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Thinking different: How ByteDance shifted course to launch TikTok as a global hit

Written by Zhang Jun, KrASIA Connection Published on   7 mins read

Before TikTok became the first major Chinese app to achieve overseas success, ByteDance encountered many obstacles that would come to shape its international outlook.

ByteDance’s global presence is mainly defined by TikTok’s meteoric rise around the world. But before the Beijing-based app factory was able to create a culture-defining app that allowed users to create and post short videos, ByteDance experimented for years, failing repeatedly, before the company’s leadership figured out the right formula to take their app to the top.

As ByteDance increasingly became a multinational company, co-founder Zhang Yiming saw Facebook as both a model for emulation and a potential rival. He frequently nudged his developers when they were building the chat app Feiliao (also called Flipchat), steering them to create a platform that drew inspiration from Mark Zuckerberg’s platform.

Zhang had his eyes on a path for ByteDance to head abroad even before the company’s domestic operations were fully formed. While the company is now chiefly known for operating TikTok, other international business lines existed as early as 2015, when ByteDance released News Master, an app that functioned similarly to its hugely popular news aggregator Toutiao. News Master was eventually renamed as TopBuzz, and ByteDance then released the BuzzVideo app, again drawing inspiration from its domestic hit Xigua Video. However, both apps failed to gain traction overseas.

This goal to establish overseas operations was rooted in Zhang’s meticulousness and obsession with data-driven decision-making. ByteDance’s research had suggested that the number of daily active users (DAUs) for all news aggregation apps in China could reach a maximum of 240 million. If the dominant app could control half of the market and serve 120 million users each day, then the ceiling for growth was low.

Soon enough, that prediction became reality. Toutiao had 30 million DAUs in mid-2016. That number surpassed 100 million in February the following year. At its peak, Toutiao had 120 million DAUs, but growth became sluggish, and the count slid back down to 100 million. ByteDance quickly realized that it needed to seek new users beyond China.

Toutiao’s first overseas markets included the United States, Japan, and several Latin American countries. This deviated from the typical expansion plans of most Chinese companies. A former ByteDance manager said, “At the time, Chinese companies were likely to explore markets in Asia or Africa if they wanted to go global, but Zhang said the business conditions in those regions could not sustain ByteDance’s growth targets. However, even a small slice of the market in the US or Japan was valuable. Therefore, those developed countries became the priority.”

Zhang didn’t simply consider DAUs when determining the value of a market. He also evaluated the average revenue per user, or ARPU. Multiplying these two numbers would yield the market’s maximum daily revenue. With this information, Zhang shaped ByteDance’s strategy to challenge mainstays such as Facebook and Google. He routinely spoke with his staff members and said that ByteDance had to “dominate the market” and “go big.”

The ByteDance co-founder chose an approach that could be interpreted as the opposite of Facebook’s. While Facebook relied on the power of influencers and key opinion leaders to attract and retain users, ByteDance focused on building experiences that cultivated a sense of community. The belief was that this would lure users away from Facebook and entice them to join ByteDance’s apps and platforms.

The primary objectives for ByteDance in 2017 were to cultivate user-to-user interactivity and entertainment, as well as execute the company’s internationalization. Over the next three years, ByteDance did precisely that, with Douyin hosting an immense volume of user-generated short videos and becoming a massive success in China. At the same time, the company had gone global, giving it additional channels for growth.

Every Sunday, Zhang strolled into a conference room in ByteDance’s headquarters in Beijing. Meetings for the company’s internationalization strategy were held once every two weeks, with roughly 20 people in attendance each time. Typically, Zhang listened intently, typing notes on his Surface laptop. He rarely spoke, but one of his comments was particularly memorable: “It’s crucial to move fast.”

It didn’t take long for ByteDance to run full speed into a series of obstacles.

The first person to oversee the company’s overseas operations was Zhou Jingjin, who volunteered to take on these responsibilities. He was one of ByteDance’s earliest staff members and worked his way up in the company.

One of the first problems that ByteDance encountered outside of China was the matter of intellectual property, such as music tracks and film clips. It was crucial to protect copyright in the US and Japan, where IP laws were much stricter than in China. The company had to deviate from how it operated domestically—it purchased the right to use IP from major stakeholders such as those that have the scale of Disney, while IP held by smaller owners who may not seek legal recourse would still be used and disseminated through proxy accounts. However, these evaluations and decisions were often faulty, leading to ByteDance being the defendant in lawsuits as it attempted to establish a foothold in the US and Japan.

