Business April 11, 2023
ByteDance Posts Record Profit, Surpasses Tencent and Alibaba
Despite facing mounting losses in its fast-growing TikTok business unit, ByteDance managed to surpass China’s long-standing tech giants Tencent and Alibaba for the first time by generating a record underlying profit last year.
ByteDance reported a 79% surge in earnings before interest, tax, depreciation, and amortization (EBITDA) to around $25 billion in 2022 reports Financial Times, citing two people familiar with the matter.
ByteDance is more profitable now than its Chinese tech peers Alibaba and Tencent.
Per @FT, ByteDance sales grew 30% last year to $85 billion, and profits surged 79% to $25 billion.
Worth $300 billion, it's the world's most valuable private company. pic.twitter.com/Jzwi4y6XJt
— Morning Brew ☕️ (@MorningBrew) April 10, 2023
The sales spike was driven by advertisers’ increased spending on TikTok and its Chinese counterpart Douyin, according to the story. The healthy figures saw ByteDance leapfrog China’s listed tech giants, Tencent and Alibaba, in terms of EBITDA for the first time ever, with both companies reporting $23.9 billion and $22.5 billion for 2022, respectively.
Also Read: Why Was TikTok Fined $16 Million in the UK?
It appears that mounting security concerns about TikTok haven’t hit ByteDance where it hurts – although much of the TikTok criticism has flared in recent months, i.e. after these figures were posted.
The US government has called for a nation-wide ban for TikTok. In a recent congressional hearing, the company’s CEO Shou Zi Chew defended the app, stating that it would remain free from government manipulation.
Shou Zi Chew argued that TikTok put measures in place to protect teenagers. He said the algorithms make young users watch STEM videos (science, technology, engineering and math), and these had been viewed 116 billion times.
He also said ByteDance is not owned nor controlled by… pic.twitter.com/Uf4hz1nVak
— Mario Nawfal (@MarioNawfal) April 1, 2023
If TikTok were to face a forced sale or ban, it could severely impact ByteDance’s potential earnings.
Although the company generated around 80% of its revenues in China last year and TikTok itself was loss-making, it still represents a vital future profit engine for ByteDance.
‘TikTok ban will not affect profit’
According to one US-based ByteDance investor, a potential TikTok ban would not severely impact the company’s financials considering their current earnings.
“TikTok is not as material a percentage of ByteDance’s total revenue as people assume. But the ban would be a real loss to future potential given its growth rate,” said the investor.
ByteDance’s international business, including TikTok, saw a surge in sales to about $15 billion last year, more than double the figure from the previous year.
Meanwhile, a separate investor revealed that ByteDance’s revenues in China reached around $70 billion. However, the company did not disclose its revenue or profitability figure and declined to comment to FT.
ByteDance was founded Zhang Yiming in 2012 and was valued at approximately $300 billion last year.
Did ByteDance spend over $1bn to promote TikTok?
Brendan Gahan, a partner and chief social officer at independent creative agency Mekanism, stated that the Chinese company spent over $1 billion only in the US to promote TikTok back in 2019.
“The last social app to gain lasting traction in the US was TikTok. Bytedance spent over $1 BILLION promoting TikTok in the US in 2019,” stated Gahan in a Twitter thread.
According to Gahan, it is likely that ByteDance is conducting small tests to determine which apps translate well to the US market.
TikTok’s sister app surges in the US
ByteDance’s new mobile app, Lemon8, is gaining popularity in the US market despite concerns over the company’s China ties.
With a mix of TikTok-like videos and Instagram-like photos, Lemon8’s aesthetic is more artsy and aspirational, attracting brands in retail, travel, and cooking.
“We’re obviously going to do our best with the Lemon8 app to comply with U.S. law and to make sure we do the right thing here,” said ByteDance’s global general counsel, Erich Andersen.
Its early success highlights the power of Chinese apps over American users and highlights ByteDance’s determination to grow in the US market.
Lemon8 has gained significant traction in Japan and Southeast Asia too, with 17 million global installs since March 2020.
The app has been installed in the US 650,000 times in the past week and a half, according to Apptopia.
Business
Metaverse Gaming Market Expected to Reach $119.2 Billion by 2028
The metaverse gaming market is estimated to encompass $22.7 billion in 2023 and projected to reach $119.2 billion by 2028, according to a recent report from ReportLinker.
The metaverse has been a hot cake in the tech industry in recent years and was boosted by Mark Zuckerberg’s decision to change Facebook’s name to Meta. However, the market has been limping towards AI, which stole the spotlight from virtual reality.
“The global metaverse in gaming market size is estimated at USD 22.7 billion in 2023 and is projected to reach USD 119.2 billion by 2028 at a Compound Annual Growth Rate (CAGR) of 39.3%,” stated the report.
