Zhang Yiming incorporated ByteDance Ltd. to the world’s most valuable private company through a series of box office apps like TikTok that challenged Facebook and other headlines for its own turf. Its ultimate goal: Alibaba.
The 38-year-old AI coding genius, who is looking for ByteDance’s next big event, has set his sights on China’s $ 1.7 trillion e-commerce scope. The co-founder has hired thousands of staff and hired well-known sponsors such as Xiaomi Corp’s entrepreneur Lei Jun to drive what he calls his next “big breakthrough” in global business: selling things to consumers through their addictive short videos and live plays. This effort will test not only Zhang’s magic touch with ByteDance’s application creation and artificial intelligence magic, but also investors ’reception in the face of one of the most anticipated IPOs in the tech world.
Its launch is already beginning to make waves in an industry controlled by Alibaba Group Holding Ltd. and Jack Inc. by Jack Ma. It sold makeup, clothing and other products worth $ 26 billion in 2020, achieving in its first year what Alibaba’s Taobao took six years to accomplish. It is soaring more than $ 185 billion in 2022. Douyin, TikTok’s Chinese twin, is expected to contribute more than half of the company’s $ 40 billion in sales this year, driven in part by e-commerce. .
“Short video platforms have so much traffic that they can basically do any business,” said Shawn Yang, CEO of Blue Lotus Capital Advisors. “Douyin not only includes ads, but also live broadcasts, e-commerce, local living services and search. That has a lot of room for imagination. ”
A growing e-commerce business could help the company surpass its $ 250 billion valuation when it goes public, counteracting concerns about Beijing’s crackdown on the country’s major internet monitors. It is said that a list is being prepared that would be one of the most anticipated debuts in the world. The startup is working with consultants on the offer and is choosing between Hong Kong and the United States as the headquarters of the list, according to people familiar with the matter. While ByteDance will not manage sales or merchandise on its own, it expects to sell more ads to merchants, increase traffic, and reduce business.
The Internet giant is a recent entrant into China’s social commerce scene, where influencers promote products to fans like a Gen-Z version of the Home Shopping Network. The format, launched by Alibaba as a marketing tool in 2016, developed a life of its own last year when Covid-19 boosted the demand for home entertainment. Last year, Alibaba’s Taobao Live generated more than 400 billion yuan ($ 62 billion) in gross value of the merchandise, and Kuaishou Technology’s social platforms hosted 381 billion yuan of transactions, more than double Douyin.
ByteDance has its interest-based recommendations based on artificial intelligence to help your e-commerce business catch up. Last month, at a welcome party for the one-year business, executives explained that the company intends to replicate its success by using AI algorithms to feed users ’content into purchases. on line. By shifting an endless stream of social content, now more than ever connected with physical goods, Douyin users will not be able to resist their urge to buy, they said.
It’s “like shopping on the street,” Bob Kang, head of e-commerce at Douyin, 35, told an audience of hundreds at the Guangzhou event. “As people get richer, they don’t go to malls or stores with specific thoughts, they buy if they see something they like.”
Kang, an engineer at Baidu Inc. which was stolen by ByteDance in 2017, is one of the many fast-growing young lieutenants, commissioned by Zhang to pave new avenues for the company. He was previously the technology leader of ByteDance’s Helo app, one of India’s most used social platforms for sharing content like videos, until the South Asian nation shut it down along with dozens of Chinese apps. last June for national security reasons.
Since Kang took over as head of e-commerce, Douyin has banned live broadcasts from selling items listed on third-party sites and invited them to open their own in-app stores, preventing rivals with Alibaba and JD.com Inc. your traffic. He grew a team of customer service staff from one hundred to approximately 1,900 to combat counterfeiting and hired more than 900 sites to support the business. ByteDance also has an online dating system that helps connect merchants with influencers and their agencies, and lays the physical groundwork to host live broadcasts and merchandise, similar to what Alibaba does.
