China’s Toutiao Buys Musical.ly in a $800M-$1B Deal
By Faith Magbanua, November 14, 2017 04:11 AM
Musical.ly, commonly known to many as the lip-syncing app that is popular among teens and young people, has been sold to Chinese social media giant Toutiao, according to an announcement made on Friday.
However, information about the deal remains undisclosed but some sources tell TechCrunch that Bytedance, the company behind China's top news aggregator service Toutiao, will pay between $800 million and $1 billion to buy Musical.ly, which claims 60 million users most of whom are based in the U.S.
Three-year-old Musical.ly was previously valued at $500 million when it raised its most recent round of funding in 2016. The startup said it will continue to run as an independent business within Bytedance, taking advantage of the distribution and tech that its new parent offers.
Bytedance itself has been on a tear over the past two years thanks primarily to Toutiao, which claims 120 million monthly users. The firm is reported to be raising as much as $2 billion in new funding at a valuation of $20 billion, and it has expanded into other types of mobile content through acquisitions such as video app, Flipagram.
Toutiao, known officially as Jinri Toutiao, is a Beijing, China-based news and information content platform powered by artificial intelligence technology. By analyzing the features of content, users and users' interaction with content, the company's algorithm models generate a tailored feed list of content for each user.
The company is China's largest mobile platform of content creation, aggregation and distribution underpinned by machine learning techniques, with 120 million daily active users as of September 2017.
In that sense, there's plenty of synergy to the deal - which gives insight into how keen Bytedance is to expand overseas, having already found huge success in the Chinese market.
At a time when investors have cooled on social media, Musical.ly will be viewed as a rare success story. There's a commonly held view that it's almost impossible to stand out amongst a crowded market which includes Facebook, Snapchat and Twitter. In that way, Bytedance is similar since it has emerged to become a super company in China, where Baidu, Alibaba and Tencent have traditionally dominated as the big three.
In Musical.ly's case, it latched onto the tween demographic and quickly developed a cult fanfare. From music videos to live streaming, the platform built a full-fledged social network comprised of four apps, with some users becoming stars in the process.
In the business community, Musical.ly's success was initially under the radar. However, the Shanghai-based company had both local and Silicon Valley investors which permitted it to grow such as Greylock Partners, GGV Capital, DCM and Qiming.
Unfortunately, controversy still affected the social media app's growth. Musical.ly has defended the way on how it works with its young user base - with many not even in their teens - after concerns about how it handles data and permissions have been raised by critics.
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