The growth of the metaverse in the gaming market is expected to be fuelled by several significant factors, including the dynamic and evolving landscape of adjacent technology markets “such as extended reality (XR),” which encompasses “virtual reality (VR),” augmented reality (AR), and mixed reality (MR).
Expectation of rapid growth
In 2021, the gaming industry experienced rapid growth, with billions of people playing video games globally and generating over $193 billion in revenue.
Gaming companies quickly became early adopters in exploring the potential of the metaverse. Looking ahead to 2023, it was projected that the metaverse will continue to reshape the gaming landscape.
A survey from last year shows that about 52% of U.S. gamers believe the metaverse will change the game industry.
“According to the survey, just over half (52%) of gamers believe the metaverse will change the video game industry and a plurality (41%) think that the metaverse will have a positive impact on the industry (vs. 25% who disagree),” reads the survey report of Globant and polling firm YouGov.
Moreover, 40% say the buzz around “metaverse gaming is warranted,” though nearly “one-third (30%) were undecided” on that subject.
Who are the big players?
The metaverse is not just a single platform, virtual experience, or game; it is an entire world recreated to provide an immersive experience. Gaming is one of the many experiences in the metaverse that is powered by AI, VR, and AR.
Whenever it comes to gaming, some of the giant games like Fornite, Unreal, and Roblox come to mind.
Read Also: Meta Seeks to Boost Its Metaverse Gaming Credentials
And those are expected to be significant players in the metaverse due to their existing influence and capabilities in the gaming industry, as a report from 2022 states.
“As gaming platforms like Fortnight gain functionality and evolve into technologically advanced social meeting places, it becomes more likely that a functioning Metaverse, with an independent economy, systems, and processes is in our future,” reads the report.
Fortnite has transformed into a social meeting place, offering interactive events and branded experiences.
Unreal’s powerful engine enables immersive media experiences, while Roblox’s user-generated content and virtual currency have attracted millions of users. These factors position them to thrive in the evolving metaverse landscape.
Europe expecting significant growth
Europe is expected to witness significant growth in the gaming metaverse market, with the second-highest CAGR during the calculation period.
The UK, Germany, and France lead the way in technology investment, while Russia and Spain are also adopting new display technologies.
“The substantial growth of the virtual world immersive interactive gaming industry in Europe is a crucial driver for the gaming metaverse market in this region,” stated the report.
The immersive interactive gaming industry in Europe, along with the demand for AR, VR, and MR technologies in the entertainment sector, serves as a driving force, indicated ReportLinker.
@riseofaitech are now entering the Metaverse and the Play2Earn gaming space which, according to a 2021 Bloomberg report, is valued at $500bn with huge growth predictions. @sanboy23@Iamchike2@nainiydd#NFT #Crypto #P2E $AITECH pic.twitter.com/uMzyD2aSqL
— 오라클🔺 (@hoonjitw) June 1, 2023
Initiatives such as the European Association for Virtual Reality and Augmented Reality (EuroVR) and projects like Augmented Heritage and International Augmented Med (I AM) contribute to market growth.
With increasing startups in extended reality, particularly in Sweden, Europe is poised for increased growth in the gaming metaverse markets.
Business
Chinese City Pledges $1.42bn to Boost Metaverse Industry Growth
Chinese city Zhengzhou has announced a plan to boost the metaverse industry by providing a significant 10 billion yuan ($1.42 billion) fund for local companies’ growth and development.
Although the People’s Bank of China banned digital assets in September 2021, the Asian power centre seems liberal towards the metaverse.
Under the new government’s draft, metaverse companies relocating their headquarters to Zhengzhou will have the opportunity to grab a start-up capital investment of up to 200 million yuan ($28.34 million).
In addition, the municipal government will provide a promising opportunity for companies operating in the metaverse sector within the city.
Chinese city Zhengzhou has released a policy draft to support the development of the metaverse industry with a $1.42 billion fund, aiming for a thriving metaverse industry by 2025 pic.twitter.com/5dLGj1Rmp1
— 0xClaudia (@0xClaudiaCloud) May 29, 2023
For each project that receives certification as viable by the government, companies will have the chance to secure a substantial grant of 5 million yuan ($710,000), regardless of their headquarters location.
Moreover, the government is offering other benefits such as rent subsidies for the metaverse company within Zhengzhou.
Open for public to review
The draft is now available on the municipal government’s website for feedback and review by the public.
“The public is now open to solicit opinions, and all sectors of society are welcome to put forward their opinions and suggestions,” reads the translation.
Hence, the purposed plan is only a draft to date, and the government has not mentioned the specific date of the fund allocation.
The metaverse-related sectors in Zhengzhou are expected to generate annual revenues exceeding 200 billion yuan ($28.34 billion) by the end of 2025, according to the municipal government.
Amid speculation about China lifting an absolute ban on crypto, the public is taking this draft as positive news for the industry.
