling its organization’s structure, expanding, and covering new grounds. If anything, ByteDance has taken all the pre-emptive measures required to diversify its portfolio way before any of the recent setbacks started happening. No matter the kind of obstacles ByteDance faces, we are sure that this rising tech giant will tackle them accordingly and their next move will definitely be an exciting one to watch.