In 2012, a Chinese businessman tired of the difficulty to find relevant information in mobile applications and disappointed by search engines that mixed organic results with advertising decided to create a company to use artificial intelligence to deliver relevant information to users according to their interests. Today, his company has achieved a valuation of $140 billion and bills more than $31 billion annually thanks to the creation of multiple popular applications that have put internet giants like Facebook and Google in trouble., despite their enormous efforts, have not managed to recover the ground that their rival has taken from them… How did you manage it?
TikTok Case: How did it become one of the most powerful technology companies in the world?
The protagonist of this story is Zhang Yiming, an engineer and programmer who was born on April 1, 1983, in Longyan, a southeastern Chinese city of approximately 2.7 million inhabitants.
Zhang is part of a generation of entrepreneurs who experienced China‘s cultural revolution and economic reforms firsthand. His home province, Fujian, was one of the first regions of mainland China to open up to the world.
Zhang was the only child in a middle-class family. From a very young age, he developed a great interest in computers, something that first led him to study microelectronics at Nankai Public University in Tianjin in 2001, before moving on to a career in computer science and software engineering.
After graduating in 2005, he got a job at Kuxun, a travel startup. There he entered as an ordinary engineer, but, thanks to his commitment and his excellent work, in the second year he was already in charge of about 50 people responsible for the technological area; however, when the product presented problems, he did not hesitate to get involved and actively participate in product development discussions. There he learned the value of seeking excellence in all of his products. This rapid rise, and his innate ability to develop new skills, helped transform the young man into one of the most prominent emerging leaders of the decade.
His sense of responsibility and his desire to do things well prompted him to embark on new challenges to gain experience. As an engineer, his dedicated attitude and fervor for solving problems served him well. Zhang credited that first job with providing valuable lessons in leadership and sales skills that he would later use to undertake projects of his own.
In 2008, he left his job at Kuxun and joined the multinational Microsoft, but he admits that he came to feel stifled by the company’s very corporate style, so he resigned shortly after and decided to return to work for a start-up company. this time for Fanfou, a kind of “Chinese Twitter”, which was finally censored and unfortunately had to close in 2009. After this unfortunate event, he decided to capitalize on the lessons learned in his previous jobs and started his first company: 99fang, a real estate search platform that would quickly scale to become one of the most important in the world. China.
Two years later, in 2011, Zhang realized that users were increasingly using their mobile phones and fewer computer to search for information, a key piece of information for what would be his next project. For this reason, he hired a professional manager and appointed him as the CEO of 99fang. Later, he resigned from the company to be able to unleash all his creative capacity.
The origins of TikTok
Zhang observed that Chinese smartphone users had difficulty finding relevant information on mobile apps. In addition, Chinese web search giant Baidu, a copy of Google, added hidden advertising to search results without differentiating it from the rest, making the search process cumbersome and inefficient. Then, he had the vision to redefine how content was consumed on the Internet, using artificial intelligence to generate recommendations and thus send relevant information to users. Based on this premise, he founded ByteDance Technology in 2012.
The company started in a four-room apartment in Beijing, where the team lived and worked in the early days. The largest room was only about 10 square meters. Although it may sound uncomfortable, for Zhang the conditions were quite decent for a start-up company. The businessman tells that, at that time, he saw a slogan on a construction site that inspired him: “Small place, big dream”, said the slogan.
The place was small, but the ideas and ambitions of its founder were huge. He did not want to limit himself to China, like most businessmen in that country. His goal was to create something with the capacity to expand throughout the world. However, this view was not shared by most of the venture capitalists he approached and he found it very difficult to get funding. Fortunately, Susquehanna International Group took a chance and invested $5 million, confident in the company’s potential and the determination of its founder. The following year they would invest $10 million more.
In March 2012, ByteDance launched its first app, called Neihan Duanzi, which allowed users to circulate jokes, memes, and humorous videos. Although it had more than 200 million users, the application would be removed after the China National Administration of Radio and Television accused it of hosting inappropriate content. Following the removal, Zhang Yiming issued a letter stating that the app was “incommensurable with socialist core values” and vowed that ByteDance would further deepen cooperation with authorities to promote their policies.
In August 2012, the company launched the Toutiao news app, which managed to attract more than 13 million daily users within 2 years. The purpose of the app was to drive information discovery, not by query, but by news recommendations, something that significantly differentiated it from the main platforms used by users at the time of information.
Zhang‘s management style with ByteDance was inspired by American West Coast technology companies such as Microsoft and Google. He included bi-monthly public meetings and discouraged employees from referring to him as boss or CEO.
