'China's Google' accused of not playing fair by popular news aggregator

Start-up ByteDance and internet search giant Baidu both compete in the growing market for mobile newsfeed advertising in China

PUBLISHED : Tuesday, 30 January, 2018, 8:40pm
UPDATED : Wednesday, 31 January, 2018, 11:46am

Baidu, China’s largest online search provider, has been sued by the operator of the country’s most popular news app for unfair competition amid an intense battle for the attention of mobile users and the lucrative advertising business they help generate.

Beijing ByteDance Technology, which runs the Jinri Toutiao app that had 232 million monthly active users as of December last year, said on Tuesday that it filed the lawsuit against Baidu at the Haidian District People’s Court in the Chinese capital, where both companies are headquartered.

In a post on its official WeChat account, ByteDance said Baidu used its “monopoly advantage” to mislead users and damage Toutiao’s reputation, the details of which it has filed in court.

Ahead of the ByteDance filing on Tuesday, Baidu issued a statement that described ByteDance’s lawsuit, like its public relations efforts, as reflecting “anxiety over its own challenges in development”.

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The Nasdaq-listed company also threatened to take legal action against ByteDance, accusing the Chinese media start-up of making up stories to smear the search engine operator’s reputation.

The open feud between ByteDance and Baidu is poised to escalate as competition in digital advertising continues to heat up in the world’s largest smartphone and internet market.

The total number of internet users in China reached 751 million at the end of June last year, according to data from the China Internet Network Information Centre. It estimated about 96 per cent of that number accessed the internet through their smartphones.

Baidu directly competes against Toutiao in China’s growing market for mobile newsfeed advertising.

“We expect Baidu to be one of the top three players of the mobile newsfeed ad market,

together with Toutiao and Tencent [Holding],” Jefferies equity analyst Karen Chan said in a research note last week.

Chan said Baidu delivered “continued strong traction with its mobile newsfeed ad as monthly time spent on mobile Baidu app showed 41 per cent year-on-year growth in the fourth quarter of last year”.

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The revenue contribution from mobile newsfeed advertising provides a solid base for Baidu, as its hefty investments in artificial intelligence (AI) and autonomous driving initiative are not expected to pay off in the near term.

Founded in 2012, ByteDance is one of the first companies in China to adapt AI to a news and information platform. With its use of algorithm models to analyse different data, the Toutiao app aggregates and delivers tailored news, video and other content to its users.

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ByteDance, which has a reported valuation of more than US$20 billion, is now one of China’s fastest-growing and most valuable technology start-ups.

Toutiao was ranked 14th among China’s top 20 mobile apps in terms of monthly active users last year, according to data from Analysys International and Jefferies.

“News and video apps have shown the strongest traffic growth,” said Jefferies’ Chan.

She estimated that around 80 per cent of China’s mobile internet users install fewer than 35 mobile apps, out of about 4 million total apps in the market, on their devices, which suggested increasing traffic consolidation towards the top apps.

Tencent’s WeChat and QQ were China’s top-ranked mobile apps, with 895 million and 570 million monthly active users, respectively, as of December last year. Baidu’s video streaming platform, iQiyi, was ranked third with 510 million monthly active users in the same period.