Is a bubble brewing in China’s mobile internet sector?
That is the question many industry observers are asking after Toutiao (or ‘Today’s Headlines’), a personalized news app that was launched barely two years ago has been valued at US$500 million in its latest round of funding.
The valuation comes even as the app has sparked some copyright concerns with its content aggregation model.
ByteDance, the developer of the news reader app, secured US$100 million from Sequoia Capital and Sina Weibo in a deal this week that valued the app at around half a billion dollars. It was ByteDance’s third round of funding after a US$5 million series A round and an undisclosed series B round that involved Yuri Milner, the founder of investment firm Digital Sky Technologies (DST).
Toutiao, which was launched in August 2012, has more than 100 million users in China. It has occupied the number one spot in the news category on Apple’s App Store for 15 consecutive months in China.
Analyzing data on people’s reading habits, social network comments and their preferred topics, the feed reader tries to customize the news content for readers. Users are now said spend a cumulative 350 million minutes per day on it, and share its feed on social networks 600,000 times daily.
The fund-raising as well as the latest valuation has created a wow effect among Chinese venture capitalists and media executives. The deal marks the nation’s second largest fund-raising deal by a start-up so far this year.
However, due to its business nature, many media veterans, especially those working in traditional print media, argue that the news reader is making profit by using others’ content.
Copyright has become a sensitive issue in China’s media industry after a wide range of internet portals came into being a decade ago. Many websites lift content from traditional media to fill up their pages.
But as internet portals have become profitable businesses with massive pageviews, firms have been under pressure to clinch deals with content providers for the right to use the content. Companies can either pay a lump-sum fee or opt for a revenue-sharing model.
With more than 100 million registered users and 40 million active users, Toutiao has no doubt become one of the largest news portals in China. State-owned Xinhua news agency and Peoples Daily’s website are among those that have partnered with the news reader to reach more users, as well as to secure additional traffic and advertising dollars, leveraging on Toutiao’s user base.
But some media owners have seen red after Toutiao’s high valuation, and are planning to join hands to seek huge compensation or copyright fees from the news reader for the use of their content. Toutiao insists that it is the content providers’ responsibility to protect the copyright, and not the news reader, which is only a distributing platform.
Such copyright conflicts show that the existing regulatory framework in China has failed to keep pace with the new technologies and media platforms.
While the issues may take a long time to get resolved, the success of Toutiao offers a lesson for the traditional media that it needs to think out of the box to reach out to the internet world. It’s true that content is king, but high-quality content also needs well-established distribution platforms.
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