In 2014, VC investor Sequoia Capital China invested $100 million in ByteDance. This transaction valued the company at $500 million, marking it as one of the most important startups in China.
In September 2015, ByteDance launched a short video-sharing app called Douyin in China. The product was an instant hit with Gen Z and millennials.
Given this great reception, Zhang considered that the application had the potential to expand globally, but he knew that the cultural, political, and legal differences between China and the rest of the world could jeopardize his plans, so he thought carefully about the entry strategy to New markets. He didn’t want to leave anything to chance…
TikTok’s global expansion strategy
The first thing he did was establish a different name for the application that would expand to the whole world, in this way the TikTok brand was officially born in 2017, which would work from servers located in the United States to avoid problems with some countries. while Douyin would continue to work from servers in China. ByteDance then bought the video-editing and sharing app Flipagram, to use its content as the basis for training TikTok‘s recommendation algorithm based on the interests of users outside of China .. And, to close his strategy with a “golden finish”, he bought the video creation application Musical.ly for approximately $1,000 million, which already had a significant user base in the West, thus facilitating the process of expansion to TikTok. Although both applications initially functioned independently, in 2018 they merged definitively, leaving only TikTok active, which that year already exceeded 200 million registered users.
“As far as content is concerned, text and photos have evolved into video. The content that circulates on the web is increasingly generated by the users themselves. Many of our changes respond to their needs.” –Affirms Zhang Yiming about his company’s approach.
Thanks to the strategies implemented, TikTok began to experience exponential growth globally, quickly becoming one of the most downloaded applications with the longest use time. This growth attracted the attention of SoftBank, which invested $3 billion in ByteDance, raising the value of the company to $75 billion, positioning it as the most valuable startup in the world, managing to dethrone Uber from first place, which for years had headed the list.
Regarding the business model, TikTok initially depended on the sale of virtual currencies that it offered to users so that they could give them away to their favorite influencers, the platform keeping a small commission on each transaction. This model allowed it to bill at that time about 150 million dollars per year.
In 2019, the company announced the launch of the TikTok advertising system so that brands could advertise through the application, and closed the year reaching 500 million users and surpassing social networks such as Twitter, and LinkedIn in usage time. Snapchat.
TikTok Vs Facebook and Google: a battle to dominate the video industry on the Internet
As Zhang Yiming basked in the tremendous success of his app, internet industry giants including Facebook and Google were concerned that the effectiveness of TikTok‘s recommendation algorithm could jeopardize their market dominance. Years ago, Mark Zuckerberg tried to buy Musical.ly but failed. Faced with the refusal, he decided to copy its main functions and launched a new very similar app called Lasso, which failed miserably and would be closed later.
In 2020, the Covid-19 pandemic became a catalyst for the growth of TikTok. When the confinement measures were put in place to stop the spread of the virus, people began to look for ways of entertainment to pass the time at home, and TikTok was one of the most used alternatives. In addition, TikTok, which already billed about 1.9 billion dollars annually thanks to advertising, announced the creation of a fund for 200 million dollars to reward content creators in the United States, and another for 60 million euros.to reward content creators in Europe. All this allowed the Chinese app to surpass Facebook, WhatsApp, and Instagram as the most downloaded application of the year, with a total of 980.7 million downloads.
As a fun fact, boredom amid the pandemic motivated a young man named Khabane Lame, better known as Khaby Lame, to join TikTok. Eventually, Khaby Lame would become the most followed person on the platform, with over 154 million followers.
While TikTok was expanding at a frenetic pace, Mark Zuckerberg‘s empire was struggling to continue growing, especially among young audiences, who no longer felt the same interest in creating and sharing content on social networks like Instagram and Facebook. Also, Mark Zuckerberg‘s social media was blocked in China, a gigantic market he couldn’t profit from. This put on the table the debate of whether the United States should also place restrictions on Chinese applications to balance the balance.
To compete with TikTok, Zuckerberg‘s company introduced a new feature for Instagram called Reels, which is considered a copy of TikTok. Such functionality allows users to create short videos and distribute them within the platform. Subsequently, the Reels would also be implemented on Facebook and the creation of a fund would be announced to reward users who dared to create videos in this format.
Although the Reels have encouraged the creation of content within Instagram and Facebook, they have not been enough for the platforms to recover the lost ground against TikTok.
In 2021, TikTok surpassed 1,000 million users and announced an alliance with Shopify, one of the most popular e-commerce platforms in the world, to promote the development of businesses and brands within its social network. TikTok plans to offer a new eCommerce experience to its users, which will come in the form of a shopping tab. This tab will suppose a dedicated section in the profile of the brand or business, where there will be a drop-down list of the products that the seller has available in his Shopify store .. From this list, users can click and be taken directly to the website to make the purchase.
