China’s most addictive news app Toutiao eyes world domination with AI feeds

Published On: 05, Dec 2017 | Source: techinasia.com

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Chinese news aggregator Toutiao sucks in daily active users for 74 minutes per day. Photo credit: Antonio Tajuelo.

Despite multibillion-dollar valuations, Chinese tech giants have little presence overseas – excluding investments – especially on the consumer side. Bytedance, a rising Chinese unicorn, does not want to suffer the same fate.

The Beijing-based tech company operates one of the stickiest apps in mainland China. Bytedance estimates that its flagship content aggregator Toutiao hooks in 120 million daily active users, each of whom spends an average of 74 minutes per day inside the platform – more than double that of Snapchat.

This year, the company expanded its focus abroad – mostly through a spree of overseas investments, such as its estimated US$800 million purchase of video-based social app Musical.ly. Bytedance believes it can replicate its success in China by focusing on regions with similar content consumption habits, fast-growing mobile growth – resembling China’s landscape a few years ago – and artificial intelligence.

See: How Chinese startup Musical.ly won the hearts of American teens

“We have identified several key markets that we want to really focus on, [including] Japan, Korea, Brazil, the US, Europe, Southeast Asia, and India,” Liu Zhen, senior vice president at Bytedance, told media at the company’s AI conference last week. Previously, Liu was the head of strategy at Uber China.

In five years, about half of the company’s revenue will come from overseas, she estimated – an ambitious claim given that at present, most of Bytedance’s business comes from mainland China.

Tencent is still king in terms of addictive apps. Its messaging apps WeChat and QQ are ahead of Toutiao, as well as Baidu-backed video streaming app Iqiyi.

Bytedance is somewhat of an anomaly in China’s tech industry. Unlike most startups, the tech firm hasn’t received funding from Alibaba nor Tencent, making it a relatively independent entity in an increasingly binary ecosystem. Its massive content platform, which monetizes through advertising, also challenges established players, such as Tencent’s news products, Tian Tian Kuai Bao and Tencent News.

Bytedance was one of the earliest companies in China to use algorithms to recommend content.

“Before they get rid of you, you need to grow into a player that can’t be overlooked,” says Pheona Chen, investment manager at Autobot Capital Partners, referring to China’s Baidu, Alibaba, and Tencent tech giants. Autobot is a Chinese VC firm that invests in entertainment startups.

Bytedance, she says, managed to pick a vertical and push forward aggressively and quickly scaled up their short-video business. They’re also “one of the earliest companies in China to use algorithms, not simply editors or manpower, to recommend content.”

Ride the mobile wave

At first glance, it’s hard to understand how Toutiao became so popular in China, a country where consumers are spoiled for choice when it comes to news and other kinds of content. In the short video industry, there are dozens of apps. Tencent and Sina Weibo both operate their own news portals. Chinese superapp WeChat also serves up a dizzying variety of news, blogs, and videos.

But Bytedance caught China’s smartphone wave. Between 2011 and 2016, the number of mobile internet users in the country almost doubled from 356 million to 695 million, making up 95 percent of total internet users by 2016. Early on, CEO Zhang Yiming, who founded the company in 2012, anticipated the need for a one-stop shop for mobile content browsing.

“Late 2011 to 2012 [was] when the mobile market in China really took off,” explained Liu. “[When] Yiming took the subway commuting from home to work, he discovered there were [fewer and fewer] newsstands and kiosks in the subway station. People tended to spend more time on their mobiles, reading content.”

Liu Zhen, senior vice president of Bytedance, ex-head of strategy at Uber China. Photo credit: Bytedance

Today, the app does not only include articles aggregated from various news sites, but also blogs, Quora-style question-and-answer posts, short videos, and live streaming. Instead of having to download multiple apps, all users have to do is open Toutiao, which uses machine learning to create customized newsfeeds based on in-app behavior and reading preferences. It’s more of a “you are what you read” than a “you are who your friends are” approach.

