ByteDance investors value TikTok at $50B in takeover bid
reuters.com
reuters.com
If that's the case, do you believe FB is overvalued at $662B? Instagram, as of 2018, was estimated to be worth around $100B on its own (with about 1b MAUs, versus TikTok's 800m).
TikTok seems at least equally addictive, and its algorithm does a fantastic job at quickly showing good content that matches your interests.
Instagram, acquired for $1b in 2012, had $0 revenue.
WhatsApp, acquired for $19b in 2014, had $10.2m revenue.
Based on TikTok's usage-per-day and active users being comparable to Instagram, they could presumably generate ~similar revenue if focused on it.
With these types of apps, growth comes first, and profitability comes later (and the profitability step seems to come easily, unless FB cannibalizes you).
Where are you getting the $176mm figure?
"The investors’ bid values TikTok at 50 times its projected 2020 revenue of about $1 billion..."
So that's a projected revenue growth of 465%. That's still projected, but a big number.
2) Online spending: In theory wealthier countries / demographics should have higher online spending. May also have correlations with gender, age, employment status, number of digital devices, delivery infrastructure, etc.
3) Advertiser relationships: the real customers have to want to put their stuff next to your content.
4) Political risk: if many countries ban it, it’ll lose access to a lot of high value markets.
Lastly, profitability doesn’t always come later particularly for high bandwidth applications. Personally I’ve been getting a higher number of ads from YouTube but they are exceptionally poorly targeted (I skip at-least 90%). I would expect google to have as much data as anyone. The only explanation I have is that it’s simply too expensive to produce video ads to have an efficient targeted ad market.
I'll take the opposite side of this bet any time.
TikTok will become a juggernaut on par with Instagram and perhaps even surpassing it.
These companies make apps to try to monetize a community, but communities are fickle and easy to scare off. If I were an investor, I'd value these apps for the computers in their offices and the code their developers write and that's it. Maybe $100mil if you get me on a good day. You can't value them for their reach, because it's not the company or the app that makes them valuable, it's the community.
https://www.statista.com/statistics/545967/snapchat-app-dau/
Snap is losing a lot of money.
Their operating loss was an astounding $596 million for the first two quarters of 2020. Barely an improvement over last year's $620m operating loss for the same period.
Somehow they managed to generate a $596m operating loss on $916m in sales. Truly remarkable performance. It's not easy to so poorly run a business that should be printing profits. Facebook generated nearly a billion dollars in operating profit at that sales scale. The least Snap could do is break even.
Besides that, they've built out their first-party content platform pretty well, which I assume is what's driving their advertising growth, and (anecdotally) is shared in-app relatively frequently, although I've recognized some reposting/reformatting of said video content from Youtube or other sources, e.g. WatchMojo.
Vine was bought by Twitter and shut down. Tumblr was bought by Yahoo and suffered the same fate as everything Yahoo buys.
What makes TikTok unique beyond growing like wildfire: their monetization strategy will be easier (the social aspect leads to relevant advertising), and their community is more stable!
The stable community is driven in part by their algorithms, which replace Instagram and Facebook's idea of a feed of those you follow. It gives more power to TikTok, in that you won't notice if some members of the community leave, and they can continue showing you content you'll enjoy from millions of other users.
To run through the list of companies you mentioned:
(1) Snapchat has a solid userbase that's likely to stay with it, and they're worth over $30b. They aren't profitable, but they chose that path when they focused on Spectacles above monetization, and paid engineers more than Google. A $50b valuation wouldn't be unheard of if they had 2x time-on-app as TikTok does.
(2) Vine had hundreds of millions of active users when it was shut down by Twitter.
(3) Tumblr is unique; they cut their own head off when they started removing content. They were always a niche service, without the mainstream appeal and without the ability to target their users with relevant advertising.
I think monetizing a community that did not start with the expectation of being monetized will be difficult. Reddit is dealing with this right now and it's degrading the site and the community and they still aren't profitable. Youtube has the same issue right now - many creators did not plan to have their channel monetized and are now being shutdown or delisted because their content is thought to be dangerous to the monetization efforts.
This is what I mean when I say that TikTok is "easy to uninstall". As soon as a creator feels burned by the monetization efforts, they press and hold and click Delete App and they are gone. There's no contract in place that says "if you quit you must give us 60 days notice or pay a penalty", there's no stickiness but the validation from the community.
Monetization puts the company in the middle of the validation the creator gets from the consumer. Creators detect this, feel like they are being cut off from their drug, and bail to find the next "dealer".
