ByteDance that challenged Fb with TikTok has a brand new goal: ecommerce king Alibaba

By Coco Liu and Zheping Huang

Zhang Yiming built ByteDance Ltd into the Most Valuable Private Company in the World through a series of blockbuster apps like TikTok that challenged Facebook and other established companies on their own lawn. His latest destination: Alibaba.

The 38-year-old AI coding genius looking for ByteDance’s next big act has its sights set on China’s $ 1.7 trillion e-commerce arena. The co-founder has hired thousands of employees and has well-known sponsors such as Xiaomi Corp.’s Impresario Lei Jun. committed to driving his next “big break” in global business – selling things to consumers through addictive short videos and live streams. That endeavor will not only test Zhang’s magical touch in app creation and ByteDance’s AI wizardry, but also receiving investors ahead of one of the hottest-anticipated IPOs in technology.

Also Read – TikTok Founder Zhang Yiming is now among the richest people in the world with a net worth of $ 60 billion

His startup is already starting to make waves in an industry that has long been supported by Jack Ma’s Alibaba Group Holding Ltd. and JD.com Inc. is controlled. In 2020, it sold approximately $ 26 billion worth of makeup, clothing, and other merchandise, and achieved success in its first year What Alibaba’s Taobao Achieved in Six Years. More than $ 185 billion will be sold by 2022. Douyin, TikTok’s Chinese twin, is expected to account for more than half of the company’s $ 40 billion domestic ad revenue this year, thanks in part to e-commerce.

“Short video sharing sites have so much traffic that they can run virtually any business,” said Shawn Yang, managing director of Blue Lotus Capital Advisors. “Douyin is not only into ads, but also into live streaming, e-commerce, local life services, and search. That leaves a lot of room for the imagination. “

A burgeoning e-commerce business could help the company surpass its $ 250 billion worth if it goes public and counter concerns over Beijing’s crackdown on the country’s internet giants. Preparations for what is said to be one of the most anticipated debuts in the world are said to be underway. While ByteDance doesn’t care about sales or merchandise itself, it does hope to sell more ads to merchants, increase traffic and cut back on business.

The internet giant is a late entry into China’s social commerce scene, where influencer fans advertise products like a Gen-Z version of the home shopping network. Developed as a marketing tool by Alibaba in 2016, the format took on a life of its own last year as Covid-19 fueled demand for home entertainment. Last year, Alibaba’s Taobao Live had gross merchandise value of over 400 billion yuan ($ 62 billion), and Kuaishou Technology’s social platforms had 381 billion yuan in transactions, more than double that of douyins.

ByteDance relies on its artificial intelligence-based, interest-based recommendations to help the e-commerce business catch up. In a lively coming-out party for the year-old company last month, executives said the company intends to replicate its success by using AI algorithms to feed user content as they shop online. Scrolling through an endless stream of social content linked to physical goods now more than ever, Douyin users cannot resist their impulse to buy, they said.

It’s “similar to shopping on the street,” said Bob Kang, Douyin’s 35-year-old e-commerce boss, to hundreds of spectators at the Guangzhou event. “When people get richer, they don’t go to malls or boutiques with certain things, they only buy when they see something they like.”

Kang, a former Baidu Inc. engineer who was poached by ByteDance in 2017, is one of a number of rapidly emerging junior lieutenants who have been hired by Zhang to break new ground for the company. Previously, he was the technical director of ByteDance’s Helo app, one of India’s most widely used social platforms for sharing content such as videos – until the South Asian nation shut it down last June along with dozens of Chinese apps for national security reasons.

Since Kang took over the running of e-commerce, Douyin has banned live streamers from selling items listed on third-party websites and encouraged them to open their own in-app stores to prevent competitors from like Alibaba and JD.com Inc. benefit from its traffic. He grew a team of account managers from just a hundred to around 1,900 to fight counterfeiting and is hiring more than 900 more jobs to support the business. ByteDance also has an online matchmaking system that allows traders to be connected with influencers and their agencies. Also, physical bases are set up to house live streamers and merchandise, similar to Alibaba.