“More positive news for crypto from China, that’s great,” wrote a Redditor in reaction to the news.
“One positive thing after the other,” another agreed, hopeful of China’s liberal step towards the crypto industry.
Will China overtake the West?
Western industry leaders like Meta wanted to be the leaders in the metaverse, but are now pivoting towards AI. Whereas China appears to be positioning itself as a potential metaverse hub.
As part of its commitment to spearheading China’s digital advancement, Nanjing, the capital of Jiangsu province, has also launched the China Metaverse Technology and Application Innovation Platform.
Chinese cities are promoting the metaverse sector as the future of the digital economy.
— ICNN (@icnncryptonews) May 29, 2023
“The Metaverse is a vague concept and every [company] is interpreting it in its own way. In China, it’s very much a government-led concept,” said Brady Wang, an associate director at tech market research firm Counterpoint.
The Chinese government is clearly keen on the technology.
“The key difference [in the metaverse] between China and the rest of the world is it’d be heavily regulated in a centralized manner,” said Zhengyuan Bo, a partner at China-focused research firm Plenum.
Bo emphasised that the monetization of digital assets within the metaverse is constrained due to limited space for growth.
“I think in a decade or two, China will play a bigger role in everything than the US,” speculated one Redditor.
“America hates China because China doesn’t do what America wants it to. They hate it because it exists. I’m happy China is dedollarizing,” another Redditor expressed.
Business
Microsoft Accuses CMA of Irrationally Blocking $68.7bn Activision Takeover
Microsoft has blamed Britain’s Competition and Market Authority (CMA) for “irrationally” blocking its $68.7 billion takeover of Call of Duty video game maker Activision.
The tech giant announced its plan to acquire Activision to “bring the joy and community of gaming to everyone, across every device,” back in January 2022. The proposed takeover aimed to bring Activision’s popular franchises, like Call of Duty, under Microsoft’s umbrella.
“Microsoft will acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard’s net cash,” stated the company.
Read Also: Google Opens Up Access to its Search Labs with Generative AI
However, its bid faced regulatory obstruction amid concerns over industry consolidation. The deal’s block provoked Microsoft to appeal, heightening anticipation for the outcome and its potential implications on the gaming landscape.
The regulatory body blocked Microsoft’s takeover of Activision in April, saying it would encourage market monopolies and stifle competition in the growing video game streaming market.
EU offers favorable conditions for businesses
The company has accused the regulator of making “fundamental errors” while blocking its deal.
Microsoft has claimed the CMA had not taken “proper account of three long-term commercial agreements which Microsoft had entered into with the other party” in the filing with the Competition Appeal Tribunal.
After the ruling, Microsoft president Brad Smith slated the regulator, suggesting the decision conveyed a “clear message” that the European Union (EU) offered more favorable conditions for starting a business in comparison to Britain.
Additionally, Activision, which is also the creator of the popular mobile game Candy Crush, accused the UK of having an unwelcoming business environment, stating that it was “closed for business.”
Hence, while the CMA has halted the acquisition, the EU has given the green light for the merger.
Need for broader understanding
Chancellor Jeremy Hunt expressed his belief that regulators should understand their “wider responsibilities for economic growth” following the blockage of the deal.
“I would not want to undermine that at all, but I do think it’s important all our regulators understand their wider responsibilities for economic growth” stated Hunt.
One of the reasons companies like Microsoft and Google are interested in investing in the UK is due to the presence of independent regulators that are not influenced by politicians, argued Hunt.
‘Takeover won’t be unfair’
The fact that the deal was blocked by the UK but welcomed by the EU has made headlines. Evidently in giving the green light, EU officials believe Activision’s takeover by Microsoft won’t be unfair.
In the meantime, it is still awaiting a confrontation with the US Federal Trade Commission which has filed a lawsuit to block the deal. The trial is scheduled to start in early August, with a decision expected by the end of the year.
EU approves — with conditions to license to rivals access to Activision's content for 10 years — @Microsoft's $MSFT's deal to buy 'Call of Duty' maker @Activision https://t.co/kjSxzJzjwm via @YahooFinance
— Alexis Keenan (@alexiskweed) May 15, 2023
“Where we diverged with the CMA was on remedies,” stated Margrethe Vestager, the EU’s competition chief.
She stated that a 10-year free license was granted to consumers, enabling them to stream all Activision games they hold licenses for via any cloud service.
“And why did we do this instead of blocking the merger?” she questioned.
“Well, to us, this solution fully addressed our concerns. And on top of that, it had significant pro-competitive effects.”
However, the Chief Executive of the CMA Sarah Cardell reiterated her support for the decision, emphasizing the regulator’s objective to establish favorable conditions for competition that would foster the growth of both large and small companies.
“I don’t find that we are operating sort of, broadly speaking, in a hostile environment,” stated Sarah.
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