PARIS, FRANCE – DECEMBER 26: In this photo illustration the logo of Chinese media app for creating … [+]
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It has been widely reported that ByteDance, the Beijing-based digital entertainment and information company, had impressive 2019 revenue and earnings. ByteDance had revenue of $17 billion in 2019, up from $7.4 billion in 2018. In the first half of 2019 ByteDance is reported to have had revenue equal to or exceeding the whole year of 2018. According to the same reports, ByteDance’s profit was $3 billion for 2019. It is also reported that they have over $6 billion in cash available for investment and growth initiatives. As a privately held company, ByteDance does not officially release their financial data and I was not able to get a comment from ByteDance regarding their financials.
ByteDance has been reported to have a valuation over $100 billion and as high as $180 billion. ByteDance has announced that they have over 60,000 employees in 126 cities.
TikTok is reported to have over 800 million daily active users which compares to 1.73 billion daily active users for Facebook, who reported that number this year.
HANGZHOU, CHINA – OCTOBER 18: A stand of TikTok (aka Douyin) is pictured at The First International … [+]
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ByteDance has a number of core products that use artificial intelligence to choose content that will be shared with readers whether it is in their news and information content product, Toutiao, or their entertainment apps, particularly Douyin and TikTok. Douyin is a mobile app launched in China by ByteDance in 2016 focused on consumer-generated short videos.
Much of the revenue for ByteDance comes from advertising and in-app purchases, both areas with a lot of room for growth, plus ByteDance’s user numbers continue to grow rapidly. ByteDance was founded in 2012. ByteDance has raised money from funds like Softbank, KKR KKR, Sequoia, General Atlantic, Hillhouse Capital Group, Coatue, SIG Asia Investment, and Source Code Capital. Knowledgeable sources have indicated to me that there are also some influential Internet-related investors from around the world, invested in ByteDance, some at a very early valuation. This will be a company that will be closely watched for an IPO or other liquidity event.
BOCHUM, GERMANY – MAY 11: (BILD ZEITUNG OUT) A smartphone screen is seen with the Social Media apps … [+]
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Every few years a new “bright shiny object” appears on the digital scene. Sometimes these companies go on to be huge (Amazon AMZN, Google, Facebook, etc.) and other times they fail massively – Excite.com, Go.com/Infoseek, Vine, Friendster, etc. Other companies may not be the “bright shiny object” of their early years, but they are still gaining momentum and traction, such as Snap. Even MySpace, a company that most people probably assumed was shut down and written off entirely, is still alive with about 4% of American social media users reporting they are currently using Myspace in a quantitative study I conducted with 2,400 Americans in June of last year.
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Which flavor of “bright shiny object” is TikTok? Short-term or long-term?
TikTok has received a lot of attention in the U.S. and around the world recently, including the announcement of the new CEO of TikTok (and COO of parent company Byte Dance), Kevin Mayer, the head of Disney DIS’s Direct to Consumer services and International (including Disney+). Mayer was previously the planning and M&A guru at Disney. Forbes writers Dawn Chmielewski and Abram Brown reported in detail the search by Byte Dance for a CEO of TikTok and the hiring of Mayer.
So the question is now: is TikTok more like Vine (short 6 second video serviced owned by Twitter TWTR and shut down) or more like YouTube, owned by Google GOOGL, which reportedly has revenue over $15B a year – mostly advertising – and over 125M monthly unique users in the U.S. alone.
While some analysts look at TikTok as competition for the social networks – Facebook, Instagram, and Snap, there are many reasons to think of TikTok as more of a competitor to YouTube. TikTok is not about sharing what you did today or where you went (though there is some great travel content on TikTok), but more about creating and sharing content, such as songs, dances, ideas, challenges – all presented in short video form. Unlike Vine, which limited users to six seconds, a TikTok can be as long as 60 seconds, with a function that combines four videos of 15 seconds each. Furthermore, you can upload to TikTok longer videos shot outside of the Tik Tok app.
TikTok, whose mobile app is free, is owned by Byte Dance of China. Byte Dance is a private company with many reports that it is worth $100B and beyond. Byte Dance runs a similar service to TikTok in China, Douyin, which was launched in 2017.
