There was little Toutiao could do about censorship -- in fact, the company’s been repeatedly excoriated by authorities for failing to filter content and been forced to clean up its services with alarming regularity. But Zhang held fast to his early vision of delivering content that mattered to users through AI. The closest American equivalent was Facebook’s news feed.
After falling flat with the bulk of China’s venture capital stalwarts, Zhang eventually secured investment from Susquehanna International Group. It began offering the news app in August 2012. The platform studied what users read and searched for, then referred information and articles based on those habits. The more people used it, the better the experience, and the longer people stayed. By mid-2014, daily active users had climbed to more than 13 million. Sequoia finally came to the table, leading a funding round of $100 million.
“We push information, not by queries, by news recommendations,” Zhang said in the interview last year.
But it was video that really propelled Bytedance into the big leagues.
Streaming services have always been popular in China. Even during the desktop era, companies like YY Inc. championed a model where people sang and danced in virtual showrooms to win online gifts from fans. Later, outfits like Kuaishou fueled that penchant for zany showmanship. Bytedance saw an opportunity, but made its videos much shorter: 15 seconds, to be precise.
Around September 2016, it quietly launched Douyin. The app let users shoot and edit footage, add filters and share them across platforms like the Twitter-like Weibo or WeChat. That format appealed to shorter millennial attention spans and became an instant hit, so much so that WeChat later blocked direct access to the app.
A year after, Bytedance acquired Musical.ly for $800 million. It saw synergy between the buzzy teen U.S. social video app created by Chinese co-founders and Tik Tok, and is now in the process of combining them. Tik Tok and Douyin had a combined 500 million users as of July.
The challenge now is in translating buzz and viewership into dollars. The company is expanding its ad sales operations, particularly for Toutiao. Several media buying agencies said its massive reach and the attention it draws is a natural lure for marketers. Many said Bytedance is even pulling spending away from Tencent. Bytedance, which previously cut a deal with Cheetah Mobile to sell ad space, has brought most of its ad sales in-house, said Kenneth Tan, the chief digital officer for Mindshare China, an agency.
“From a pricing perspective, they are expensive for what they are. They definitely charge a premium,” Tan said. “But that has not been an inhibitor for the large brands.”
There’s a big caveat, however. Brands remain cautious about Bytedance’s regulatory issues, particularly given Beijing’s historic unpredictability around censorship. This year, it had to shut down a popular joke-sharing app in April just as it appeared to take off. It also suspended Douyin and its bread-and-butter Toutiao around the same time.