ByteDance – APP Factory
Early this year, 7 out of 10 Top 10 iOS apps in China were from ByteDance. As an app factory, ByteDance has mastered the method of quickly launching, measuring, A/B testing, and monetizing a new app.
Principles for mass manufacturing apps
One big difference compared to other social network companies is that all tech stack, including the recommendation engine, is shared across all ByteDance apps in all countries. This ensures that all apps will benefit from its strong tech and product team. It also significantly reduces the cost and time to launch a new app. The product manager just needs to focus on the product feature itself.
ByteDance has broken its team into three segments:
- Tech/Engineering: Retention
- User Growth: User Acquisition
- Commercialization: Monetization
Similar to Facebook, ByteDance relies heavily on A/B testing for its decision-making. Once an app proves that it has the strongest retention rate, the company can focus all its resources on promoting it. On the other hand, if an app shows an early sign of decline, the company will shut it down quickly. Recently, ByteDance shut down Vigo Video, which was a very popular app in 2018-2019.
ByteDance started in 2012. Globally, it’s famous for TikTok, which is an app that pushed into the mainstream only in 2016. ByteDance’s core product was Doutiao, a curated news app. Zhang Yiming believes that all social networks come and go. The key to success is to constantly test new apps and catch social trends.
Recommendation vs search
One key product feature for all ByteDance apps is the recommendation engine. The app quickly learns a user’s preference, then optimizes its recommendation engine to encourage the user to spend as much time within the app as possible. Essentially, it makes each app very addictive without any effort from the user side.
This is a very different product philosophy compared to other apps. Typically, media apps expect a user to input a search term and watch specific content. ByteDance flips it around. Whether it’s a news app or a video app, there are almost no user types in a search term for a video. Just like Tinder, a user can swipe one video to another, easily spending a few hours on it.
ByteDance is the most successful Chinese tech start-up in terms of globalization. Before ByteDance, most global Chinese tech start-ups were hardware start-ups. ByteDance’s domain is mobile apps, especially social networks, which require lots of local expertise.
In May, TikTok hired Kevin Mayer to be its new CEO. Since the beginning of its globalization, ByteDance has put a lot of effort into localizing its management team in each country. Compared to other Chinese tech start-ups, ByteDance’s culture is more similar to that of a typical Silicon Valley company: very flat organization, OKR, All Hands, Ask me anything session with CEO, etc. It certainly helped ByteDance expand its global footprint.
At this point, China accounts for only about 30% of TikTok’s downloads. This shows how successful TikTok’s globalization has been compared to others. About 90% of WeChat users are from China. Similar to Facebook, India is the biggest market for TikTok.
ByteDance has raised only $7Bn to date to become the most valuable private start-up in the world. This is significantly lower than Uber ($25Bn), Didi ($21Bn), and other unicorns. If ByteDance wishes to do so, I’m sure it could secure a massive amount of capital for its growth. ByteDance has been profitable since 2015. In the last financing round in 2018, ByteDance raised $3Bn at $75Bn.
ByteDance doesn’t hide its ambition to expand its territory beyond media. It is already testing the waters in the gaming and commerce category to monetize its growing traffic and app downloads.
With ByteDance’s low cost to access capital and strong ability to produce many apps at the same time globally, it can create a serious threat to Facebook, Snap, and other social network companies.