That same year, YouTube, a platform belonging to the Alphabet business group, of which Google is also a part, decided to join the trend of short videos that were being led by TikTok, thus launching a new feature called Shorts, which, like Like the Reels, they are practically a copy of the TikToks format. And, to encourage the creation of Shorts, the platform announced the creation of a fund to reward users who dare to create videos in this format.
Although Shorts have achieved their goal of increasing video consumption within YouTube, they have also generated annoyance from content creators because this format is favored by the platform’s algorithm and does not represent the same profitability as long videos. . At the moment, YouTube is working to reconcile the benefits of both formats so that content creators can get the most out of them. In addition, he announced that soon it will be possible to generate advertising revenue through the Shorts, so YouTubers have great expectations about it.
For its part, TikTok has fought back by gradually extending the time limit on its videos. Initially, videos in the app could be a maximum of 15 seconds, but later the limit was extended to 30 seconds, then 1 minute, then 3 minutes, then 10 minutes, and you can now upload videos up to 30 minutes long. duration. With this move, the company has made it clear that it not only plans to compete with short videos against social networks like Instagram and Facebook but also with long videos with platforms like YouTube, focusing on vertical format videos and leveraging the power of its algorithm. recommendations.
2022 began with a bitter taste for Mark Zuckerberg, since, in the report for the last quarter of the previous year, Facebook registered a decrease in the number of users for the first time in its history, losing up to 500,000 users compared to the previous year. previous quarter. This data caused great concern among investors, who began to wonder if it was the beginning of the decline of the platform or if it would manage to reinvent itself to remain valid in the coming years. Meanwhile, TikTok surpassed the barrier of 1,700 million users, positioning itself as the second largest social network in the world, ranking only below Facebook .which, despite the difficulties it faced, remained in first place with more than 2,600 million users.
And if the year had not started well for Mark Zuckerberg‘s company, with the passing of the months the situation did not improve. Little by little Instagram was implementing changes to improve the experience on the platform, however, users perceived that these changes were more aimed at turning Instagram into a clone of TikTok and they were quick to express their annoyance about it. User Tati Bruening decided to start a media campaign called “Make Instagram, Instagram again”, asking the company’s managers to stop trying to be TikTok because they just wanted to see pretty pictures of their friends. The campaign had such an impact that personalities such as Kim Kardashian and Kylie Jenner, among others, joined it. The complaint from the users is mainly because Instagram was removing the relevance of the photographs to give more diffusion to the reel-type videos; and that in their feeds more and more content was seen from accounts that they did not follow. Faced with criticism, the head of the company, Adam Mosseri, published a video explaining that these changes are because video has become the most relevant format on the Internet, and therefore they considered that they should adapt to the trend; and what Instagram will show posts from unfollowed accounts because they help users discover interesting content. Despite the explanations, the annoyance of the users continues and the platform finds itself in a very difficult situation since it cannot sit idly by while its rival continues to take away market shares and it cannot put the loyalty of its users at risk.
Controversies in the history of TikTok
But not everything has been “rose color” on the road to the rise of TikTok. The Chinese app has been embroiled in multiple controversies since its global expansion plan began.
In February 2019, the company had to pay a 5.7 million dollar fine to the United States Federal Trade Commission after being accused of collecting personal information from children under the age of 13 without their parent’s consent, which means a violation of the Privacy Protection Act.
In August 2020, due to concerns about TikTok being used as a Chinese spy tool, then-President Donald Trump signed an executive order to ban TikTok in the United States effective September 15. This aroused the interest of large American companies, such as Microsoft and Twitter, to acquire the company, but the negotiations did not materialize. That same year, the app was also banned in India. for two weeks due to concerns about the potential release of hateful or adult content, as well as considering it a national security risk. In Great Britain, the Parliament opened an investigation to analyze what use the platform makes of user data.
TikTok experienced extraordinary growth driven by the viralization of memes, challenges, and challenges that sometimes even had tragic endings. This vertiginous expansion was watched with care in the aforementioned countries due to the poor security of the app and suspicions of espionage. So, TikTok tried to calm things down by naming the CEO of Disney+, Kevin Mayer, as CEO. Despite this move, the storm is far from over. The first criticisms have to do with its security and privacy. Until recently, messages and content were not encrypted, there was no parental control, and anyone could send private messages to a minor’s account. These deficiencies have been corrected, and, for example, now those under 16 years of age cannot send or receive private messages. The different regulations and obstacles made the company work to be more transparent and trustworthy for its public, which is mainly minors, and thus bring more peace of mind to their parents and governments.