The endurance of Facebook, Instagram, Youtube and Twitter is the precisely because of the connect/subscribe/follow model.
Algorithmic content from random creators is not a model for creating an enduring user base. Users will eventually get desensitised to it and leave. There's a limit to how many memes you can consume.
Another thing about these users in this specific demographic always eventually do is they just grow out of it and leave for something else. Or perhaps what was 'hot' in 2020 is now 'not' in 2021.
They'll just flock to the next social network rocket ship until either it runs out of fuel or if the liftoff (momentum) is too slow. Which ever event happens, it's the beginning of the death of the social network's growth.
Obviously Tiktok and their advertisers will be doing a lot of work on this, and they've only just begun, but I really wonder about the efficacy of the medium for ads. It seems like a much more difficult forum for that. Even youtube ads I've heard are often cheaper than fb/google ads, perhaps because the video format is so challenging for advertisers to get right (plus it's expensive to produce good creative).
TikTok has been very good at focusing on new content discovery first when you open the app, making you swipe left to see the people you follow second—this is the opposite of Instagram. If Facebook does manage to pull people like Charli D’Amelio and Addison Rae to Reels and makes them more prominent, it would really be interesting to see two different philosophies compete against each other.
Sounds more like Facebook should restructure as a holding company and keep creating independent concepts to see what succeeds, but keeping the Facebook name is likely an ego-driven decision.
https://techcrunch.com/2020/07/01/lasso-facebook-tiktok-shut...
For every pundit-bashed unicorn, there are tens of thousands of times the pundits got it right.
That's been the dynamic with Tesla since the company was started.
> At that point Tesla may become no more than Dachia or Kia.
The future is already here, and it requires these old car companies (Ford, GM, etc) to not only become electric car companies, but also become computer hardware and software companies. Many many manufacturers will fold in the coming years or be absorbed by larger conglomerates because they simply won't be able to compete on these vectors.
The advantages/efficiencies these old car companies have spent decades building are being rendered irrelevant. And that's the real problem for them. The risk isn't that they can't compete, the risk is that whatever they put out is irrelevant. Think iPhone v. Blackberry.
It's not just about making a new type of car. It's about building a new kind of company entirely.
The worst case scenario is Tesla gets acquired for a godly sum of money - not that it goes under or becomes the next Kia. Tesla's battery production capacity very well makes the company one of national strategic interest.
Fab could have been successful as a not-so-large company, but it wanted to be Amazon.
Is there any real reason why Tesla should be worth more than the rest of the US auto industry combined? Can Uber ever actually turn enough profit to justify their valuation? At what point does Amazon stop growing and their PE ratio start mattering?
Right now investors seem to believe that these companies have a very bright future ahead of them. Some of these companies have had “a very bright future” for over 20 years now. Some of these companies have very bright futures even though they’re only supported by investors and have never made any money of their own. Uber, for example, lost $8.5b in 2019 and are surely going to lose a ton this year too.
In the long run, how many SV unicorns and traditional companies pretending they’re tech companies will actually prove their valuation was right? A bear would say very few.
DHH had a widely shared post where he said FB wasn't worth $33B+ and it could never be. He was clearly wrong (off by an order of magnitude). Eventually there will be some overvalued companies (WeWork before the valuation plummeted might be a good example). But given how many bear predictions have turned out to be really wrong, it's good to be skeptical of similar arguments going forward (they won't always been wrong, but some have been spectacularly wrong).
I think this is like asking "Should Amazon be worth more than all e-tailers combined?" circa 2009. Both of their businesses are growing in tangential directions to their core business. In just about 5 years, AWS turned from some "nice supplemental income" to becoming the company's new core product.
The Tesla bulls are betting that Tesla's energy collection and storage products will grow to eclipse their car business and take advantage of the economy of scale of the GigaFactories. The bears are only looking at Tesla as a niche car company.
Well you really don't have to do a lot to have better content than Instagram.
I'm glad TikTok could prove that social network users including very young generation can produce better content. Otherwise, Facebook was going to brain damage half of the earth population with the type of culture they are promoting for profit. And everybody was going to blame generation for it instead of the world that we designed for them.
Yeah, I think it’s overvalued by several hundred billion, which is scary dangerous when you think about it. That’s a bubble that tech might not be ready to reconcile.