“Toutiao gave new internet users something to ‘do’ when their mobile time was still up for grabs,” observed Anu Hariharan, a partner with the Y Combinator Contuity Fund and investor in Toutiao, in a blog post.

“In the years that followed, competition for user share of attention on mobile would drastically increase – the number of mobile apps available in China more than tripled in the three years from 2012 to 2015,” she wrote. “But Toutiao’s early lead meant that, by the time competitors arrived, it already had an important and valuable foothold.”

Toutiao gave new internet users something to ‘do’ when their mobile time was still up for grabs.

Bytedance might be able to catch the same wave in less developed markets, like India and Indonesia, which are both in the company’s line of sight for international expansion. In India, where mobile internet usage was estimated to have reached 420 million in June, Bytedance already has a stake in local news aggregator Dailyhunt. In Indonesia, the company launched Tik Tok, a social app where users share their own music videos, in September.

That being said, the Chinese unicorn will face competition from local companies, such as Singapore-based live streaming app Bigo – though they could also become potential acquisition and investment targets. Bytedance is well-funded by Sequoia Capital and Russian billionaire Yuri Milner, among other investors.

The Chinese startup also runs an ambitious advertising business, though Liu wouldn’t disclose whether the company has hit profitability. “All I can say is that the company is very healthy and well-capitalized,” she replied. Next year, Bytedance aims to hit about US$7.6 billion in advertising revenue.

Toutiao headquaters in Beijing. Photo credit: Tech in Asia.

Scaling short videos

One challenge that content platforms grapple with when they expand to other markets is localization. Bytedance plans to overcome that with short videos, which it believes have more global appeal.

Creating a one-stop solution for content – like Toutiao’s Q&A column, blogs, and Twitter-like posts – may need some customization, especially in linguistically and culturally diverse regions like Indonesia and India. But for short-video products, Liu explained that “it’s easier to make it a global platform.”

A lot of our technology is actually language-independent.

That may be especially true for neighboring countries in Asia, where there is already proof of cross-border traction between Japanese, Korean, and Chinese content, according to the company. “We found out that creators, content, [and] music videos from Japan are actually quite popular in […] China,” pointed out Liu.

Its music video app, Tik Tok, has also seen positive reception across Southeast Asia in countries like Thailand and Vietnam, according to Liu. But the company declined to disclose any figures around user growth.

In more mature markets, Bytedance will rely on niche markets first, such as the tween and teen culture that Musical.ly and Tik Tok target. The North American and European markets have more developed key players, making market entry more challenging, said Liu. And on top of media sites, there are also social platforms that are in the publishing space.

“I think for developed markets, you probably start out with a niche market and a market that’s untapped and expand from there.”

Dual learning

Ma Weiying, head of Toutiao’s AI Lab. Photo credit: Bytedance

Finally, artificial intelligence may give Bytedance a leg up in its overseas ambitions. Specifically, research from its AI Lab will make it possible to take certain AI systems trained on Chinese user data and apply them to other markets.

“A lot of our technology is actually language-independent,” Ma Weiying, head of Toutiao’s AI Lab, told reporters during a group interview at Bytedance’s AI conference. For instance, the way that the company automatically tags and understands videos is done through image and object recognition. In that sense, the company doesn’t need to understand a user’s native language in order to recommend videos based on what they click.

“So the algorithm we train on a huge amount of Chinese people is now suddenly useful and beneficial to other countries,” he explained.

Conversely, Bytedance’s expansion abroad would make Toutiao’s machine translation systems more intelligent. When Ma was still with Microsoft Research Asia, he studied a type of AI technique called dual learning, which makes it possible for a machine translation system to automatically learn from unlabeled data. More data from international users and products would thus make it possible for Bytedance to develop translation for various language pairs.

That’s the power of Toutiao’s content platform, emphasized Ma. If it goes abroad, the lab can plug in big data not only from China but also from around the world, “across languages, across different cultures.”

This post China’s most addictive news app Toutiao eyes world domination with AI feeds appeared first on Tech in Asia.