This situation showed Zhang that ByteDance’s internationalization efforts had to be helmed by someone with experience in this process. In mid-2016, he recruited Liu Xinhua, the former CMO of app maker Cheetah Mobile, for the job. Zhou reported to Liu, and the two led ByteDance’s i18n business unit, whose name is derived from the number of letters between the first and last characters in the word “internationalization.”

i18n stood out in that it had autonomy within ByteDance’s organizational structure—a status that no other division wielded. But it soon became clear that i18n’s operations did not match that of the rest of the company, as ByteDance still chiefly focused on developing middleware—software that lies between an operating system and the applications running on it.

Meanwhile, Liu began work in four directions—building the business structure for international operations, forming local teams, resolving copyright disputes, and changing the name of News Master to TopBuzz to target a younger user base.

One former TopBuzz operations executive said that it was difficult to foster growth for news aggregators in developed markets, where Facebook and Google often controlled the pathways for user acquisition and monetization, creating what the executive described as a “dead-end” for any growth model that ByteDance attempted. This was unlike the condition in China, where there were many ways to reach revenue-generating users, such as by pre-installing apps on smartphones.

The executive mapped out the costs. Toutiao spent RMB 5 for each pre-install on new smartphones. Every new user generated RMB 0.30 in revenue per day. A user would on average use Toutiao for 50 days before the app might be uninstalled, so the revenue generated per user over this period was RMB 15—yielding RMB 10 in gross profit. In the US, however, the 30-day customer lifecycle generated USD 1 in revenue, while the cost of obtaining a user was USD 3, resulting in losses.

In 2017, ByteDance became concerned about the lack of high-quality content on its overseas platforms. A strategy report that landed with Zhang suggested that the outlook was grim, and an imminent breakthrough was crucial to their survival, but Zhang did not accept the prospect of failure. One staff member in i18n said, “Yiming believes that hard work leads to miracles.” Zhang held on to the idea that if a business model could work in the cutthroat environment in China, then it could also apply globally.

Meanwhile, Liu was shifting his focus from text to video content. This was the consequence of one of his visits to Japan, where he realized there were already local news aggregation apps that would be difficult to displace. Liu was able to make some headway when he was cultivating BuzzVideo’s user base. However, at the time, this was not in line with Zhang’s expectations of Liu, who left ByteDance one year after joining the company.

In 2018, Zhang Lidong, who would eventually become the China chairman of ByteDance, spoke up at a high-level meeting and posed questions about the performance of i18n. Zhang Lidong is known for his incisiveness—he was a veteran journalist and a former vice president of the Beijing Times Media Group. At ByteDance, Zhang Lidong controlled cash resources and his views carried hefty weight. He proposed that ByteDance should give up its overseas business because there didn’t seem to be a road to profit.

For a few moments, no one at the meeting responded. Eventually, Zhang Yiming said, “There is a future in these projects. We should look again.”

After Liu’s departure, i18n was disbanded. Its responsibilities were absorbed by other teams within ByteDance. Chen Lin and Zhao Tian, who were the leads for Toutiao’s product and operations teams, respectively, took over those corresponding components of i18n. Soon afterwards, Kang Zeyu, who is now the head of ByteDance’s e-commerce business, joined the company and led its overseas operations. In particular, Kang incubated and launched Helo, a direct competitor to the ShareChat app, which offers social and video-sharing features in local languages.

In 2018, ByteDance decided to wind down and reevaluate its global presence. TopBuzz was shut down in June that year due to a combination of issues stemming from the usage of copyrighted media on the platform and sluggish growth. In 2020, Helo and 58 other Chinese apps would eventually be banned by the Indian government. Meanwhile, other international platforms that were based on popular offerings in China, including comedic entertainment app Neihan Duanzi and short video app Huoshan, were unable to gain traction.

However, this would all change when Douyin’s sibling, TikTok, emerged as a medium for users to express themselves through engaging short videos.

This article was adapted based on portions of a feature originally written by Zhang Jun (WeChat ID: benita-story) and edited by Gao Yulei. KrASIA is authorized to translate, adapt, and publish its contents. 


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