In April 2022, the BuzzFeed News portal published revealing information provided by former ByteDance employees, who claimed that the company used questionable practices to expand outside of China. Some of these practices were: extracting information and content from profiles on Instagram, Snapchat, and other social networks to publish it without authorization on the Flipagram platform; manipulation of video viewing and reaction statistics; and creation of fake accounts.
Other controversies surrounding the popular Chinese app are related to censorship. According to the newspaper La Vanguardia, various journalistic investigations have found that the social network censors information that criticizes the Chinese Communist Party. For example, censorship of mentions of the Tiananmen Square incidents in 1989 or content about the recent protests in Hong Kong has been evidenced.
“While our services, like WhatsApp, are used by protesters and activists around the world due to strong protection and encryption, mentions of these protests are censored on TikTok, including in the United States. Is it the Internet that we want? –Mark Zuckerberg says about it.
And, as if that were not enough, the application has been accused of affecting the mental health of users due to its highly addictive algorithm and for allegedly favoring content generated by physically attractive people, thus promoting high standards of beauty and generating frustration in some. users.
TikTok, the platform that revolutionized the consumption of content on the Internet using artificial intelligence
Currently, Bytedance Technology bills more than 31 billion dollars annually, generate employment for more than 60 thousand people, and has a valuation of 140 billion dollars, maintaining first place among the most valuable startups in the world and surpassing companies like SpaceX, Shein, and Stripe. Its most successful product, TikTok, continues to be the app with the most usage time and is approaching 2 billion active users, hot on the heels of Facebook, which still holds the top spot among the largest social networks on the Internet. ButByteDance is not just TikTok . The company has in its portfolio a set of successful applications available in more than 150 countries and 75 languages. Some of these applications are Toutiao, an information content platform based on artificial intelligence; BaBe, an Indian news service; Xigua Video, a platform for weekly videos of up to five minutes in length; Lark, an online communication service; Vigo Video, a popular short video app among teenagers in China; hello, a social media platform; BytePlus, a service that offers artificial intelligence solutions for businesses; BuzzVideo, a platform for discovering viral videos; FaceU, an app specialized in photo editing; CapCut, a video editing application; and Douyin, the Chinese version of TikTok. In addition, the company launched the Jianguo Pro 3 in China in 2019, a smartphone that it manufactured in partnership with the Smartisan company, so it may consider distributing mobile phones in other markets in the future. For now, the biggest challenges forBytedance are: reaching agreements with governments of various countries so that their applications can continue to operate without restrictions and continue to innovate to continue taking away the market from the industry giants, Facebook and YouTube … Do you think that TikTok will be able to dethrone Facebook as the largest social network? in the world and overtake YouTube as the web’s leading video platform? It will be a matter of time to see which company plays its cards better, but what is certain is that it will be an intense battle and that the attacks will not be waged only at the business level.
As for Zhang, he is now 39 years old and has a personal fortune of more than $49 billion, ranking as the second richest person in China according to Forbes, second only to businessman Zhong Shanshan. In 2021, the founder of ByteDance resigned from the position of CEO and President of the company arguing that he lacked the necessary skills to be an ideal boss; Despite this, his employees defined him as “a soft voice, but charismatic; logical, but passionate; young, but with wisdom”. Other versions suggest that his resignation was allegedly influenced by the pressure exerted by the Chinese government on companies in the technology sector. Now without the bustle of the corporate world, the successful businessman decided to settle in Singapore, with the aim of not suffering the restrictions of his native country against the Covid-19 pandemic, and to have certain tax benefits; Meanwhile, his executives are negotiating with senior officials of the Biden government an agreement that allows TikTok to continue operating in the United States, and avoid something similar to what happened to Huawei during the presidency of Donald Trump. On a personal level, she claims to be a fairly normal person, who loves and relaxes the simple things in life. He defines himself as a person with a little discipline, who spends the night watching videos or surfing the Internet on his company’s content platforms or playing video games, even if he planned to get ahead with work. He considers himself “allergic” to meetings and day-to-day life, which is why he prefers to delegate the administrative tasks of his companies to others.
Thus we conclude the fascinating story of Zhang Yiming, an entrepreneur passionate about technology who set out to use artificial intelligence to offer a better content consumption experience on the Internet and ended up creating one of the most powerful technology companies in the world, launching predicament to industry giants who are now making great efforts to not fall behind the addictive algorithms that ByteDance has developed. In Zhang Yiming’s own words :
“People who achieve great things tend to have a very ordinary mindset. In other words, if you keep an ordinary mind, accept yourself as you are, and do well, you can often do great things. Ordinary people can do extraordinary things.”