Infact I would go ahead and say real tech was under valued look at Sun Microsystems, A company that Developed its own Processor (Sparc) , Its own OS (Solaris) , Its own Database (Mysql) , Its own VM (Virtual Box) , Its own Language and Development Platform (Java), Its own Development IDE (Netbeans) every one of those products is real technology and a leader in its own category.
And yet the company was sold at 1 Billion USD, which seemed like short change.
That was 2009 though, was 1B USD small compared to the average corporate acquisitions at the time?
Instagram was also sold for 1B if I recall correctly.
Despite the controversy with its personal data leakage, TikTok has been massively successful and put the established players like Facebook, Twitter and even YouTube on alert. Competition forces companies to improve and just as we need Android to hold iOS accountable, etc TikTok is a good counterbalance to Facebook.
Another dimension is that the tech space is either dominated by U.S. companies or regionally segmented (e.g. Whatsapp in Europe, Wechat in China). TikTok was exciting as a non-U.S. product that grew viral globally. If ByteDance is forced to sell to a U.S. company, then it's back to the status quo.
They kind of dug themselves in hole with how sketchy the app is
This does not seem specific to tiktok at all. Would you jump in on discussions on LinkedIn and claim "Not surprised, given how sketchy LinkedIn is?"
https://old.reddit.com/r/videos/comments/fxgi06/not_new_news...
This article further shows the point I was trying to make: not saying tiktok is in the right here but the media focus on tiktok for the entire article and then tag on the full list of 32 apps towards the end of the article in bullet points.
A recent example is the app was caught reading the user clipboard in iOS 14 beta but a lot of other apps were also caught red handed. The oft-cited national security risk about ByteDance providing user info to Chinese government is a bit overblown, when the NSA has been spying on its own citizens for years...
Countries using foreign products will be more and more wary of espionnage.
Attempts at local data residency are encouraging. Yet they are still a far cry from what is needed.
It is unfortunate that there’s less diversity of competition, but the loss of trust happened for a reason.
Stateside, I'm discouraged to see it's VC firms making bids (according to the article), as then it may become a play on how to flip this to Facebook as they are the only ones actually monetizing social media.
Eternal September: what has happened to Instagram will also happen to TikTok.
Additionally there is the very real risk that TikTok will be seen by governments as what it is: Chinese spyware. India has already banned it, I hope that the rest of the world follows suit.
Well that's why the investors are trying to take it over.
>Eternal September: what has happened to Instagram will also happen to TikTok.
Definitely agree this is always a concern, but the type of content that is rewarded on TikTok makes it less exploitable by people who build followings by posting low-effort content that looks good aesthetically.
As long as China has anything meaningful to say, that won't be enough.
> but the type of content that is rewarded on TikTok makes it less exploitable by people who build followings by posting low-effort content that looks good aesthetically.
Lol most of the stuff that goes viral on Tiktok is essentially that. People scaring cows ffs (look up "kulikitaka challenge"). Can't get much more "crap" than this.
That's not what my FYP looks like and I don't think most people would agree TikTok and IG content aesthetics are similar... but even scaring cows sounds more entertaining than a picture of an influencer on the beach.
Forgive me for not being completely in the know, but everything I've seen about TikTok leads me to believe that it's primarily low effort content.
In five years, everyone will be complaining about how TikTok is boring and worthless, but The Next Over"valued" App is going to shake things up and award good content.
Overheard on current US war on Tiktok. A thread:
Talks abt ban on Tiktok subsiding a bit because Tiktok in talks with General Atlantic and Sequoia to sell to a US shell company. US demanding that Tiktok technical staff be completely changed, AI algorithm be based in the US...
Continued at https://twitter.com/CarlZha/status/1288284750273114112
Suppose that PRC considers to open the GFW but with the same requirements (AI and tech team evaluated by MSS). Would that be acceptable?
On the other hand, until the US kicked over the table, the UK had a national security oversight centre for Huawei where people with UK security clearances performed code review ..
I don't think the CCP is putting spyware into the iPhone because it's only barely technically possible and they don't have the will to risk it. Getting caught with your hand in the cookie jar there would be the end of their whole economic strategy.
Would the CCP put spyware into Tik Tok? It's trivially possible, and the will is absolutely there. I would be more surprised if it were somehow proved that they weren't interfering with Tik Tok on some level.
Would the CCP put spyware into 5G? AFAICT, it would be technically possible, and the payoff from it would be so huge that they might have the will for it, but it's a close thing. Hard to say definitively either way. I think the industrialized nations should make their own 5G, just so they're not shut out of a growth industry, but the spy thing is sort of a wild card that could be something or nothing.
