Por Erik Wernberg-Tougaard
While most people have heard of Tiktok, not many people are familiar with its parent company, Bytedance.
How Bytedance became thethe most valued internet startup in the worldWHAT ABOUT THE MAIN COMPETITOR OF COMPANIES LIKE GOOGLE, FACEBOOK AND TWITTER? HOW THE BYTEDANCE ALGORITHM WORKS AND HOW THE COMPANY DEALS WITH PRIVACY AND DATA PROTECTION. THESE ARE SOME OF THE QUESTIONS THAT WE ANSWER IN THIS BLOGPOST.
WATCH UNTIL THE END TO LEARN MORE ABOUT MICROSOFT AND ORACLE'S INTEREST IN BUYING TIKTOK AND WHY THE TRUMP ADMINISTRATION AND THE CHINESE GOVERNMENT GOT ENGAGED
The Rise of Bytedance
Bytedance was founded in 2012 by Chinese internet entrepreneur Zhang Yiming and since then the company has been one of the fastest growing companies in the world. According toHurun Global Unicorn Index 2020Bytedance is the world's second-largest unicorn with an $80 billion valuation, and its popular video-sharing app TikTok has been downloaded2 billiontimes globally starting today. With over 110 million downloads this year alone, TikTok has taken over as thethe most downloaded app in the world in 2020until now. TikTok is available in over 150 countries and has an estimated800 million monthly active usersfrom July 2020.
In 2019, Bytedance had revenue of17 billion dollars,of $7.4 billion in 2018. That is to say, in the eight years since Bytedance was founded, it has earned more than twice as much revenue as Google has achieved in its first eight years.
What is Bytedance known for?
Bytedance's most well-known platform is TikTok. The Chinese counterpart is called Douyin, but there are many other companies within the Bytedance ecosystem that own news aggregators and other video platforms.
Bytedance started with its news aggregator app "Jinri Toutiao" - Today's Headlines - which is the biggest news platform in China. Every day, more than 200 million users open Jinri Toutiao to get personalized news aggregated and presented by artificial intelligence, which is powered by more than 4,000 news outlets. There are no editors or journalists behind the selection, just an advanced algorithm that can identify users' consumption patterns and recommend news based on users' interests. Users spend a daily average of 76 minutes on the platform, almost doubleFacebook, Instagram and Snapchat. This makes it very attractive to advertisers who can very precisely target ads based on user data (such as age, location and interests) and most of Bytedance's revenue comes from this as well.
In May 2015, Bytedance started to venture into the short video business, initially launching the Toutiao video channel. On the channel, individual users can create and upload films, and in 2016, Toutiao's videos were viewed on average over a thousand million times a day, which made it the largest short video transmission platform in China in that then. However, it became clear to Bytedance that Toutiao's monthly active users had reached maturity and Bytedance needed new services. This was Bytedance's first step in creating its video sharing apps TikTok and Douyin.
Tiktok and Douyin
In September 2016, Bytedance used its proven recommendation algorithm to launch Douyin (in China) and TikTok (outside China, mainly in the US). On TikTok, users can record short videos imitating and dancing to a song and customize it with filters and graphic ringtones.
Like Jinri Toutiao, TikTok relies on users' in-app behavior to create a user profile, to whom it can present personalized advertising. TikTok and Douyin skyrocketed in users, and Bytedance also bought Musical.ly, a Shanghai-based short lip-syncing and comedy video app that has gained a lot of traction in the US. In addition, Bytedance also bought Indian news platform Dailyhunt and runs the English language platform 'TopBuzz'.
How advanced is the algorithm?
Bytedance's core is its highly advanced algorithm that works on the basis of machine learning, artificial intelligence and big data. The Bytedance algorithm, which is the sequence of instructions that prepares what is included in your newsfeed, has been developed since Jinri Toutiao and is generally considered to be one of the most sophisticated on the market today. This is probably the reason why Bytedance apps are so addictive for consumers. TikTok's short video format, for example, makes it very easy for consumers to open the app to "just take a quick look at a video." However, this often ends up in long in-app sessions, which feed the algorithm to improve. This type of "little" content has been a big part of Bytedance's rapid growth.
