Rumour: Alibaba to invest in Douyin after it splits off from Bytedance

This will pit Alibaba against Tencent, which backs Kuaishou, in the short-video war

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Alibaba and Jack Ma-backed Yunfeng Capital are allegedly planning investments in China’s biggest news aggregator Jinri Toutiao and short-video app Douyin, according to a rumour (link in Chinese) posted by independent Chinese news site Chang Geng Technology on WeChat today, citing an anonymous source.

According to that post, Yunfeng Capital, Jack Ma’s personal private equity fund, would invest in Jinri Toutiao, while Alibaba is interested in investing directly in Douyin once it is spun off from parent company Bytedance. It says that both deals are still in preliminary talks.

Bytedance, a Beijing-based technology firm, owns both Douyin and Toutiao.

Douyin, known as Tik Tok outside of China, recently cracked 500 million monthly active users worldwide and is now considered the leading short-video app. The app lets you view or quickly produce videos that are up to 15 seconds long using animations and stickers as effects.

A Douyin spin-off with subsequent backing from Alibaba can be seen as a power move on rival Tencent, which backs Kuaishou, the second most popular short-video app in China after Douyin. Tencent also has its own short-video arm Tencent Weishi.

Bytedance declined to comment when asked about the rumored investments by 36Kr, KrASIA’s parent company.

Similar rumours had surfaced before. Both Toutiao and Douyin appear to be in fundraising mode, with Toutiao previously reported to be in talks with venture capital firms KKR and Yunfeng, and Douyin said to be independently raising funds. Douyin is currently valued between US$8 -US$10 billion, and Toutiao at US$35 billion, according to a report by Jiemian in June (link in Chinese).

Alibaba and Yunfeng won’t have any representation on Douyin and Jinri Toutiao’s boards, should the deals go through, said Chang Geng Technology in its post. Passing on board seats is a move in contrast to Alibaba’s past practices of investment, which reflects the company’s urgency to get a leg in the fast-growing short video sector, it speculates.

Douyin has previously linked up with Alibaba earlier this year as part of its monetization push, with a shopping feature integrated into its app that allows for users to buy goods showed in the videos from Alibaba’s Taobao and Tmall sites. In addition to social ecommerce, Douyin also plugs video ads into its normal video flow.

Douyin is popular in major and first-tier cities, in comparison to its rival Kuaishou which is popular among the lower-tiered cities.

The short-video sector has seen explosive growth during the last two years, with almost 80 percent of all mobile internet users actively using the short-video apps in recent months, according to a report by South China Morning Post and Abacus. The sector is also tripled in value to close to US$900 million last year December from a year ago, according to a report by iResearch.

 

(14:40, July 20, this article has been updated to explain how Douyin monetize its popularity through both social ecommerce and video ads in the 9th paragraph.)

Editor: Nadine Freischlad