I don't believe for one second that the CCP doesn't leverage Chinese made networking gear for intelligence. They probably even leverage third party gear too. This stuff is all so insecure everyone is in everything anyway.
I wonder what percent of people are actually stymied by the gfw, versus minorly annoyed
Talks abt ban on Tiktok subsiding a bit because Tiktok in talks with General Atlantic and Sequoia to sell to a US shell company. US demanding that Tiktok technical staff be completely changed, AI algorithm be based in the US ...
US want both TikTok staff and the algorithm to be verified by a US technical committee which includes the NSA. US threaten to put TikTok on entity list that would prevent it frm run on Android or OS phone if it doesn’t sell to a US company.
The implication is that for any Chinese app with a lot of users abroad, US will now demand the code and the models or they will kill the app.
Some Chinese tech leaders nows think China needs a tech Manhattan project to build its own IT stack from scratch. It will be hard but can be done if China really tries esp when forced to the wall by US.
Some people are pretty sure US will sabotage any Chinese attempt to go it alone. Many in China believed US intelligence agencies behind 2015 XcodeGhost malware attacks on China to test whether they could screw w China’s software “supply chain” also a warning to Chinese.
plot twist, HQ moved to Israel and entire company becomes un-critique-able
Nothing against Israel, they're smart to hedge their bets.
Two ways. Gradually and then suddenly.”
I'm not surprised at all that they find international success. Any very large domestic market will create viral products and give their makers enough money and reach to go global.
The parent comment is merely stating that no Chinese app has enjoyed global success and that many of their apps are very janky with poor UI/UX (generalizing here of course).
USA 20 Million MAU in 2018, estimated 70 million in 2020?
Snapchat has recovered from the low point at the end of 2018 when FB/Insta had copied the stories feature and all seemed lost. Their traffic is up, stock is up and revenue is growing quickly again ($1.18B in 2018 -> $1.72B in 2019).
Perhaps our definitions of doing well are different.
Sure DAU is up, but we all know those metrics are inflated BS and monetization is all that really matters. It’s been 3 years since IPO and they’re still making a heavy loss.
https://www.ft.com/content/c6a8b9bc-dd6d-46a7-b008-825568982...
TikTok’s rampant growth strikes wrong note with US
Chinese corps generally have a much lower standards on privacy. Because they were subject to lower standards when they started in domestic China.
Edit: this is a genuine question I do not have an answer for and I'd like to hear some takes.
If there's no follow model, how do I see stuff that I want to see? Say there's a particular guy I like, I want to see a bunch of his content. Do I have to like it and hope the algo gives me more?
IG made 20B in 2019, but it's revenue strategy may not work for Tik Tok's demographic. I'd like to see them capitalize a little more before claiming they should be worth 300B.
As someone who grew up outside the US or a western country I don't really see anything wrong with TikTok. If they do something Facebook or Google or your runt of the litter tracking script will do it. I am also not brought up in China or a country involved in this dispute so feel I have a neutral view.
What I see as torturously unfair that this founder made a great startup and app that people do enjoy to consume. Because it simply isn't from a western country he must be bought out at some crappy valuation (which he probably doesnt even want to do) simply because this is the first foreign tech company to do well in the US that isn't from a western country.
If this happens where TikTok is banned/has to sell, etc. I would feel it completely reasonable that India, Africa, China, some small Eastern European country, SE Asia forces a US company to sell down its local operations at a price they dictate to a local business.
WhatsApp for example should be forced to sell its Indian operations to Reliance Industries. Don't any of you think that sounds rather unfair to Facebook?
That's a false projection. For example, products from Korea and Japan are very popular in the US. App from those countries would have no problem. China is qualitatively different.
> must be bought out at some crappy valuation
Nobody is forcing the sale, they also have the option to stop operating -- like Google chose to do re: China when they refused PRC demands.
> WhatsApp for example should be forced to sell its Indian operations to Reliance Industries
You mean like how US companies are forced to vest technology with local partners to operate in China?
https://money.cnn.com/2018/04/05/news/economy/china-foreign-...
For example, non-Chinese companies cannot sell electric cars in China without handing over their trade secrets.
Is that fair?
If they stalled until the election would there still be interest from lawmakers on this topic? Or is it topical for the moment because of China and Covid?
https://www.anti-empire.com/today-the-us-is-waging-a-war-on-...