The more users and longer usage sessions, the better the algorithm. That's how machine learning works. And algorithms can be trained very quickly: while it takes you 10 minutes to watch a video on Youtube, the same amount of time can be spent watching 40 15-second videos on TikTok. And the algorithm learns quickly that way. The algorithm has several inputs that it weighs when deciding which video will appear next. These include the duration of the reproduction, the repetitions, the tastes, the shared actions, the comments and many other entries, which the algorithm uses to provide "what you need, when you need it", to attract and retain as many users as be possible.
Privacy and data protection
You can't mention TikTok without mentioning privacy and data concerns, which have occupied a good portion of the TikTok debate in the media. The company has faced increased scrutiny from US lawmakers concerned that TikTok is sharing personal information of (American) users with the Chinese government, and Mike Pompeo, US Secretary of State,declaredthat or Tiktok places"your private information in the hands of the Communist Party”. Also in Denmark, specialistsHe warned(in Danish) that the app may be collecting"so much data that basically you have to imagine a person in the corner looking at your screen, following everything you do.”
Around the world, authorities are starting to investigate TikTok due to privacy concerns. As of June 30, 2020, the Danish Data Protection Agencystartedan investigation seeking to assess the extent to which TikTok complies with EU GDPR requirements. India banned TikTok along with100 other appswith ties to China. France's data control body, CNIL,also decidedto take a look at how TikTok handles transparency requirements, user data, and what steps TikTok takes to ensure that minors' data is adequately protected. And the list goes on.
In reaction to all these criticisms and concerns, TikTokAnnouncedwho will open a 'transparency center', which will sidestep their privacy and security concerns. And according to a comprehensive study of TikTok data streams,pelo Wall Street Journal,there were no direct signs that TikTok communicated or shared private data with Chinese authorities. as with himcaso de huaweiTherefore, it is very difficult to confirm or refute such links.
TikTok has also come under heavy criticism for being subject to Chinese government censorship, which discourages TikTok from mentioning "sensitive topics" such as Tibet or the student protests in Tiananmen Square. Furthermore, the apps algorithm was criticized for discriminating on aspects such as race and obesity, and also promoting sexualized content. With a user base made up primarily of young children, tweens, and teens, exposure to this type of content is problematic.
Bytedance goes international
Bytedance is probably Google and Facebook's fastest growing competitor in recent times. Its user base spans the world's two largest economies, on a much larger scale thanany other digital advertising company. According to founder Zhang Yiming, Bytedance's main strategy is to eliminate the need to search and instead be able to serve users exactly what they want, when they want it. This is in stark contrast to the way companies like Google and Amazon work, where the search engine is the heart of the business.
Google and Amazon products are designed for use on computers, while Bytedance's DNA is originally designed for mobile devices. In China, users spend much more time on their mobile phones than on their computers, so designing for mobile devices is crucial. This means that the entire design and layout is more suitable for mobile users.
The watch is Tik-Toking
On August 6, Trump signedan executive orderthis gave TikTok owner Bytedance 45 days to sell or spin off its US TikTok operations or face a ban, citing national security reasons. Microsoft has said it is prepared to explore buying TikTok in the US, Canada, Australia and New Zealand and is negotiating a deal with Walmart. But instead, TikTok is making corporate tech company Oracle its US business partner. Oracle will act as a trusted technology partner and handle data for US TikTok users.
According to CNN, Donald Trump has already indicated that he would support an agreement between Oracle and TikTok. There's no doubt that partnering with Oracle is a strategically smart move for TikTok, as co-founder Larry Ellison is one of the few Silicon Valley tech leaders to support the Trump administration.
China gets involved
The Chinese government is well known for interfering with transactions if things don't go according to their wishes. And this time is no different. The Chinese government has established export rules that will complicate trading with TikTok. By updating its list of export controls to include some AI technology, TikTok's personalized recommendation algorithm will likely be included in the list, according to theWall Street Journal. In this way, the Chinese government has placed itself in a central position to control the technology war.
As James Lewis of the Center for Strategic and International Studies in Washington, D.C., states,put, the most valuable part of TikTok is its algorithm:
“You could buy the [TikTok] brand and user data without the algorithm, but the algorithm is the most valuable part of TikTok and the secret to its success.”
Microsoft/Walmart and Oracle bids, respectively, included the algorithm value in their bids. But according to Chinese state media CGTN, the partnership does not appear to involve TikTok's algorithm and ByteDance is not selling TikTok's US operations.
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