By Clay Chandler
August 12, 2017

 

Two fascinating—and inter-related—China tech stories surfaced Friday. The first involved Facebook which, according to a report by The New York Times, has tip-toed back into the China market using a photo-sharing app called "Colorful Balloons". The second involves a news aggregation site, Jinri Toutiao, who's name literally means "today's headline."

The Times reports that Facebook authorized the release of Colorful Balloons—caise qiqiu (彩色气球) in Mandarin—on the Chinese version of the iOS App Store in May. The app looks and functions like Facebook Moments, (hence the balloons) but carries no overt Facebook branding. The app was released through a local company named Youge Internet Technology, which has no apparent connection to Facebook.

Facebook seemed to obliquely acknowledge that it had authorized the app. “We have long said that we are interested in China, and are spending time understanding and learning more about the country in different ways,” the company said in a statement.

Trying to learn about China without Beijing's blessing would be a bold move for Facebook, which was banned in China in July 2009 after the network was used to spread news of riots between ethnic Uighurs and Han Chinese in the western Chinese city of Urumqi. Since then, CEO Mark Zuckerberg his tried just about everything he could think of to curry favor with China's communist rulers. He learned to speak Mandarin, invited China's Internet czar to tour Facebook headquarters in Menlo Park, California, and made multiple forays to China himself. (A 2016 Beijing visit included a brisk run through the haze of Tiananmen Square famously mocked as the "smog jog"). It has all been to no avail.

The Times declared the release of Colorful Balloons "stealthy and anonymous," "unprecedented," and a mark of the "desperation—and frustration—of global tech companies as they bring to break into the world's largest online market." Hard to disagree with that.

Which brings us to Toutiao. The service was launched in 2012 by 34-year old entrepreneur Zhang Yiming and is operated by Zhang's company, the delightfully named Beijing ByteDance Technology.

ByteDance may be China's hottest startup. The venture has already raised more than $1 billion from Sequoia Capital and CCB International, the overseas investment arm of China Construction Bank. On Friday, Reuters, citing "people familiar with the matter," reported that ByteDance is seeking an additional $2 billion in funding at the jaw-dropping valuation of over $20 billion. That would make ByteDance a "decacorn" and then some—equal in valuation to Peter Theil's Palantir, and bigger than WeWork, SpaceX, Pinterest or Dropbox. Reuters says U.S.-based private equity firm General Atlantic is among potential new investors.

Why would savvy investors like Sequoia and General Atlantic be so keen to throw money at a news aggregator in country where news is so heavily censored by government? Well, one reason is that the country in question is China, which has 700 million Internet users and is still growing like mad. But there's another that's probably more important: China's Draconian censorship policy makes it one of the only major markets in the world where startup news aggregators don't have to worry about getting steamrolled by Facebook, which has become a primary news source for users in less restricted markets.

In China, Toutiao has no natural predators. It has become the most popular news offering on the China's App Store and claims more than 80 million daily active users who spend an average of 76 minutes reading news and watching videos through the app. Revenue comes mostly from online advertising, and totaled nearly $870 million last year, a fivefold increase over the previous year.

As

Reuters

notes, Toutiao, along with online services firm Meituan-Dianping and ride-hailing company Didi Chuxing, are collectively known as "TMD." The three ventures are generally held to be the next wave of Chinese Internet wonders following the "BAT," the country's three tech giants, Baidu, Alibaba and Tencent.

Tencent and Baidu operate Toutiao's two biggest competitors. If China's homegrown tech giants

were

try to muscle in

on Toutiao,

they would pose formidable rivals. But

the company

has little to fear from Facebook and its colorful trial balloons.

"Clay
@"claychandler"
"clay.chandler@timeinc.com"

Technology and Innovation

Weibo, Tencent and Baidu under investigation. China’s Cyberspace Administration is scrutinizing Baidu’s Tieba forum, Tencent’s WeChat, and Weibo, the country’s most popular social media sites, for violating laws that prohibit content that is violent, obscene or deemed offensive to the Communist Party. In response, Baidu immediately said it felt “deep regret” and will actively work with the government to audit its content, while Tencent and Weibo have yet to comment. Reuters

Sogou files for U.S. IPO. Sogou, a search engine subsidiary of NASDAQ-listed Chinese internet company Sohu.com, will file for an initial public offering (IPO) in the U.S., in the footsteps of Chinese search giant Baidu. The 13-year-old company produces three core products: keyboard software for smartphones, input software for desktops, and a browser and search engine, but is currently undergoing a pivot into artificial intelligence. It is eyeing a $5 billion IPO, said CEO Wang Xiaochuan. Technode

China’s first bike-share IPO. Changzhou Youon Public Bicycle System has out-pedaled bike-sharing unicorns Mobike and Ofo to become the nation’s first listed bike-sharing company. The Jiangsu province-based company will begin offering subscriptions, worth a quarter of the company, Monday. The public float is expected to raise $96m, valuing the company at $384 million. Financial Times 

Snap shells out for “selfie drones”. Snapchat’s parent company, Snap Inc, is reportedly keen to purchase Chinese drone maker Zero Zero Robotics for $150-$200 million to compete with  Instagram and Facebook. Zero Zero produces the Hover Camera Passport Drone, a $500 consumer-targeted “selfie drone” that tracks users through facial recognition. TechNode

Huawei and Tencent’s data dispute. Chinese phone maker Huawei has been collecting data from users of its Honor Magic smartphone to bolster its artificial intelligence functions, but Tencent contends that unauthorized use of information seized from their WeChat app infringes on the privacy of WeChat users, and has asked the Chinese government to intervene. Wall Street Journal


Trade and Investment

Marriott teams with Alibaba to woo Chinese touristsMarriott International, the world’s largest hotel chain, announced a partnership with the Alibaba Group that would allow Chinese travelers to book  Marriott hotels through Fliggy, the Chinese e-commerce giant’s  online travel website, and pay via Alipay, its online payments platform.  Reuters

Supersize me. McDonald’s plans to double the number of stores in mainland China from 2,500 to 4,500 by 2022, in a new partnership with state-backed conglomerate CITIC Ltd and Carlyle Group. The $2.1 billion deal, which was announced earlier this year and approved by Chinese state regulators last week, will give CITIC 52% and Carlyle 28% of McDonald’s China and Hong Kong business. Reuters



China in the World

Who’s behind Wanda’s woes? New York Times  highlights potential links between Wanda’s financial recent asset sell-offs to missing Chinese billionaire Xiao Jianhua, who is believed to be providing information to Chinese authorities after he was abducted  from his Hong Kong hotel in January.  New York Times 

China seeks middle ground between Trump and Kim. China will stay neutral if North Korea launches an attack against the United States, but will intervene to stop the United States if it tries to overthrow North Korea, Chinese state-run newspaper Global Times wrote in an editorial on Friday. China will “firmly resist any side” that tries to change the status quo of regions where China’s interests are at stake, the paper said, adding that “no side should try to be the absolute dominator of the region.” Global Times

This edition of CEO Daily was curated by Debbie Yong.
@debyong
debbie.yong@timeinc.com
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