Rumors have been floating for months that ByteDance will go public with TikTok and Douyin. Just last night, Bloomberg reported that ByteDance was looking for a $ 2 billion IPO pre-IPO with a staggering $ 180 billion valuation.
Before any of that happens, Chinese rival Kuaishou has filed an initial public offering on Thursday night in Hong Kong and its prospectus is illuminating a the race where both growth and cost are phenomenal.
Launched by a former Google engineer in 2011 to share GIFs, Kuaishou has grown into an enemy of Douyin, TikTok’s sister in China. With Tencent owned 21.5%, the company reported a net loss of 6.8 billion yuan ($ 1 billion) in the first six months of 2020 while its operating loss stood at 7.57 billion yuan. In contrast, it posted an operating profit of 1.1 billion yuan in the same period last year.
This increase is partly the result of the company actively promoting the scaled-down Kuaishou Express, in line with China’s less tech-savvy demographic. Unlike ByteDance, Kuaishou’s success is limited abroad and depends on continuous growth in the country.
Its sales and marketing expenses soared by 354.1% from 3 billion yuan in the first half of 2019 to 13.7 billion yuan in the first half of this year. But the extravagance seems to have paid off: the lite application achieved 100 million DAUs within a year. It’s a pay-to-play game.
The Kuaishou main app itself, as of June, reached 302 million daily users who spent more than 85 minutes on the app every day watching clips and live sessions. For comparison, Douyin passed 400 million DAUs in January.
Despite being called a “short video app”, Kuaishou makes the bulk of its revenue – 68.5% in the first half of the year – from live streaming, in which audiences can send the server virtual items at prices. from 1 to 2,000 yuan. Other ways to monetize include advertising, which accounts for 28% of its revenue, as well as less important sources like e-commerce and games.
On the other hand, Douyin took in about 67% of advertising revenue last year, a source told TechCrunch earlier, while live streaming accounted for 17%.
The revenue structure reflects the core use case of the app. Kuaishou often prides itself on user engagement; In fact, more than a quarter of its 776 million monthly users are creators. That makes Kuaishou a social app where viewers and creators interact regularly through means like live-streaming and gift-giving.
Douyin, with its algorithms that prioritize premium content, acts more like a form of communication as commented by some Chinese venture capitalists, making it a destination for advertising.
In terms of revenue scale, Kuaishou generated 39.1 billion yuan last year, about a third of ByteDance’s last year. But one should remember that ByteDance has another cash cow: its news and information aggregator, Jinri Toutiao.