Give me a B


Bytedance was unquestionably the rising star of China’s internet sector in 2018. The rapidly growing popularity of its main services – an AI-curated newsfeed (Toutiao) and a short video site (Douyin) – even worried Tencent, which feared its ubiquitous social media app WeChat was losing eyeballs to the rival offerings. As we pointed out last year, this led to a very public feud between the two companies resulting in legal action (see WiC416).

Also getting in on the act was Baidu (see WiC424): in September it sued Bytedance for illegally streaming the TV drama The Story of the Yanxi Palace. This followed a lawsuit by Bytedance against Baidu for copyright infringement, this time over the streaming of a talk show made by Toutiao.

An article by Reuters Breakingviews at the end of December seems to have further fuelled the Baidu-Bytedance rivalry. Entitled ‘Bytedance will take over the B in China’s BAT’, it was part of a series of predictive pieces about 2019 (the BAT acronym refers to the grouping: Baidu, Alibaba, Tencent). It turned out the headline got both parties very excited and prompted the release of public statements.

On December 29 the Baidu communications department posted on its social media account that: “Baidu will not consider buying Bytedance”. This declaration clearly irked Bytedance’s executives who claim a higher valuation than Baidu (the former is an unlisted unicorn worth $75 billion at its last fundraising; the latter is New York-listed and this week had a market value of $57.8 billion). Li Liang, a VP with Bytedance, released a screenshot of the Reuters article and said the Baidu comment revealed “the importance of learning English”, claiming the term ‘take over’ had been misunderstood by its rival. The headline, Li suggested, was predicting that in 2019 the ‘B’ in the BAT would no longer be Baidu, but Bytedance instead. reckons the fight over the term ‘take over’ reflects the differing psychologies of the pair. Baidu is the “old giant” which has dominated China’s internet as part of the BAT triumvirate for the past decade, but is now on the defensive. Bytedance is the upstart that wants to replace the weakest link in the BAT.

So beyond the companies reactions what did the Reuters article actually predict? It called a “union of Baidu and Bytedance… a tantalising prospect”, arguing both had advantages in artificial intelligence, had complementary client bases and that a deal would bring cost savings as the economy’s growth rate further slows. WiC had also forecast a transformational Baidu merger, albeit slightly earlier in October. We suggested Robin Li’s search giant might combine with Ding Lei’s NetEase, after the two internet giants inked a strategic cooperation in online music streaming (see WiC429).

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