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TikTok was launched outside of China in 2018 and merged with Musical.ly, another company owned by Byte Dance, that year. Douyin and TikTok when translated from Mandarin mean: “shaking sound” and “vibrating sound” respectively.
TikTok was the most downloaded, mobile, non-game app worldwide in January and February of this year. There are over 800M worldwide users. In China there are 400M users which doubled in one year. About half of all smartphone owners in China are using TikTok. Byte Dance is also growing TikTok in India where they have over 120M users. Southeast Asia is another growing area for TikTok.
In the U.S. TikTok is reported to have 60M monthly users, who spend on average 45 minutes a day on the app. A majority of U.S. users of TikTok are female (57%). Over 40% percent of TikTok users are between 16 and 24 years old. Roughly 50% of TikTok’s global audience is under the age of 34. While only 9% of US internet users say they have used TikTok, 49% of teenagers say they have used the app. Another demographic strength for TikTok are the large number of families, siblings, and co-workers that collaborate on TikTok dances, challenges, lip syncs, etc. When you watch TikTok you see many multi-generational users.
Though privately-owned, it was reported that TikTok grossed over $175M in revenue in 2019. TikTok revenue comes from in-app purchases (virtual goods and subscriptions), sponsorships and advertising. All of these areas are likely to grow for TikTok as the platform grows in numbers of users and as TikTok gears up their revenue sales teams.
Tiktok has hired many top Facebook executives and others from Snapchat, YouTube and other companies, before the hiring of Mayer. It is expected that TikTok will continue to pursue some of the top talent at the successful social media and digital video companies. TikTok has a large office in Los Angeles (the largest presence outside of China) and their European efforts are headquartered in London.
Vine failed for many reasons, including that six seconds was too short a time for some people to express their creativity. Furthermore, Vine was bought by Twitter where it withered. It was not a good brand fit with Twitter or demographic fit. TikTok is the main business of Byte Dance outside of China and will not have the problems Vine had at Twitter. Also, the TikTok app has a lot of strong functionality that did not exist for Vine, such as powerful viral tools, easy video recording and editing, mobile first, a great recommendation algorithm and strong social features.
TikTok is also more than just dances and Vine-like antics. They also have people giving short video advice on health, exercise, the stock market, travel, DIY (do-it-yourself), and even politics. Naturally these categories will reach young people, as well as a more mature audience.
I spoke to a number of 20-30 year olds in the media world and most of them said they used TikTok. Numerous people I spoke to said that TikTok is more like a short/mobile first version of YouTube. I think TikTok is going to challenge YouTube more than than TikTok will challenge Instagram or Facebook.
I think TikTok will be grow substantially, and quite possibly, will have the longevity of YouTube, which is 15 years old this year. Vine, in comparison, lasted 5 years. My projection of strong, future growth for TikTok in the U.S. is supported by the high evaluation score that TikTok receives from its users – a 4.7 score out of a 5-point scale.
If you doubt the appeal of TikTok, take a few minutes and explore the videos on the app. And don’t miss this one – “The Five Stages of TikTok” on TikTok which you can search for on TikTok or you can watch it on YouTube:
SHANGHAI, CHINA – MAY 05: Tourists as Disneyland imposes social distancing measures on May 05, 2020 … [+]
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Monday, May 11, Shanghai Disneyland DIS opened to a limited number of visitors, along with new rules and procedures to keep everyone healthy. “During this initial reopening phase, the park will institute new measures and procedures, including opening with limited attendance and required advanced ticketing and reservations, accommodating social distancing in queues, restaurants, ride vehicles and other facilities throughout the park, and implementing increased frequency of sanitation and disinfection,” according to the Shanghai Disney Resort website. Disney and Disney’s travel partners had tickets on sale the morning of May 8 and they were very quickly sold out for most of the next week.
In general China’s government has been reopening much of the country and much of the economy, as the spread of the virus has slowed dramatically in China. The government and companies like Disney have implemented rules regarding social distancing, as well as mask and other health requirements. Disney reportedly will be scanning visitors when the Shanghai park opens for any high temperatures.