The initiative was supported by prominent endorsers such as Lei, the Xiaomi founder who hosted livestreams for his Mi TVs and smartphones. Luo Yonghao, a once high-flying entrepreneur who tried to challenge Apple Inc. with its smartphone business, is another top influencer moving more than $ 17 million worth of goods on its very first livestream on the platform.

Smaller retailers are following suit, like Zhou Huang, who opened a Douyin store for her jewelry business in October, bypassing traditional platforms like Alibaba’s Taobao. Instead of imposing heavy traffic fees on the operators of the platform, it has managed to reach a fan base of around 20,000 by creating videos that offer practical tips on how to choose the right size when buying a bracelet online.

“It’s a challenge for brand new retailers like me to win customers on Taobao,” says Huang, whose Douyin store broke even after just three months. “Sometimes people come to our store not to shop, but to have fun. But as soon as we have enough visitors, we can make a sale. “

ByteDance helps. In Foshan, Huang and 200 other jewelry sellers receive training on everything from registering a store to marketing to recording high quality videos. Technical support is available around the clock: Huang says ByteDance’s technicians will come to the rescue immediately if their livestream channel goes down.

Huang is one of roughly 1 million developers who have generated e-commerce sales on Douyin since January and is drawn to the platform’s more than 600 million daily users. The platform, which brings in merchant commission fees as a new source of income, aims to have more than a thousand brands partnered with Suning.com Co. to open stores on Douyin this year. This number could increase fivefold by 2022, the company forecast in an internal memo. GMV could grow up to 600 billion yuan this year before doubling to 1.2 trillion yuan in 2022.

ByteDance’s ambitions aren’t just limited to Alibaba. The company has also started enabling users to book hotels and restaurants through Douyin and offering lifestyle services similar to super apps like Meituan and Tencent’s WeChat.

Douyin’s e-commerce foray into China may provide a roadmap for TikTok, which has already begun testing the waters of online shopping in partnership with WalMart Inc. and Cananda’s e-commerce company Shopify Inc. Back in December, Zhang informed global employees that e-commerce, combined with live streaming and short videos, offers an even greater opportunity outside of China, according to the participants, who did not want to be identified. The company has quietly built a team of engineers in Singapore to grow TikTok’s burgeoning e-commerce business.

ByteDance is pushing for online shopping as the other companies face headwinds. To fuel video game growth, ByteDance bought development studios, but it could take years to produce blockbuster hits like Tencent Holdings Ltd.’s Honor of Kings, and China previously hit the industry hard in fits and starts. When it comes to online tutoring, regulators have tried to curb excessive marketing and competition is fierce against a number of deep pocket startups like Zuoyebang, which are backed by Alibaba.

In April, Zhang’s company was one of 34 companies hired by the antitrust watchdog to conduct internal investigations and correct excesses. And while the payment service was just getting up and running, ByteDance and his colleagues were hit with sweeping restrictions on their fast-growing financial operations after meeting regulators, including the central bank, last month.

However, the same test could help the TikTok owner break into Chinese e-commerce, the largest online marketplace in the world. Alibaba has held back rivals JD.com and Pinduoduo Inc. for the past decade, ostensibly through practices such as forcing dealers to enter into exclusive agreements. Regulators have since imposed a record $ 2.8 billion fine on Jack Ma’s flagship company and made the elimination of “pick one out of two” one of the main goals of their antitrust campaign to make room for talented talent like ByteDance.

The biggest and most immediate boost from ByteDance’s expansion into e-commerce right now is advertising revenue, which still makes up the bulk of its revenue. As the number of merchants on Douyin increases, so does their marketing spend within the platform. The company believes ecommerce could outperform gaming to make the biggest contribution to ad sales. At rival Kuaishou, dealers contributed around 20%, the company said in March.

“It’s more about getting a bigger share of ad spend from brands that would otherwise spend money on platforms like Alibaba,” said Michael Norris, senior analyst at Shanghai-based research firm AgencyChina. “This is where the threat to Alibaba comes from.

– With the support of Jinshan Hong and Yoyo Cheng.

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