ByteDance hit US$3b in net profit in 2019

New York

TIKTOK'S parent ByteDance generated more than US$17 billion in revenue and more than US$3 billion in net profit last year - figures that show the world's most valuable startup is still growing briskly, said people familiar with the matter.

The revenue for last year was more than double the company's tally of about US$7.4 billion in 2018, propelled by phenomenal growth in user traffic that has drawn advertisers away from Tencent Holdings and Baidu. The people asked not to be identified because the financial details are private.

ByteDance has emerged as one of the tech industry's most surprising success stories, an innovative Chinese company that is challenging the global dominance of the US Internet giants. It draws some 1.5 billion monthly active users to a family of apps that includes the TikTok short-video platform, its Chinese twin Douyin and the news service Toutiao. This month, the company poached Walt Disney streaming czar Kevin Mayer to become chief executive officer of TikTok.

The company owes much of its success to TikTok, now the online repository of choice for lip-synching and dance videos by American teens. The ambitious company is also pushing aggressively into a plethora of new arenas, from gaming and search to music.

ByteDance could fetch a valuation of between US$150 billion and US$180 billion in an initial public offering, a premium relative to sales of as much as 20 per cent to social media giant Tencent, thanks to a larger global footprint and burgeoning games business, estimated Ke Yan, Singapore-based analyst with DZT Research.

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"None of the Chinese tech companies has achieved this level of success in the global market before ByteDance," he said, adding that neither social media company harbours much debt.

"That ByteDance is making a profit - if true - and sitting on a US$6 billion cash pile means that it is not in a rush at all to come to market to raise capital, and therefore less likely to offer the shares at a more reasonable price for IPO investors."

ByteDance, led by Zhang Yiming, is becoming a viable rival to the dominant American online behemoths, Facebook and Alphabet. Facebook unit Instagram brought in about US$20 billion in advertising revenue in 2019, Bloomberg previously reported. Google said its video unit YouTube recorded US$15.1 billion in ad sales last year.

ByteDance representatives did not respond to a request for comment.

That success has come despite American lawmakers raising concerns about privacy and censorship. In a rare bipartisan effort in Washington, Republican Senator Tom Cotton and Senate Minority Leader Chuck Schumer last year urged an investigation into TikTok, labelling it a national security threat.

ByteDance is strengthening its operations in newer arenas such as e-commerce and gaming. This year, it went on a hiring spree, and expects to hit 40,000 new jobs this year. This would put it close to the headcount of e-commerce giant Alibaba Group Holding - at a time technology corporations across the globe are furloughing or reducing staff.

The company had very preliminary discussions about an initial public offering last year, but is in no rush to go public, given its financial performance, people have said.

ByteDance, backed by SoftBank Group Corp, General Atlantic and Sequoia, is already the world's most valuable startup, said researcher CB Insights. Some private trades recently valued the Chinese company at between US$105 billion and US$110 billion on the secondary markets, Bloomberg News previously reported. It has also traded at as high as US$140 billion, one person said, making it one of the most highly valued private companies of all time. BLOOMBERG