TikTok’s owner transcends a contentious year

Hong Kong — ByteDance’s revenue more than doubled to about $35bn last year, defying heightened global competition and former US president Donald Trump’s attempt to ban its signature video service TikTok in the US.

The Chinese company managed to grow operating profit to about $7bn in 2020 from less than $4bn the prior year, a person familiar with the matter said. That’s in a year when Trump sought to ban TikTok and force its sale to American investors led by Oracle. With Joe Biden in office, the company is moving closer towards listing part of its social media empire in Hong Kong.

ByteDance’s phenomenal growth stems from the global success of teen phenom TikTok and its Chinese twin, Douyin, which helped pioneer a new form of social video and undercut rivals from Facebook to Tencent Holdings. Last valued at about $180bn, the company is said to be exploring an initial public offering (IPO) for some of its businesses in Hong Kong, including Douyin. A ByteDance spokesperson declined to comment.

An eventual IPO would follow smaller competitor Kuaishou Technology’s impending $5.4bn debut. Kuaishou, which operates China’s most popular video service after Douyin, is expected to list on February 5 in the world’s biggest internet IPO since Uber Technologies.

But one major uncertainty remains for ByteDance: whether the Biden administration will follow through on its predecessor’s actions.

Founded by Zhang Yiming in 2012, ByteDance built TikTok into one of the most popular apps around the world, with more than 100-million users in the US alone. The start-up has more than quadrupled revenue from just $8bn in 2018 and now posts sales on par with Nike and Coca-Cola.

But the Trump administration labelled the app a security threat and banned the service last year, contending the Chinese government could compel ByteDance to turn over the data of millions of young American users. Oracle and Walmart then agreed to buy 20% of TikTok in a complex deal blessed by the former president.

Biden’s immediate priorities are curbing the pandemic and resuscitating the economy, and he has had little to say so far about TikTok. It’s possible ByteDance could work out a compromise with the new president that allows it to retain full or majority ownership, provided it can demonstrate American user data is secure.

As the TikTok saga raged, Zhang has put more effort into nascent Chinese-focused businesses from gaming and education to e-commerce, while fine-tuning ByteDance’s management structure, the person said, asking not to be identified discussing internal matters.

During a December town hall meeting attended by ByteDance’s 100,000-plus employees, Zhang said TikTok’s user growth slowed in the second half of 2020 because of new competition from YouTube and Snap, according to attendees who asked not be identified discussing private events. But he emphasised that its growth potential still outstripped Douyin’s, they said.

Bloomberg