4 Lessons from My Visit to ByteDance (Tech Strategy – Daily Article)

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I recently visited a ByteDance office in Beijing. This was part of our China Tech Tour and it was really a fantastic visit. I’m going to be writing a lot about ByteDance shortly but wanted to list the key lessons I took away from the visit.

First a disclaimer. None of this is information or opinions from ByteDance. The discussions are still off the record (at this point), so these are my own personal lessons. Basically, this is how my own thinking about the company has changed. But this is not anything anyone said during the visit.

Two other clarifications:

  • This was a visit to a ByteDance office. Which is a different group than TikTok.
  • The ecommerce GMV numbers cited are from external reports – and not ByteDance or TikTok. And these numbers are likely probably guesses and only somewhat accurate.

China Tech Tour Day 1: Beijing and ByteDance

Our tour group was staying in Beijing Hilton, which is in the northwest of the city (liangmaqiao). It’s close to Sanlitun and Worker’s Stadium which is my old stomping ground. I’ve literally spent years hanging out at bars and restaurants in the area, so I was pretty happy to be back. Although most of my favorite bars and hang outs (especially Bookworm) are now gone. Everything has gone upscale.

Most participants arrived for the tour on Sunday afternoon. And our first stop on Monday morning (after coffee) was heading ByteDance. That was pretty great way to start the week.

We piled on the bus and heading West across Beijing. Most of the tech companies are located on the periphery of Beijing (not downtown). That is where the newer districts are, and these are generally nicer and less chaotic areas. I spend most of my time in these areas and don’t really go downtown very often.

The problem is you end up having to drive long distances to go from tech companies in the northeast to tech companies in the northwest. And then to the southeast. And so on. So, there were some pretty long drives during our two days in Beijing. Plus, we stopped for coffee like 3-4 times per day (not joking).

We arrived at ByteDance headquarters around 9:30am. And this is also TikTok headquarters.

However, lesson #1 is that ByteDance is far more decentralized than people know. The business units operate independently to a large degree. And now that it is a multi-national (with American, Southeast Asian, and other businesses), it is hard to say where the headquarters actually is. It really depends on the country and the product.

First stop was the exhibition hall. Most of the China tech companies have such halls. This is where they give information about their company. And they’re getting better and better. They are increasingly becoming museums and interactive centers.

ByteDance has just opened a new exhibition hall and it is one of the best. The entrance (which I can’t show pictures of yet) had a huge globe (think 30 feet in diameter) suspended from the ceiling and taking up most of the foyer. Videos and statistics were projected on the globe and the walls while the introduction video played. And as the video ended, the globe raised into the ceiling and the entire wall opened, which was the entrance to the exhibition. It was pretty fantastic.

Although Ant Financial (which I will write about shortly) still has the best exhibition hall I have ever seen. ByteDance and Alibaba are tied for #2 (in my opinion).

I’ll try to get permission to show videos of the exhibition hall. But for now, here’s a quick summary.

It was basically lots of exhibits explaining their history and major products. That is actually important because it tells you how management views the business. The list for ByteDance was:

  • TikTok and Toutiao. Big surprise. Plus, their other famous B2C apps (Xigua), mostly in China.
  • Their suite of creator tools (more on these below)
  • Lark and Volcano engine (more on these below)
  • New stuff. The two that were interesting here were:
    • Entertainment systems for cars. You can watch TikTok in your car. Ok fine. But you can also create videos for your trip. The car’s cameras (inside and out) can capture video and your voice over. And it can automatically create travel vlogs. Kind of cool.
    • Virtual and augmented reality. In 2021, ByteDance bought Pico, the world’s second-largest VR (virtual reality) headset maker. They have a strategic presence in the space.

After the exhibition, we met with public relations and some management. That’s off the record.

But, per my disclaimer, here are my personal lessons learned during the visit.

Lesson 1: TikTok’s Move into Ecommerce Is More Complicated Than I Thought. Especially Internationally.

I’ve been talking a lot about the increasing merger of entertainment, ecommerce, and social media. At least on smartphones.

  • Ecommerce companies like Alibaba are moving into entertainment. They created Tudou and Alibaba Pictures. And they made a major move with Taobao Live (their livestreaming unit). Interestingly, their entertainment businesses have just been spun off into a separate business unit. This Caixin article is good summary of what’s going on. 
  • Similarly, social media companies like WeChat are moving into ecommerce and entertainment. WeChat has added mini programs. And it has moved rapidly into short video and livestreaming (largely in response to TikTok).
  • Finally, entertainment and attention giants like TikTok and Kuaishou are moving into ecommerce. TikTok Shop has already been launched and is growing rapidly (+$200B GMV in China, likely $20B internationally).

 

I argued that B2C mobile apps were becoming a fight between attention and infrastructure. Companies like ByteDance and Tencent are masters of keeping user attention. Companies like JD and Alibaba are increasingly focusing on infrastructure (logistics, physical retail).

However…

I underestimated the difference between ecommerce at companies like Alibaba vs. TikTok / WeChat. The biggest difference is why the consumer is using the app in the first place.

  • Consumers go on TikTok to be entertained. They search for things and watch things based on interest.
  • Consumers go on Alibaba to buy things. They have high consumer intent.

