Toutiao: a rising $30 billion USD Chinese tech giant

Tingyi Chen New WeChat features

China’s largest artificial intelligence (AI)-powered content platform, Toutiao, is getting a lot of media attention. Toutiao is currently looking for a new round of investment, with a $30 billion USD valuation, according to the news website The Information.

Today we’ll dig deeper into the Toutiao ecosystem.

Toutiao App

Toutiao is a news display App. It’s specialized in display algorithms that recommend personalized articles to its users. This makes Toutiao China’s largest artificial intelligence (AI)-powered content platform. It had 178 million Monthly Active User by June 2017.

Toutiao was launched in 2012, and quickly became one of the biggest tech giants in China.  Only a month ago, its valuation was $22 billion USD.

Toutiao gets most its traffic from BuzzFeed style content: funny gifs, eye-catching video clips and silly jokes. Toutiao “early adopters” were mostly lower education background users in small Chinese towns. Since these users aren’t the target of traditional Internet companies, Toutiao could get them onboard at a lower cost. In 2012, Toutiao spent only 1 million RMB in promotion, and achieved 1 million daily active users by the end of the year.

Most of Toutiao’s users are located in low tier cities: 72% of Toutiao users are located in tier 2 to tier 5 cities.

The platform has a lot of potential for marketers as 86% of Toutiao’s users are under 30 years old.

Users also spend a lot of time on Toutiao. Toutiao is the number 5 App in terms of time spent: 2.95 billion hours were spent on Toutiao in June 2017, a 125% YoY increase. Note that WeChat still dominates most of the time spent on mobile, and the top 3 Apps are all controlled by Tencent (WeChat, QQ and v.qq.com).

Most of Toutiao’s revenue comes from display advertising. By 2016, Toutiao’s revenue reached 6 billion RMB.

Toutiao Ecosystem

As one of the booming tech giants, Toutiao has a dynamic ecosystem that covers short-videos, social Apps to content creation and curation platforms.

Toutiao is one of the few Chinese company successfully launched products in North America. Like other Chinese tech companies, it also expand its market in the US by acquiring local companies (Musical.ly, Live.me, Flipgram).

Toutiao heavily invested in short videos market

Here is a graph published in QuestMobile’s Internet Report in June 2017, It shows how the 3 short-videos companies acquired or invested by Toutiao are growing at an exponential pace just during the first months of 2017. Comparatively, the overall short video user base in China grew by 11.5% in 2017.

Let’s take a closer look at some of these investments from Toutiao

Douyin

A high quality music video App that has taken top tier Chinese cities by storm. 73% of Douyin users are young users under 24 years old. By June 2017, MAU reached 18 million, according to Questmobile.

Here are Douyin’s Baidu search index results between 2016 and 2017

Here is an example of a popular video clip on Douyin:

Musical.ly

Musical.ly is a teen-focused lip-syncing app with 60 million monthly active users (MAU).  Toutiao acquired Musical.ly for around $1 billion USD in November 2017. It’s an App founded in China by Luyu Yang in 2015. Musical.ly quickly became the top ranking music App in the App Store, with 20 million Daily active users, 6 million of which are from North America.

Huoshan

Huoshan is an App focused on 15-second short video display, mostly used in third or lower tier cities. Huoshan and its competitor Kuaishou are often the first video App these young Chinese users ever used. It encourages them to create and upload short videos.

Content Investment

Toutiao also invested in many WeChat based companies/ super KOLs. The scope ranges from technology-focused to car-related content companies.

Wall Street News (华尔街见闻): one of the biggest financial news company. It received 100 million RMB C round investment in 2016 from China Media Capital.

watcn.cn (餐饮老板内参): a WeChat account about how to operate restaurants and F&B business. It raised 50 million RMB A round from investors like Toutiao and Meituan.

Geek Park (极客公园): one of the biggest tech news and review news channel. Investment status undisclosed. 

Newrank (新榜) – the largest social data analytics company in China. It raised 180 million RMB B round investment in March 2017.  

Conclusion

Toutiao is one of the biggest content distribution App in China. Users are spending an increasing amount of time on the Toutiao App and on Apps that are owned by Toutiao.

As user acquisition is becoming increasingly costly on WeChat/Taobao/Tmall, companies should consider these new Apps for content marketing and advertising. For certain types of products, the Toutiao ecosystem might be just what you are looking for in order to set foot in China.

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