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TikTok influencers Florin Vitan (L) and Alessia Lanza perform a video for the social network in the “Defhouse” in Milan on January 21, 2021. Photo: AFP.

ByteDance carves out TikTok as world’s most valuable technology unicorn finds way to satisfy US-China regulatory demands

  • CEO Liang will oversee the finance of ByteDance, allowing CFO Chew Shou Zi to relinquish the role to focus on Tiktok unit
  • The remainder of ByteDance’s operations will be reorganised into business units, according to a memo to staff obtained by South China Morning Post
ByteDance will separate out its worldwide social media phenomenon TikTok into a stand-alone business unit, as chief executive Liang Rubo overhauls the world’s most valuable technology unicorn into six parts after founder Zhang Yiming decided to take a back-seat role.
Liang will oversee the finance of ByteDance, allowing chief financial officer (CFO) Chew Shou Zi to relinquish his finance role to focus on his job as chief executive of TikTok, the video-based social network service, and expand it into a technological platform, including such businesses as e-commerce, according to a memo to staff obtained by South China Morning Post.
Beijing-based ByteDance, the world’s first and only hectocorn – an unlisted company valued at more than US$100 billion – will also delineate its global operations from the myriad businesses in its home country through the separation of TikTok into an independent business unit.
The separation is an important step to help ByteDance and TikTok satisfy the regulatory demands of China and the United States over data privacy, storage and usage, when both governments are trying to exert oversight over the phenomenally successful app. TikTok had 1 billion monthly active users at the end of September, making it the most popular app worldwide by a Chinese company, while its China-only version Douyin chalked up 600 million daily users in August 2020.
Composite image of ByteDance founder Zhang Yiming (left) and chief executive officer Liang Rubo (right). Photo: ByteDance
The overhaul, nearly half a year since Zhang picked his university roommate Liang to oversee ByteDance’s daily operations, followed the drop in the company’s valuation in private equity markets from its peak of more than US$400 billion. The challenge of setting clear corporate, technology and legal boundaries between the businesses in China and overseas was the key hurdle in listing ByteDance, forcing the company to put its initial public offering (IPO) plan on hold until at least late 2022, the Post reported last month.

The reorganisation is needed “as the company continuously optimises and upgrades its structure,” Liang said in his memo. “The company’s business lines are growing and maturing, and need flexibility to address their own unique challenges.”

Zhang, one of the world's wealthiest technology moguls with a personal net worth estimated at nearly US$60 billion by Forbes, will remain closely involved with the company’s strategic matters, including any IPO plans, according to a source familiar with the matter, speaking on condition of anonymity.
The ByteDance logo on the company’s headquarters in Beijing on July 8, 2020. Photo: AFP
The Cyberspace Administration of China (CAC) inserted itself into the application process of Chinese companies seeking to raise funds abroad in July, demanding that any company that holds personal data of more than 1 million users to obtain its approval before launching an offshore IPO.

At the same time, ByteDance is facing the squeeze from outside China. TikTok, wildly successful in the United States, was threatened with a ban if its US business were not sold by its Beijing owner, according to an executive order last summer by then president Donald Trump.

US President Joe Biden dropped Trump’s order to ban TikTok in early June. Still, the company’s head of public policy for the Americas Michael Beckerman faced tough questions during the app’s first attendance at a Congressional hearing late last month.
Beckerman reiterated that TikTok does not share information with the Chinese government and that TikTok has “no affiliation” with Beijing ByteDance Technology, a ByteDance unit at which the Chinese government took a stake and a board seat earlier this year. ByteDance is considered part of TikTok’s “corporate group,” Beckerman said.
Chew Shou Zi, formerly the chief financial officer of Xiaomi, is now chief executive of TikTok. Photo: Bloomberg
ByteDance will be reorganised into six divisions. Douyin will sit at the apex of a unit responsible for domestic information services, including the Jinri Toutiao news aggregator, the Xigua video service, internet search and encyclopaedia applications. This is the crown jewel of ByteDance, where its 2020 revenue soaring 111 per cent to 236.6 billion yuan (US$37 billion) from 2019.

Dali Education will add a vocational education unit that will be responsible for technology-powered learning, continuing education, smart hardware, and campus collaboration.

Lark, also known as Feishu, will focus on building collaboration and management services for enhancing productivity, while BytePlus will build enterprise solutions, products and services including cloud computing services to help companies with their digital transformation. Nuverse will build a global community of games players and developers as it focuses on developing and publishing games, according to the memo.

“It looks like a separation of TikTok outside China in preparation for a separate IPO of the short video app, hence [Chew] is still heading TikTok,” said Jeffrey Towson, a long-time observer of China businesses and visiting professor of the China Europe International Business School.

This article appeared in the South China Morning Post print edition as: ByteDance to carve out TikTok in restructuring