Ecommerce based on interest vs. consumer intent is like selling at the movies vs. the supermarket. There are big limits on how much and where you can do ecommerce for apps based on interest. You don’t have nearly as strong as signal about consumption. You can easily take away from the experience.  So, you have to be very careful when going from entertainment to ecommerce.

In practice, most of the entertainment to ecommerce activity is still livestreaming. That is 90% of what is going on today. And TikTok is doing well here. According to Jing Daily:

“TikTok’s e-commerce engine earned a total of $208 billion (1.41 trillion RMB) in 2022, rising 76 percent from the previous year. More than 30,000 influencers and 60,000 stores have broadcast over 2.7 million hours of commercial content promoting their wares, garnering 1.3 billion user interactions, according to TikTok’s year-end report.”

But this is another complexity.

Because live streaming gets very different adoption country-by-country. Short video is popular pretty much everywhere. But we don’t see livestreaming getting adopted in the UK and lots of other markets. The consumer behavior is not the same. So, livestreaming is huge in China, South Korea, Thailand, and some places. But it is negligible in other places.

So as TikTok goes increasingly into ecommerce, there are some interesting questions about:

  • How to build ecommerce on top of consumer interest.
  • The adoption of live streaming country by country.
  • Other products for ecommerce besides live streaming.

Lesson 2: ByteDance Is More Agile and Decentralized Than I Realized

ByteDance is known for being particularly fast and adaptive on the changing frontiers of human attention. They are experts at seeing what videos get attention and then customizing to them. They are also fast at launching new mobile apps. Think hundreds each year. Again, this is about studying what gets attention (which keeps changing) and then providing it.

I’ve been trying to understand how this is done organizationally.

And I definitely underestimated how flat the organization structure is at ByteDance. They have tons of small product teams that can create and launch mobile apps mostly on their own. In fact, there are tons of apps going online and becoming available for download all the time that you don’t know are ByteDance.

That sort of agility and innovation is not uncommon in smaller companies. But it is very uncommon in companies of this size. Hierarchy and control become more important with scale. Speed almost always decreases.

But ByteDance is flatter and more decentralized than I realized. And they now have over 150,000 employees internationally. It is also far more of a multinational than I realized. These small teams are operating all over the world.

I’m going to research and write more about how ByteDance organizes at such scale. It’s a really great question.

  • How is this innovative and adaptive organization structure changing with increasing size?
  • How is it changing with increasing multinational status?

It’s a fascinating topic.

Lesson 3: ByteDance Is Really Good at Creating Tools and Activities for Content Creators

I like CapCut. This is the ByteDance “all in one” video editing app that is a huge hit in the US and internationally. It’s a video editing tool for your phone and it makes doing videos really easy (which you can then upload to TikTok).

  • You can add text.
  • You can add music and sound effects.
  • You use a big library of filters (free and paid), which are getting better and better. There is the filter that can de-age you (which I avoid). There is the filter that can put a wig and make-up on you (which people are using to troll Bud Light). And there is the video that makes you look like a model.

But CapCut is just one of ways they provide value to content creators. The tools are getting increasingly sophisticated, and I got to see some of the ones you use for live streaming. Basically, you can just sit in front of the camera and talk – and it adds absolutely everything in real time (translation, text, products, prices, etc.).

They also do activities for content creators. I didn’t know this. They regularly host events and create activities for creators. This includes trips to scenic locations (that are good for making videos). These tools and activities are particularly effective when they enter new markets. When entering the US, TikTok was very good at supporting local content creators. Especially those that had been treated badly by Facebook, Instagram, and YouTube over the years.

Lesson 4 (Last One): Apps for Developers and Businesses Are a Compelling Growth Adjacency

ByteDance is huge in B2C mobile apps. And this is turning into a good springboard for B2B growth opportunities. The two apps that are worth paying attention to are Lark and Volcano Engine. Plus, Volcano Engine is just a great name for a product. Second only to Fire Tiger (my favorite coffee place in Thailand).

Lark Suite is their enterprise collaboration and communication tool. This was released in 2019 and took off during Covid when everyone started working from home and doing video conferences. Most of the China tech companies launched similar services during this period (WeChat Work, Alibaba’s DingTalk). It has a domestic version (Feishu). And Lark is increasingly going international.

Volcano Engine was another clever externalization move. As mentioned, ByteDance is good at rapidly creating, testing, and operating mobile apps. They are increasingly offering this capability as a service, which they call Volcano Engine. It is a cloud service with lots of strengths in algorithms and data science. And it can be used in a fairly lightweight manner, that lets you ramp up and test apps easily.

So similar to Lark, they took an internal capability and began offering it as a service to businesses and developers. The have also launched an international version (Byte Plus?), which is based in Singapore.

***

Ok. That’s it. I’m going to be writing a lot more about ByteDance in the next couple of weeks. It was a great visit. And zipping around Beijing is always fun.

Lots more content from the tour on the way.

Cheers, Jeff

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From the Concept Library, concepts for this article are:

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From the Company Library, companies for this article are:

  • ByteDance

Photo by Alexander Shatov on Unsplash

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

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This content (articles, podcasts, website info) is not investment, legal or tax advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. This is not investment advice. Investing is risky. Do your own research.

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