Chinese Advertising Generates $27B For TikTok’s ByteDance

ByteDance is now firmly positioned as the second-biggest platform in China by digital advertising dollars, closing in on Alibaba’s lead and bumping Baidu, according to a Reuters report citing two sources.

In the first half of 2019, ByteDance brought in $7.6 billion in advertising, capturing 23 percent of China’s total digital ad spend, according to consultancy R3, per Reuters. Alibaba had the biggest ad spend with $10.9 billion, about 33 percent of the 2019 market. ByteDance, however, is catching up to Alibaba this year, a second source told Reuters.

Founded in 2012 and headquartered in Shanghai, the tech unicorn is widely known internationally for the app TikTok, which did not add much to the company’s revenue. The Chinese version of TikTok, Douyin, brings in almost 60 percent of ByteDance’s revenue.  Its news aggregator Jinri Toutiao is responsible for 20 percent of earnings and long-form video platform Xigua brings in less than 3 percent, according to one of the sources.

ByteDance has global ambitions and is among the few Chinese firms that have an international customer base. The source told Reuters that the company is planning to invest in eCommerce, search and longer-form videos, including earmarking 10 billion yuan to grow Xigua. ByteDance is aiming to boost active users on Xigua to top 100 million, the source said.

eCommerce on the Douyin platform is expected to hit 150 billion yuan in gross merchandise value (GMV), and is among the fastest-growing units in the company, sources said.

Social commerce topped $89 billion January to September, making social media the new advertising darling and ByteDance a threat to longer-established platforms like Facebook and Instagram. A recent report forecasted that social commerce will reach $604.5 billion by 2027.

Retail giant Walmart is looking to cash in on social commerce and has a tentative deal on the table for a 7.5 percent stake in TikTok’s U.S. operations. Walmart sees TikTok as a seamless way for people to click and buy merchandise seen in videos.

TikTok started shopping around for U.S. buyers when the Trump Administration tried to ban the app citing national security. TikTok has roughly 100 million younger, tech-savvy users in the U.S., up from about 11 million users in 2018.

Postmates in Los Angeles recently formed a limited tie-up with TikTok to deliver app-featured treats like pancake cereal and whipped coffee. Food trends and influencers capture a huge audience on TikTok.