TikTok Rival Kuaishou Desires Your Consideration—and Funding
TikTok was undoubtedly the most talked about app of 2020, both for its viral popularity and the political issues that resulted from it. Its biggest competitor in China hasn’t been scrutinized overseas, but it could still cause a sensation in the market.
The upcoming Tencent-backed Kuaishou IPO – “quick hand” in Chinese – in Hong Kong could be one of the largest in the city. The company was founded in 2011 as an app for creating GIFs – animated images used in chats – and is the second largest short video app in China after Douyin, the Chinese version of TikTok. Analysts at Morgan Stanley, one of the IPO sponsors, estimate the value between 70 and 97 billion US dollars.
In Kuaishou, 262 million users spend an average of 86 minutes per day on the app. While Douyin was first known for goofy videos of music and dance that attracted young people, Kuaishou started out as an app that documented everyday life for ordinary people outside of big cities. Today, more and more users are using both apps, but Kuaishou’s users are still focused on smaller cities.
Kuaishou generated nearly two-thirds of its revenue from live streaming in the first nine months of 2020: users buy virtual gifts to give tips to the performers. Live streaming was very popular in China a few years ago but has now been usurped by short videos. Such a shift is also significant in Kuaishou’s financial data: live streaming accounted for 95% of sales in 2017.
Live streaming’s contribution is likely to continue to decline, but what replaces it is more exciting for investors. The company’s advertising revenue, which arose from the popularity of its short video app, tripled in the first nine months of 2020 compared to the previous year and now accounts for around a third of sales. The advertising business is also likely to be more profitable than live streaming. Kuaishou’s gross profit margin has increased in recent years.