ByteDance – Tidy and focus.

ByteDance is moving from growth into monetisation.

• ByteDance is showing signs of moving into the next phase of its life cycle which involves tidying up loose ends and moving to really monetise the global engagement that it has generated over the last few years.
• India has become ByteDance’s No. 2 market with 200m users of TikTok as the nature of TikTok (short, amusing music videos) is an excellent cultural fit.
• Globally, the company has over 1.5bn users but earns just a fraction of the revenues if one takes into account other digital ecosystems of a similar size.
• Hence, ByteDance needs to shift from user acquisition to monetisation which it has done in China, but this now needs to be rolled out elsewhere.
• This is why ByteDance is tidying up its portfolio in India (closing down Vigo) as well as seeking a digital banking licence in Singapore in conjunction with the Lee family (founders of OCBC).
• Fortunately, monetisation of digital video is relatively straight forward and given that ByteDance’s core strength is being able to work out what its users like, this should be applicable to make the marketing it sells more relevant.
• However, the real opportunity remains the rest of the Digital Life Pie where ByteDance’s coverage outside of Media Consumption is fairly weak.
• Tencent has done an excellent job of expanding into financial services through WeChat and it looks like ByteDance is looking to emulate this outside of China.
• Gaming and Social Networking are areas that it should target, gaming especially as in this segment outside of China there is no dominant player meaning that there is space to compete.
• These are essential steps to take as the company’s private valuation is $75bn and shares in the secondary market have been seen changing hands at larger numbers.
• Hence, as it moves into a more mature stage and eyes an IPO it will need to have a much larger revenue base than it does today in order to justify a valuation higher than $75bn and still leave money on the table for investors.
• As some of these initiatives bear fruit, growth will accelerate and I suspect that it will be at that point that the company will come to the market.
• It is much too early to say whether it will be worth participating but given its scale and reach, this is one to keep a very close eye on.