The financial ambition of the hottest media startup in China

Shortly after the New Year’s Day, ByteDance, the company that runs Toutiao, the leading news and information platform in China, was reported to be in negotiation to buy out ULpay, a local payments wallet and processor in China.

After an amazing year of skyrocketing growth, Toutiao achieved 120 million DAU by July 2017 from 50 million same month in the previous year, a staggering 140% year-over-year growth. With another 300 million or so DAU from other social short video apps such as Huoshan, Xigua, Douyin, and Neihan, ByteDance has effectively become one of the new internet giants in China, dubbed the TMD — T for Toutiao, M for Meituan, and D for Didi — which are seen as the archrivals to the incumbent BAT — Baidu, Alibaba, and Tencent.

Meanwhile, ByteDance has put global expansion as a key strategy. After taking over the popular video app Flipagram, which was backed by Sequoia, Kleiner Perkins, and Index Ventures, in the beginning of 2017, ByteDance ended the year with another major acquisition of the GGV-invested, obtaining another 60 million US-based users who are mostly teenagers.

The person behind ByteDance’s international strategy is Zhen Liu, former Head of Strategy at Uber China. Better known as the cousin of Jean Liu who’s the CEO of Didi, Zhen joined ByteDance shortly after Uber China’s merger with Didi in 2016.

Evolving from a news publisher to a UGC platform, ByteDance has established itself as the leader in machine-learning content recommendation algorithms and claims to have the highest server computing power per employee ratio among private tech companies. It all attributes to the abundant and diverse data from ByteDance’s vast user base across multiple apps. However, there’s an important piece missing — users’ financial data.

Financial data is widely believed by Chinese tech companies to be the holy grail of monetization, and it would be even more powerful to combine it with social media to form a “closed loop”. This concept is so popular in China that the word closed-loop’s translation — “Bi Huan” — was undoubtedly a top Chinese buzzword of the year.

This is exactly why in the past few years Tencent, with its crown in social apps QQ and WeChat, made a huge scene by pivoting to finance with WeChat Pay. Meanwhile, on the other side, Alibaba, already a financial and ecommerce conglomerate, tried very hard to break into Tencent’s social territory. (Read my previous column on Alipay and WeChat Pay.)

Following Alibaba and Tencent’s leads, Xiaomi, Jingdong (JD), Meituan, and Didi all obtained their financial licenses which would enable them to handle payments for their users, content or service providers, or even logistics, supply chain management and lending.

“In the future, all conglomerates will have to be internet-based companies,” said Lei Jun, founder of Xiaomi, “and they will also have to be financial companies.” So it seems that ByteDance’s recent move is another testament to this motto.

Global Fintech Founder & Investor | ex-Adyen, ex-Franklin Templeton

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