ByteDance Story 1: An unexpected breakouts
Maybe you are new to the ByteDance, but the following series of numbers will surprise you. According to unofficial reports, the valuation of ByteDance reached $75 billion in 2018. In the latest round of funding, Softbank and other funds will provide $3 billion to $4 billion. As of July 2019, ByteDance’s products have more than 700 million DAU, and more than 1.5 billion MAU. Among them, TikTok has more than 320 million DAU. According to SensorTower data, in the first quarter of 2019, TikTok added 188 million new users, a 70% increase over the same period last year.
That’s right, ByteDance is the parent company of TikTok. Nevertheless, Tiktok is not the first product of ByteDance, but a new product that internally hatches when the ByteDance has grown. Its original product is JinriToutiao, you can call it Toutiao which means headlines in Chinese.
After Uber went public, ByteDance has become the most valuable unicorn that is still unlisted. How did his founder and CEO, Yiming Zhang, lead ByteDance to success?
2012 — — Chinese Internet market surrounded by giants
China’s Internet market is where competition is fierce and giants are stifling everywhere. No matter what services you offer on the Internet or products are targeted at any submarkets, you will face competition from the giants in the future. In 2012, many competitions are irrational.
When the submarket is growing big enough, the giants will suddenly enter it and use their brand advantages and capital advantages to quickly destroy the whole price system. Their price of the goods or services is lower than the cost, and the user is directly paid a cash subsidy (as Paypal rewards each user who signed up an account with $10). In a very short time, market share and pattern will change. If you don’t take the same measures, your customers will lose quickly.
Yiming Zhang created JinriToutiao in 2012. (JinriToutiao is the predecessor of ByteDance, and later became a sub-brand of ByteDance). JinriToutiao is an app that allows users to read the news on their mobile phones. Any people and any companies can create their account to post articles. JinriToutiao pushes different articles to the specified customers according to the algorithm.
Before he founded the ByteDance, Zhang was a CTO at a company called Kuxun which is a travel ticketing website. One day during the work of Kuxun, he wanted to book a train ticket, but it was challenging to go to the train station to buy tickets at that time because there were too many people. He cannot predict when the second-hand ticket would appear on the Internet. The search that was already available at Kuxun required users to input their information about second-hand tickets in real-time. Therefore, Yiming Zhang spent an hour at lunchtime programming a small project to automatically search for him on the website. Once it got the search results, it would notify him by SMS. Less than half an hour after coding, Zhang received a text message and then bought the ticket.
Perhaps at that time, Zhang knew that the source of people receiving information in the future might not be active search, but passively receiving a push. If these pushes are what people want, people will rely on it.
In January 2012, Yiming Zhang established the company, and the Toutiao app was launched in August. At that time in the News Application Market, there were giants like Netease, Tencent, and Baidu.
Hans Tung, the managing partner of GGV Capital in Silicon Valley, said in the podcast “Inside the Entrepreneurship”: “At that time, our colleagues went to contact JinriToutiao and jumped to the conclusion that JinriToutiao can only have the opportunity to rise on the basis that Baidu, NetEase, and Tencent fail. In fact, it happened. We were more optimistic about the ability of Baidu or Tencent or Netease to counterattack, and lastly, we became an investor of ByteDance because we Invested in Musical.ly. At that time, Musical.ly had a plan to be acquired and they had previously considered companies in the USA. I strongly recommended them to talk with Yiming Zhang. Finally, Zhang Yiming also spent a lot of time to reach a deal. So sometimes there is a miss earlier. It doesn’t matter, the point is that if you find that you missed it before, you can go back and chase it.”
(Hans Tung: famous investor in Silicon Valley, invested in Airbnb, Coinbase, Lime, OfferUp, Peloton, Poshmark, Slack, Wish, Little Red Book, Xiaomi and Musical.ly.) This podcast undoubtedly reflects the fierce competition in the Chinese Internet market in 2012. No one knows what will happen in the future. Any decision could be wrong, and we need to learn from the past and gain experience.
A Silicon Valley-style startup was born in an apartment in Beijing
As many entrepreneurs in Silicon Valley started from the garage, the first office location of ByteDance was in an apartment in Jinqiu Home, Zhichun Road, Beijing. Yiming Zhang and his colleagues bought portable tables and chairs from IKEA and transformed the bedroom into a conference room. Dozens of people worked in a 1500sqft room very crowded. Many of them were engineers.
An early team member recalled: “At that time, going to work, is like from where I live to where my friends live. Everyone talks about each other in the seat. Everyone is wearing a casual, the whole atmosphere is very open, and the environment is clean. It doesn’t feel hard.”
Yiming Zhang and his team plan their globalization strategy in the residential building. From the first day, he did not want to just be a news app in mainland China but global. They made 12 news apps in a short period of time to go to market experiments, quickly optimizing their products through rapid iteration. This is precisely the typical case of the “MVP” theory of Chinese entrepreneurs who applied from Eric Ries’s work ‘the lean startup’ in 2011.
In China, even entrepreneurial methodology or management theories adopted by many entrepreneurs like ‘The lean startup’ are not well known to the public. Even if some entrepreneurs understand the theory, they will not perform well. Besides, what is lacking in China is technology.
There are a lot of startups in Silicon Valley that are made up of geeks and engineers. They find a problem and write a program to solve it. If a lot of people are also troubled by this problem, their technology may become a good product. The company will also grow up. Yiming Zhang and his team are very similar to the startups from Silicon Valley, but they are not typical in China.
Everyone knows that China has a huge population, and the Chinese market is very large. Starting a business in China, as long as your products are improvising, it is not difficult to get some customers’ favor. But the difficulty is that if your company has no technical threshold, the homogenous competition will be very intense in the future.
The initial advantage of many Chinese companies is that they have their own unique business model, but the cost of imitating that business model is low. Soon when competitors come up with the same business model and competitive strategy, you have no advantage. China’s innovative technical talents are not as much as imagined, so entrepreneurs will think more about their business models in the absence of technology. “Our team is almost ready now, and there is a lack of somebody to write code.” This is a joke, but also a portrayal of a typical Chinese startup.
The other article in this series: ‘ByteDance story 2：Get 1M DAU in 4 months’ is published. I hope you would like my article, give me some claps and reviews to help me.
I am Jasper Han. I live in Shanghai and have a plan to build a startup in San Francisco.If you like my article, please follow our publication and we will have some new articles published every week.