The initiative gained strength for people who supported celebrities like Lei, the founder of Xiaomi, which has hosted live broadcasts promoting its Mi TVs and smartphones. Luo Yonghao, a highly flying businessman who had tried to challenge Apple Inc. with its smartphone business, it’s another influential front-line company, which traded more than $ 17 million worth of merchandise in its first live streaming platform.
Smaller traders are following in his footsteps, such as Zhou Huang, who set up a Douyin showcase for his jewelry business in October, bypassing conventional platforms such as Alibaba’s Taobao. Instead of spending big bucks on platform operators to get traffic, it has managed to amass a fan base of about 20,000 by creating videos that offer practical tips on how to choose the right size when buying a bracelet online.
“It’s challenging for new merchants like me to attract customers to Taobao,” says Huang, whose Douyin store went bankrupt after only three months. “Sometimes people don’t come to our store to go shopping, but to entertain themselves. But once we have enough visitors, we can make a sale. “
ByteDance is giving a hand. In Foshan, Huang and 200 other jewelry sellers are trained in everything from registering a store and marketing to recording quality videos. Technical assistance is available 24 hours a day: Huang says that whenever he goes down his live streaming channel, ByteDance technicians immediately come to the rescue.
Huang is one of nearly a million creators who have generated e-commerce sales in Douyin since January, attracted by the platform’s more than 600 million daily users. The platform, which incorporates merchant commissions as a new source of revenue, aims to get more than a thousand brands to join Suning.com Co. this year. in the creation of stores in Douyin, and this number could multiply by five in 2022, the company predicted in an internal note. GMV may grow to 600 billion yuan this year before doubling to 1.2 trillion yuan in 2022.
ByteDance’s ambitions are not limited to Alibaba. The firm has also begun allowing users to book hotels and restaurants through Douyin, offering life services similar to super apps like Tencent’s Meituan and WeChat.
Douyin’s e-commerce foray into China may provide a roadmap for TikTok, which has begun testing the waters of online shopping through links to WalMart Inc. and Canadian e-commerce firm Shopify Inc. In December, Zhang told global employees that -Trade, combined with live streaming and short videos, offers an even greater opportunity outside of China, according to attendees who asked not to be identified. The company has also been quietly building a team of engineers in Singapore to grow TikTok’s nascent e-commerce operations.
ByteDance’s push toward online shopping occurs as its other companies face headwinds. To grow video games, ByteDance has been buying development studios but producing box office hits like Tencent Holdings Ltd.’s Honor of the Kings, it can take years and China has repressed the industry before and after. In online tutoring, regulators have tried to curb the excess of marketing and the competition is fierce against a lot of deep pocket companies like Zuoyebang, with the support of Alibaba.
In April, Zhang’s firm was one of 34 corporations commissioned by the antitrust watchdog to conduct internal investigations and correct the excesses. And even though its payment service has only just begun, ByteDance and its peers received a wide-ranging restriction on its fast-growing financial operations after a meeting with regulators, including the central bank, last month.
But the same control could help the TikTok owner venture into China’s e-commerce, the world’s largest online marketplace. Alibaba has resisted rivals JD.com and Pinduoduo Inc. over the past decade presumably through practices such as forcing traders to establish exclusive deals. Since then, regulators have imposed a record $ 2.8 billion fine on Jack Ma’s flagship company and made eradicating “choosing one of two” one of the main goals of its antitrust campaign, creating space for emerging professionals like ByteDance.
For now, the biggest and most immediate boost to ByteDance’s expansion into e-commerce is advertising revenue, which still accounts for most of its revenue. As Douyin’s number of merchants increases, so does its marketing spending on the platform. The firm projects that e-commerce may surpass games to become the main contributor to ad sales. To rival Kuaishou, traders contributed about 20%, the company said in March.
“It’s more about getting a bigger share of brand advertising spending that would otherwise spend money on platforms like Alibaba,” said Michael Norris, a senior analyst at market research firm AgencyChina based in Shanghai. “Hence the threat to Alibaba.