Just goes to show that the US is as much the thug as it has always been.
https://www.bloomberg.com/news/articles/2020-05-20/tiktok-ow...
That would have sounded insane to me last xmas, now a few months on watching the economy deflate, more so. I guess economists must know more than a mere programmer like me.
It's easy to see overvaluation there.
Snapchat is a $33B company, with 30% yearly revenue growth and similar demographics to TikTok.
TikTok has a lot more active users than Snapchat and is growing much faster. It's the only non-FB app in the global top 5. That alone makes it an attractive investment as a hedge.
Take a look at the stats: https://mediakix.com/blog/top-tik-tok-statistics-demographic...
$200B min if investors are serious.
Everyone young uses tiktok. It's much bigger than snap could have ever hoped. TikTok is FAANG tier company.
If I were the founder, I'd go the Chinese government and ask them to ban Tesla and put tariff on Apple in retaliation. Tell the U.S. to play free market like they claim. Or lost access for it's companies.
TikTok deserves it's success fully. It's very unfair that the U.S. government is insistent on blocking it. It's not a monopoly. It's not a dirty company. Virtually all of its "privacy violations" are the same violations done by Google, Facebook. Break up BigTech instead of hitting a creative startup.
Huawei is way more valuable to the Chinese government, and they didn't ban US companies in retaliation either.
Side note: Douyin features are way ahead of TikTok. e.g. https://youtu.be/yyeO7EUciIQ
That's probably because they've already been banning American companies for years if they posed any potential thread to Communist control.
But if that is your opinion then don't come crying to the rest of the world, when they do the same exact thing to Chinese corporations that China has been doing to others, for decades.
Fair is fair.
And frankly I doubt the correctness of the statement altogether. There are a ton of American companies operating in China, much more than the number of banned ones. How many US companies does China really ban?
What all these comments about 'fairness' also don't mention is that under the WTO rules, developing nations (which China officially is) are allowed to take protectionist measures.
There are huge restrictions by China in American corporations.
You should look this up, if you are unfamiliar.
It is well accepted that there are many more restrictions, in comparison to say if an American corporation wanted to enter the EU market or something.
This is common knowledge, and it is easy to look this stuff up.
> are allowed to take protectionist measures.
And America is allowed to retaliate against them.
China can do what they want, but if they come crying to everyone else when other countries retaliate, nobody should expect others to take such complaints seriously.
Interestingly, you'd think that, but it's dead wrong. I'd say about a quarter of people actually use tick tock, compared to almost all using instagram or snap chat. There's a "subculture" of people that use it and are massively active, and most others don't use it at all. This strikes me as a massive impediment to tick tock's growth in America: it's entirely captured a specific group but has made essentially no inroads with any other.
> It's not a monopoly.
This is a straw-man; no one is saying it is. People are saying it's a national security risk.
> Virtually all of its "privacy violations" are the same violations done by Google, Facebook.
Well, I'm less sure of what tick tock does with data than either of those, so maybe better the devil you know? The concern is that at least at least FAANGs can be sued in a court of competent jurisdiction, whereas tick tock is based in an autocracy that is deeply opposed to the concept of freedom and means to make itself the foremost world power by any means necessary.
They said everybody young uses tiktok. While that's obviously an exaggeration it currently is the number 1 most downloaded app on iOS and Android by quite a long way.
It's only 300M behind the all time number of Instagram downloads on all platforms (1.8B vs 1.5B) and is growing at 4x the rate of Instagram.
https://mediakix.com/blog/top-tik-tok-statistics-demographic...
I'm speaking as a very young person, there seems to be a small group (about a quarter) who uses tick tock avidly. This is borne out by the data I could find, which showed approximately 22% usage among young people: https://morningconsult.com/form/more-young-teens-use-tiktok-...
She absolutely can if you are of any interest to her. See this talk by FBI director Christopher Wray that discusses Chinese influence operations against Americans: https://www.c-span.org/video/?473658-1/fbi-director-wray-chi...
China has already been doing stuff like this for decades.
It is about time that the US started doing the same thing back, when it makes sense to do so.
Something better could come along from an existing or new competitor, the ad platform may not come together, interest could decline when lifestyles change, they could try a bold new idea that doesn't work out or make other mistakes, etc.
Sure DAU is up, but we all know those metrics are inflated BS and monetization is all that really matters. It’s been 3 years since IPO and they’re still making a heavy loss.
We've also learned from Snap at this point not to overvalue social media. I think they really should take the $1B offer and go.