If you ever think you fall short of your goals in life, you’re in good company. Last month a Chinese executive wrote to his employees: “I feel I did not achieve as much as I had hoped to on my previous objectives.” The exec’s name? Zhang Yiming, who nine years ago started a little firm called ByteDance Ltd., better known globally by its sensational product TikTok.
Zhang continued that he was stepping down as chief executive. Not that he’ll go far. He will stay on as chairman, and hand the CEO reins to his college roommate and current HR chief Rubo Liang. The pair actually do have some crucial objectives on their horizon, despite more than a billion views a day for TikTok’s mini-videos. Back to that in a minute.
It’s a good bet that U.S. President Joe Biden does not use TikTok. He gave the company a critical boost anyway the other day, when Washington unveiled a list of 59 Chinese entities that will be off limits to U.S. investors. ByteDance is not on it.
Long, long ago in 2020, you may recall, Donald Trump decided that 80 to 100 million Americans lending their eyeballs to TikTok was a national security risk, setting off a somewhat farcical search for a native tech giant to take over its vast U.S. operation. First Microsoft (ticker: MSFT), then Oracle (ORCL) dallied on the issue, until Trump’s electoral defeat put the matter on hold. Meanwhile ByteDance had to delay an IPO that could value it in the $250 billion range, the biggest private company in the world by far.
Biden’s blacklist focuses more coherently on Chinese actors tied to the military/surveillance complex. Most of these, like telecoms equipment giant Huawei, are not public anyway. So ByteDance’s mega-listing is back on the cards, which brings us back to Zhang’s unfulfilled objectives.
The main worry for the billionaire behind TikTok’s meteoric rise, you’ve got to think, is an equally meteoric fall as the young audience moves onto other fads. Hula hoops and lava lamps were booming businesses too, once. TikTok’s audience is not actually as young as it’s made out to be. Only a quarter of U.S. users are under 20. Most of the rest are evenly spaced between 20 and 50.
Still, Zhang and Liang are looking for insurance against going out of style. One push is into online education. The bigger kahuna is so-called social ecommerce. TikTok and its Chinese twin Douyin (translates something like “shaking sound”) have been profitably larding conventional ads onto posted videos, a la Facebook (FB) or YouTube. The next step is to link popular creators and influencers directly with merchants, and have viewers buy right on the site.
These new objectives face a few problems: They require investment; the company says it’s hiring thousands of new employees in both education and ecommerce. They may not fly outside of China, particularly the education business. And they face formidable competition within China. The current leader in social ecommerce is another company you may have heard of, Alibaba Group Holding (BABA), followed closely by ByteDance’s smaller short-video rival Kuaishou Technology (1024. Hong Kong). Douyin is a distant third.
ByteDance, which has been leaking IPO-bait factoids like crazy, “projects” a 12-fold climb in revenue from social ecommerce over the next two years. Investors may choose to believe it when they see it. Kuaishou’s own IPO this February sets a sobering example. The shares jumped 50% in their first two weeks on the market, and have lost half their value since.
TikTok is not out of the regulatory woods yet. The European Union is scrutinizing the site, as only it can, on land-mine issues from privacy to child safety. A 10-year-old Italian girl reportedly died of asphyxiation after engaging in a “blackout challenge” on TikTok. Not a good look at all. The app is banned in India, where it had 200 million users, hostage to tensions between New Delhi and Beijing. The Silicon Valley empire is trying to strike back, too, YouTube and Instagram both pushing hard on TikTok-esque mini videos.
So OK, ByteDance might be worth a mere $200 billion instead of $250 billion. It’s still going to be a big damn deal when it hits markets, later this year from the sound of it. Maybe Biden can get a brief from his grandchildren.