TikTok owner ByteDance bids farewell to ‘boundless’ expansion as Beijing tightens grip on Big Tech
- ByteDance’s major reorganisation is a natural transition for the maturing business, as it weathers a tightening regulatory environment, said analysts
- China’s increased scrutiny on Big Tech casts a shadow over ByteDance’s ventures into online education, fintech and video games
The other four units will be work collaboration unit Lark, business service unit BytePlus, gaming unit Nuverse, and education technology unit Dali Education, said ByteDance co-founder and new CEO Liang Rubo in a memo.
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Experts said the move signals that ByteDance, founded by Chinese entrepreneur Zhang Yiming almost 10 years ago, is ready to emerge from the experimental phase and focus on strengthening existing assets.
“The company was boundlessly expanding in different sectors and testing different products just to see which one eventually works out. This required a lot of capital support and the ability to bear losses,” said Zhang Yi, chief executive at Chinese market research firm iiMedia. “Now it is more about improving its business based on what they have, which means reorganising product lines and consolidating resources.”
ByteDance, which made its name by building a series of artificial intelligence-powered apps including TikTok, Douyin and news aggregator Jinri Toutiao, has in recent years sought to diversify its revenue stream by branching into education, finance and gaming.
In a letter to employees in March 2020, ByteDance founder Zhang Yiming singled out education as one new direction that the company was seriously exploring, stressing that he was willing to wait patiently for the new business to bear fruit.
In the same year, ByteDance bought a domestic online payment license by acquiring the parent company of third-party payment service UIPay. In March this year, the company acquired Moonton Technology, the developer of the biggest mobile game in Southeast Asia, Mobile Legends Bang Bang, marking its biggest investment yet in an industry dominated by Tencent Holdings.
As Beijing tightens its control on the country’s increasingly powerful tech giants, however, those business ventures have quietly slowed.
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Several domestic apps, including Douyin, Jinri Toutiao and Xigua Video will be merged into one unit to ensure the “integral development of information and service businesses in the Chinese market”.
“ByteDance’s restructuring is, ultimately, about spreading risk around, rather than concentrating all service offerings in one big basket,” said Alex Capri, research fellow at the Hinrich Foundation and lecturer at the National University of Singapore
“While allowing each line of business the ability to specialise in its unique niche and attract talent and specialised resources and customers, it’s also an attempt to placate Chinese regulators by increasing transparency and accessibility to smaller, more manageable, individual entities,” Capri said.
The restructuring is “mostly about efficiency while being responsive to new regulations”, said Rui Ma, a venture capital investor and host of the podcast Tech Buzz China. “Its first hit product Toutiao is starting to fade, and Douyin is hitting saturation, while abroad, foreign Big Tech are starting to take it more seriously as a competitor.”
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Amid the uncertainty, ByteDance’s valuation in the private equity market has dropped from its peak of more than US$400 billion. Susquehanna International Group, one of ByteDance’s earliest and largest investors, has been looking to sell about US$500 million worth of its shares, while another shareholder recently sold its equity stakes valuing the company between US$360 billion and US$370 billion, according to a Bloomberg News report last month.
