Author | White mustard Tsukimi
Source | New entropy
Behind the "anxious" listing of Douyin, the growth rate of domestic advertising is slowing down.
As the CFO of ByteDance for just two weeks, ByteDance has made a new big move.
Recently, according to the website of the Hong Kong Companies Registry, ByteDance (Hong Kong) Limited has changed its name to TikTok Group (Hong Kong) Limited.
In addition to Hong Kong, a number of companies registered in Beijing have also undergone name changes.
Founded in May 2016, "ByteDance Co., Ltd." with office address in Room 503, 5th Floor, Building 2, No. 43 North Third Ring West Road, Haidian District, has been renamed "Douyin Co., Ltd." in May 2022; "Beijing ByteDance Technology Co., Ltd." has been renamed "Beijing Douyin Information Service Co., Ltd." ”
The name change is being interpreted by the outside world as a strong signal that ByteDance splits Douyin and goes alone.
As early as 2020, ByteDance reported the news of splitting Douyin and going to Hong Kong for listing. Subsequently, on March 24, 2021, Xiaomi's former CFO Zhou was funded to take office as byteDance's CFO, and the listing rumors were very loud.
For the company name change, Douyin said it would not comment. This means that TikTok's IPO process is approaching.
Douyin rushed to the Hong Kong Stock Exchange
Late last month, Skadden International Partners Senior Partner Grad joined ByteDance as CFO.
This is the same as Xiaomi's former CFO Weekly's investment in Joining ByteDance a year ago. According to a Bloomberg report in October 2020, ByteDance plans to push the Douyin business to list separately in Hong Kong.
Since then, a series of personnel changes, searching for underwriters, registered name changes and other actions have shown ByteDance's eagerness to go public.
The problem is that for the investors behind Douyin, Douyin has missed the best time point for listing.
First of all, the overall valuation of Chinese stocks is low at present, and Hong Kong-listed technology Internet companies have also failed to avoid it.
The China Internet 50 Index compiled by China Securities Index Co., Ltd. includes major domestic Internet giants, and the official website of the China Securities Index shows that as of May 5, the index point was 6335.30 points, equivalent to the level of the beginning of 2017, with a decline of 50.78% in the past year and a PE of 17.22 times. In the same period last year, the pe of the index was more than 50 times.
TikTok's main competitor Kuaishou (01024. HK) is also a constituent stock of the index. After its listing at the beginning of last year, the market value of Kuaishou once reached 1.8 trillion Hong Kong dollars, and as of May 8, the market value was only 256.6 billion Hong Kong dollars, and nearly 90% of the market value disappeared in this Chinese stock crisis.
If Douyin is not plagued by the problem of network security data risks in early 2021 and is listed synchronously with Kuaishou, its valuation level will most likely exceed Thatkshou. Although Douyin also cannot escape the collective drawdown of Chinese stocks in this round, the opportunity to reduce holdings and cash out in the early stage of the IPO has been missed.
Judging from the historical trend of Kuaishou's market value, according to the first quarterly report of May 2021, the net loss of Kuaishou was 57.75 billion yuan, and the adjusted loss was 4.918 billion yuan, an increase of 13% year-on-year. This became the beginning of a sharp decline in the market value of Kuaishou.
Since July last year, Kuaishou's market value has entered a rational range of about HK$270 billion, but the downturn continues.
From the perspective of specific business, the growth problems faced by Douyin are also not optimistic.
According to the prospectus, live broadcast revenue accounts for more than 80% of Kuaishou's revenue. Contrary to Kuaishou, public data shows that in 2020, ByteDance's advertising revenue accounted for 77% of revenue.
On November 18, 2021, the meeting of ByteDance's commercial product department confirmed that ByteDance's domestic advertising revenue had stopped growing in the past six months.
At the same time, Kuaishou is eroding the advertising market share.
According to the 2021 financial report, the revenue of Kuaishou's online marketing service business reached 42.7 billion yuan, a year-on-year growth rate of 95.2%, and the Q4 online marketing revenue was 13.2 billion yuan, a year-on-year growth rate of 55.5%. The growth is mainly due to the organic traffic growth of Kuaishou and the enhanced advertiser experience of the combination of public and private domain traffic.
The logic behind it is that with the "vibrato" of Kuaishou in the fields of recommendation algorithm and product structure, the similarity of the two products is improving. As Kuaishou's growth focus shifts from live streaming to advertising, the competitive pressure on Douyin has increased. With the reduction of advertisers' budgets such as online education, the growth rate of Douyin's advertising revenue may be impacted.
In the e-commerce business, Douyin counters Kuaishou's trust e-commerce through interest in e-commerce. Kuaishou's 2021 annual report shows that its annual e-commerce GMV is 680 billion yuan, an increase of 78.4% year-on-year; in terms of Douyin, according to the "Late Post" report, Douyin's e-commerce GMV in 2020 exceeded 500 billion yuan, with a year-on-year growth rate of more than 300%.
For this company that claims to be an artificial intelligence platform, under the market changes of the new crown epidemic, how to optimize the advertiser experience and develop more businesses other than advertising such as e-commerce will determine its post-IPO valuation level.