The theme park business is huge and many companies are deeply invested in their theme park attractions. The global amusement parks market size was valued at USD $45.2 billion in 2017, according to Grand View Research, a market research and consulting company headquartered in San Francisco, CA. Grand View, previous to the COVID crisis had projected almost a 6% CAGR for the last three years and through 2025. Obviously those estimates will be revised as the parks around the world figure out when and how to reopen.
In the U.S., Disney plans a phased reopening, starting with Disney Springs in Florida, an outdoor shopping, dining and entertainment complex, which will reopen on May 20. Other Disney Parks locations will remain closed for now, including theme parks and hotels. No date has been set for other Disney parks to reopen. Some analysts are predicting not until 2021.
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Facebook has taken a $5.7 billion stake in the Jio digital platforms business of India’s richest man … [+]
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Silver Lake, the well-known and well-funded private equity firm, announced earlier this week that they would invest 56.56 billion Indian rupees (about USD$747 million) in Jio Platforms, the largest Indian-based telecommunications company and also the owner of various consumer digital services, such as their music platform. Just two weeks ago Facebook invested $5.7 billion in Jio, which is owned by Reliance Industries, the largest private sector company in India.
I spoke with Gaurav Mehta, Managing Director and Head of India for The Raine Group, a merchant bank advising and investing in high growth sectors of technology and media, who said, “I was pleasantly surprised by the Silver Lake investment as they have not been active in India before this.”
I also spoke with Rahul Chowdhri, Co-Founder and Partner at Stellaris Venture Partners, an early stage, technology-focused venture capital firm based in India. He echoed Mehta’s pleasure with the Silver Lake investment in Jio, saying, “It is great to see Silver Lake making a large investment in India.” Chowdhri said that Jio was actively seeking to, “grow from being predominantly a telecommunications company, to a company more involved in digital content, services and e-commerce.” The Silver Lake and Facebook investments increase the opportunities for Jio to expand its digital offerings.
Silver Lake has also invested heavily in Unity Technologies, the software technology company that supports the design of games, as well as other applications such as architecture and advertising agencies. Other digital investments by Silver Lake include Ant Financial owned by Alibaba BABA, as well as Didi, the ride share service. Both are Chinese companies.
Silver Lake has also invested billions of dollars in Twitter, Expedia, Airbnb, and Waymo – all well-established digital companies. Silver Lake has also made a number of investments in the Hollywood talent-agency, WME, and IMG, the sports management company. The two companies combined in 2013, with Silver Lake as a significant minority owner. Silver Lake has become a major investor in internet companies, as well as media/entertainment companies such as WME and IMG.
Many private equity firms buy the entire company when they make an acquisition or at least a controlling portion. However, Silver Lake has made a number of minority investments in some of the best known digital enterprises in the U.S. and abroad.
The investment in Jio Platforms by Silver Lake reflects the importance of India in the nations that make up the BRIC (Brazil, Russia, India, China) countries. These countries are powerhouses of growth. India’s GDP is $3.2 trillion, which puts them in the number 5 position across the world’s economies. Income for the average household has been growing regularly. India’s population is 1.4 billion people, which makes them the 2nd most populous country in the World. India has worked hard to improve their educational system, at all levels, and are turning out many highly-trained and well-educated citizens. The Indian Government is also providing incentives and encouragement to start-ups and entrepreneurs in their country.
India is a huge emerging market and Silver Lake is only one of many major investors in the Indian economy. Many of the best known American brands are very active in India, reaching out to the huge consumer population in India.
Mehta commented on the growing American corporate involvement in India, “Major operating companies from the U.S. have been very active in building their own businesses and acquiring existing companies in India, or making majority investments such as Walmart WMT’s acquisition of two-thirds of Flipkart, the Indian e-commerce company.” Raine co-advised on this deal.
Chowdhri said that “long-term I expect the U.S. private equity funds and venture capital funds to increase their involvement in India.”
Silver Lake issued a statement quoting their co-chief executive and managing partner, saying Jio has “brought extraordinary engineering capabilities to bear on bringing the power of low-cost digital services to a mass consumer and small businesses population. The market potential they are addressing is enormous, and we are honored and pleased to have been invited to partner with Mukesh Ambani (the Chairman of Reliance) and the team at Reliance and Jio to help further the Jio mission.”
