Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

This Chinese Start-Up Is Poaching Facebook and Google’s Leaders

By Leo Sun - Jun 19, 2019 at 9:42AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ByteDance’s TikTok is gearing up for a big global expansion -- and aging tech giants should be worried.

Over the past few years, Chinese app maker ByteDance has become the world's most valuable start-up, with a valuation of $75 billion. That meteoric rise was fueled by the growth of its short video app TikTok, its news aggregator app Jinri Toutiao, and other apps aimed at China's Gen Z users.

Chinese tech giants Baidu, Alibaba, and Tencent all consider ByteDance a disruptive threat in China. However, ByteDance's flagship app TikTok, which lets users create short lip-syncing videos, is also gaining ground against Facebook ( FB 3.60% ) and Alphabet's ( GOOG 0.90% ) ( GOOGL 0.81% ) Google in overseas markets.

A magnet pulls light bulbs out of a man's exposed brain.

Image source: Getty Images.

ByteDance clearly has its sights set on those two tech giants. In February, it hired Vanessa Pappas, the former global head of creative insights at YouTube, as TikTok's first general manager in the U.S. It also recently hired Blake Chandlee, Facebook's VP of global partnerships, as TikTok's head of strategic partnerships. Those hires are aimed at expanding TikTok's global presence, and the numbers indicate that Facebook, Google, and other tech companies need to pay attention.

TikTok by the numbers

TikTok was formed from the merger of two apps, Douyin (which it's still called in China) and Musical.ly. In less than three years TikTok's monthly active user base grew to over 500 million, making it the world's fourth-largest social platform after Facebook, YouTube, and Instagram.

TikTok was the most downloaded non-game iOS app worldwide last year according to Sensor Tower. YouTube ranked second, followed by Facebook's WhatsApp, Instagram, and Messenger.

TikTok was also the fourth most downloaded non-game app on Google Play. WhatsApp, Messenger, and Facebook held the top three positions. YouTube ranked 10th, but it probably wasn't downloaded as much because it's pre-installed on many Android devices.

ByteDance is trying to lock users into Douyin by launching Mini Programs (similar to the ones found in Baidu, Alibaba, and Tencent's apps) for games, purchases, and other services. It's also expanding TikTok's ecosystem with other linked apps, including the video chat app Duoshan, the messaging app Flipchat (with integrated mobile payments from Alibaba-backed Alipay), and the work collaboration platform Lark.

A young woman in glasses and headphones takes a selfie.

Image source: Getty Images.

ByteDance still owns other established apps like Jinri Toutitao, which serves over 120 million daily active users, the overseas news aggregator platform News Republic, and the short video platform Xigua. The combination of all these apps makes ByteDance a formidable opponent for its domestic and overseas rivals.

Facebook notices the threat, Google looks the other way

Facebook, which hasn't been shy about cloning features from Tencent's WeChat and Snap's Snapchat, already identified TikTok as a growing threat last year. That's why it launched a TikTok clone called Lasso in the U.S. last November.

But Lasso never caught on. In February, Sensor Tower reported that only about 70,000 U.S. users had downloaded Lasso since its launch, compared to 39.6 million U.S. users who downloaded TikTok during the same period.

Facebook will likely kill off Lasso, but it will still probably launch more TikTok clones -- just as it repeatedly launched Snapchat clones (like Poke, Slingshot, Lifestage, and Flash) before it settled on using Instagram as its main Snapchat competitor. It could also integrate more TikTok-like features, like music, lip-syncing, and video effects, into Instagram to widen its moat against ByteDance.

Google hasn't publicly reacted to TikTok's growth yet, likely because it thinks TikTok's short videos don't compete against YouTube's longer videos. However, TikTok could still lure away YouTube's broadcasters and viewers, especially in the fickle Gen Z market.

The bottom line

ByteDance probably won't directly hurt Facebook or Google by poaching their talent. But it indicates that the world's most valuable start-up has international ambitions -- and it could eventually lure away some of Facebook and Google's younger users.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,863.10 (0.81%) $23.07
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
FB
$317.87 (3.60%) $11.03
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,875.93 (0.90%) $25.52

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.