MediaBytedance

Alibaba’s flopped attempt at investing in Toutiao

Bytedance is facing challenges from Chinese cyberspace administration and rival Tencent.

| Background image credit to Visual China. Modified by KrASIA.

Alibaba was said to have tried participating in China news aggregator Bytedance’s latest round of financing, though the deal eventually went south. The e-commerce giant, according to a local media report, was even willing to splash billions of dollars into the news aggregator with no strings attached, for instance, a guaranteed board seat.

Bytedance is one of the most valuable and highly sought-after unicorns in China that has not taken sides yet, meaning it’s not affiliated with either Alibaba or Tencent as other tech upstarts usually do in China.

The Beijing-based company’s confidence was underpinned by its solid position in the market. Its news app Today’s Headlines is the most popular of its kind in China, this is in addition to its widespread short video apps, including Tik Tok, Watermelon, and Huoshan.

The company was raising a private equity round of US$2 billion from General Atlantic and was valued at over $20 billion in August 2017, according to a Reuters report.

Alibaba’s investment went sour because the founder of Toutiao, ZHANG Yiming, was persistent on the independent and unfettered growth of his company, the abovementioned self-media said quoting people familiar with the matter. Alibaba ended up buying $200 million convertible bonds of Toutiao.

WANG Shuai, Alibaba’s head of PR, said on Weibo that his employer wasn’t interested in or good at media business. Yet this self-claimed media-averse e-commerce conglomerate acquired Hong Kong’s South China Morning Post in addition to a slew of its previous investments in local publications, including its US$ 19 million investment in Yicai in 2015.

For Alibaba, news app like Toutiao has the potential to play a crucial role in its ecosystem. For one thing, Toutiao’s app matrix, including its news aggregator and short video apps, could distribute content for Alibaba’s content-making subsidiaries. Alibaba’s video-streaming unit Youku reached a partnership with Bytedance in March for video distribution.

Obviously, Bytedance’s ace card is its 140 million daily active users who spend on average 76 minutes daily on its platform. Those users could buy clothes, film tickets and order takeaways on Alibaba’s Taobao, Taopiaopiao and Ele.me, helping Alibaba contend against Tencent-backed Pinduoduo, JD.com, and Meituan-Dianping.

Founded in 2012 in Beijing, Bytedance was on a shopping spree last year, bought Flipagram, News Republic, and Musical.ly. The company has amassed a total of over US$3.1 billion in funding, according to data compiled by Crunchbase.

Recently, Bytedance is under huge pressure, not only from cyberspace administration but also from formidable rival Tencent and some of Tencent’s investees. The social networking and gaming giant is investing hugely in its revived Weishi app to fight against Bytedance’s Tik Tok, while Qu Toutiao, a news and video aggregator who counts Tencent as a backer, is virally growing its user base in third- or fourth-tier Chinese cities, eating into Jinri Toutiao’s market share.

Editor: Ben Jiang

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