How much is TikTok worth?
In April, the South China Morning Post quoted a number of private equity investors as saying that the byte valuation was close to $400 billion.
How high is the valuation of ByteDance? For a simple comparison, in 2020, the GDP of Hong Kong SAR, China, will be US$341.2 billion, Singapore's GDP in 2020 will be US$343 billion, and Malaysia's GDP in 2020 will be US$319 billion, all below ByteDance's valuation.
Israel's GDP in 2020 is $402 billion, which is comparable to ByteDance's valuation; Greece's GDP in 2020 is only $189.4 billion, less than half of ByteDance's valuation.
According to public information, ByteDance has raised more than nine rounds of financing in the nine years of its establishment, but the official has not disclosed the amount of financing for the next few rounds.
In 2012, ByteDance started with today's headlines, and in July of that year, it received millions of dollars in Series A financing from SIG Heina Asia and others, and then rushed forward at an annual rate.
As of now, according to the "Global Unicorn Index 2021" released by the Hurun Research Institute, ByteDance has grown to a valuation of 2.3 trillion yuan and surpassed Ant Group's world's largest unicorn.
In addition, Byte is also the only company among the giants of Meituan, Pinduoduo, and Didi that has not accepted BAT investment. Currently, ByteDance is 40% owned by four U.S. investment institutions.
In addition to founder Zhang Yiming, ByteDance's board members are Shen Nanpeng, managing director of Sequoia Capital China, Arthur Denchier, founder of Haina International Group (SIG), William Ford, CEO of Transatlantic Investment, and Philip Lafon, founder of The US hedge fund Coatue.
According to industry analysts, splitting douyin to be listed separately is intended to let Tiktok, which is in the growth momentum, fly a little more bullets in reserve.
Douyin is no longer an app, but ByteDance's largest business unit (BU). It includes products such as Douyin, Watermelon Video, Today's Headlines, Tomato Novel, and multiple middle office businesses.
Douyin and its business units contribute nearly 70 percent of the company's revenue, while the remaining five BUOs (Vigorous Education, Feishu, Volcano Engine, Asahi Lightyear, and Tiktok) are far from contributing enough revenue.
However, Douyin's current daily active life has stayed in more than 600 million for more than a year, and today's headlines, watermelon videos and other products have also grown weakly, and TikTok is still in a fierce growth stage in the face of the global market.
For the valuation of Douyin, the three core businesses of Douyin BU, Douyin, Watermelon Video, and Today's Headlines can be benchmarked against the valuation level of Kuaishou, B Station, and Baidu information flow products respectively.
From the perspective of short video products, if estimated by a simple P/MAU method, according to Analysys data, as of December 2021, the monthly active users of Douyin are 650 million, while the average number of monthly active users of Kuaishou in 2021 is 578 million. According to this calculation, the valuation of Douyin is about 288.5 billion Hong Kong dollars, which is only slightly higher than Kuaishou.
But from the perspective of revenue, the volume of the two is obviously different. According to CEO Liang Rubo, byteDance's actual revenue in 2020 was 236.6 billion yuan, and according to the estimation of 60% of the revenue contributed by Douyin, The revenue of Douyin was about 141.6 billion yuan, while Kuaishou was only 58.776 billion yuan in the same period. TikTok is about 2.4 times that of Kuaishou. According to kuaishou's current valuation, Douyin is valued at about HK$618.1 billion.
From the perspective of China Video products, Analysys Qianfan data shows that as of January 2021, watermelon video MAU is 168 million, higher than the 151 million of Station B. According to this calculation, the valuation of Watermelon Video should be slightly higher than that of Station B, about 70 billion Hong Kong dollars.
However, according to foreign media reports, in 2020, Watermelon Video contributed less than 3% to ByteDance's advertising revenue. In addition, the revenue focus of the two products is different, with Station B emphasizing game revenue and value-added service revenue, while Watermelon Video is biased towards advertising. Differences in business logic will lead to different valuation logics between the two products.
From the perspective of information flow products, the 2021 Baidu Mobile Ecology Conference disclosed that the number of monthly active users of Baidu APP was 560 million; while Liang Rubo disclosed in June 2021 that today's headlines were close to 300 million monthly active users, that is, the valuation was about half of Baidu's information flow advertising business. According to Shenwan Hongyuan's estimates, the overall valuation of Baidu's online marketing business is about HK$337.1 billion.
Baidu's online marketing revenue is composed of two parts, search and information flow, according to which it is estimated that the valuation of today's headlines may be less than HK$168.5 billion.
The difference between the two is that online marketing is Baidu's "cash cow" and the main source of profits, while according to ByteDance's internal conference disclosure, today's headlines are on the verge of loss. In the future, the difference in profitability will further affect the valuation level of the two products.
Obviously, the overall IPO of Douyin BU means that the core part of ByteDance's domestic advertising business will be pushed to the secondary market. At the time when Kuaishou's stock price is sluggish and market sentiment is generally pessimistic, it remains to be seen whether Douyin can pull investor confidence back.