TikTok strikes off Alibaba Cloud: report · TechNode

Chinese internet giant ByteDance has decided to stop hosting TikTok and other overseas apps on the Alibaba cloud, reported Chinese financial media Caixin (in Chinese). Global hit app TikTok has an estimated 700 million monthly active users worldwide.

Why it matters: ByteDance’s decision is a blow to the e-commerce giant’s cloud computing industry. Alibaba saw significantly slower quarterly revenue growth in the first quarter, attributing it to the loss of a “world-class customer in the Internet industry.”

  • ByteDance also appears to be responding to increasing regulatory pressures from the US and the European Union regarding personal data concerns.

Details: ByteDance has decided to move its servers for TikTok from Alibaba Cloud to Amazon Web Service and Oracle, Caixin reported last week, citing two anonymous sources.

  • The contract is valued at approximately $ 800 million per year, the sources said.
  • Alibaba saw slow growth in its cloud business in the first quarter, apparently due to the loss of its deal with ByteDance. The company announced last week that its cloud business grew 37% year over year to RMB 16.7 billion (approximately $ 2.6 billion) in the first quarter. The cloud business grew 58% in the first quarter of last year. The segment grew by 50% in 2020 compared to the previous year.
  • Alibaba’s chief financial officer Maggie Wu said in an earnings call with investors last week that the slower rate of growth “was due to a change in our relationship with a world-class customer in the Internet industry.”
  • “This customer has a strong presence outside of China and has made use of our overseas cost services. They have decided to end their relationship with us regarding their international business due to non-product related requirements, ”said Wu.
  • While Wu didn’t mention the company’s name, two sources told Caixin that it was ByteDance. They said TikTok used Alibaba Cloud’s data centers in Singapore to secure user data in the US and serve the Southeast Asian market.
  • Both companies refused to comment when contacted by TechNode on Tuesday.

Context: According to the market research company IDC (in Chinese), Alibaba is China’s largest cloud service provider with a market share of more than 40%. After Amazon and Microsoft, it is also the third largest cloud service provider in the world.

  • Alibaba made its foray into the US market in 2014. Today the company operates two data centers in the country.
  • According to local media reports, ByteDance operates most of its domestic services from its internal data centers in northern China’s Hebei Province.

Wei Sheng is a Beijing-based reporter who covers hardware, smartphones, and telecommunications, as well as regulations and guidelines for the Chinese tech scene. He writes a monthly tracking newsletter … More from Wei Sheng

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