According to Bloomberg news, ByteDance's 2019 net profit exceeds $3 billion. Before this, some reports claimed that the revenue of TikTok reached Rs 2.3-2.5 crore in India in the fourth quarter of 2019. The company also set a goal that its revenue will achieve Rs 1 billion in the third quarter of 2020. In fiscal 2019, ByteDance announced a net profit of Rs 33.8 million.

Most of the revenue generated by ByteDance comes from TikTok. On all platforms, the number of ByteDance's monthly active users reaches more than 1.5 billion, while TikTok has more than 800 million users worldwide and TikTok has more than 120 million users in India. According to industry estimates in India, TikTok India's advertising revenue increased by more than 50% last year.

TikTok has a huge number of users, but in fact it does not make money.

95% of ByteDance's (India) revenue from its parent company's service fee

The registered entity of ByteDance in India only provides services to its Singapore company, which means that TikTok, Helo or Vigo Video in India have not created profits for ByteDance in India.

ByteDance (India) Technology Pvt Ltd is owned by the group company TikTok Pte Ltd. The company engages in simplified and back-end support services, including ops for various applications, marketing and sales support services. Tiktok Pte Ltd's platform costs are borne by the company, and it provides advertising services for the application platform under TikTok Pte Ltd. 

ByteDance (India) has a capital of Rs 690 crore, TikTok Pte Ltd holds 99% of its shares, and the other 1% is held by ByteDance (HK) Limited.

According to ByteDance (India)'s fiscal year 2019 documents, the company achieved operating revenue of 430 million rupees and profit of 33.8 million rupees in the fiscal year. The revenue covers a service fee of Rs 415 crore and an advertising fee of Rs 21.6 million. However, the service fee is the service income collected from TikTok Pte Ltd, which is recognized as a cost plus and is based on the cost between ByteDance India and TikTok Pte Ltd. And the service fee accounts for almost 95% of the company's total revenue (INR 43.72). The largest service fee revenue comes from the parent company. The actual advertising revenue of ByteDance (India) is only 20 million, and only 5% of the current revenue.

As for the company's cost, among the total expenditure of Rs 4 crore in ByteDance (India), the advertising and content expenditure reached 130 million rupees, which accounts for 32.5%. In 2019, the company spent Rs 136 crore on contract workers, accounting for 34%, but there is no employee benefit expense, or any other items as employee welfare expenses.

(Picture from inc42)

Tiktok and its competitors fight in India for the advertising market 

In December 2019, ByteDance released Resso, an online music streaming application in India, and the company has been testing the platform in the Indian market to seek an increase in Indian revenue. Prior to this, TikTok had appointed Times Internet's former president and chief operating officer Nikhil Gandhi as the head of the Indian company in October 2019. So the outside world misunderstood that TikTok has not yet occupied an important share of India's 170 billion rupee online advertising market.

Gautam Mehra, chief data officer of advertising group Dentsu Aegis Network (DAN), said that between November 2019 and February 2020, TikTok advertising spending increased by 50-60% compared to the same period last year. And Instagram is an important advertising channel for TikTok.

At the same time, according to the information provided in the Facebook advertising library, TikTok has been advertising on Instagram and Facebook since May 2019.

According to an estimate released by the research portal Statista in April 2020, since Instagram was established 10 years ago, there are currently 1 billion monthly active users worldwide, while only 3 year old TikTok has already had 800 million users.

Abhishek Asthana, the founder of Gingermonkey, a boutique agent specializing in creating advertising campaigns for digital platforms, said that TikTok began to devour the share of Instagram advertising revenue. India is the largest market for TikTok, and Instagram is the second largest market after the United States.

TikTok users are known for showing real pictures to the world. DAN's Mehra stated that online users can always be subdivided when doing targeted advertising. Ultimately, the number of monthly active users is the core motivation of advertising, and TikTok has a strong user activity.

Sam Singh, vice president of TikTok Monetization in India, also said that brands are aware of the potential of TikTok and are communicating with TikTok for effective cooperation.

According to eMarketer data released in January 2020, Instagram's user growth is slowing down, with 4.5% since 2020, compared with the previous forecast of 5.4%.

Before replacing Facebook, the crisis must be resolved 

ByteDance is also becoming a new giant. "Indian Economic Times" reported that ByteDance's initial public offering (IPO) valuation may be between 150 billion US dollars and 180 billion US dollars. Relative to social media giant Tencent's sales up to a 20% premium, DZT Research Ke Yan, an analyst based in Singapore, estimates that its premium is as high as 20%, thanks to the expansion of global coverage and the emerging gaming business, compared with Tencent's sales. He also said that ByteDance can make a profit and sit at $6 billion cash reserves, which means that it is not in a hurry to raise funds for listing, so it is unlikely to issue shares at a more reasonable price.

Andrea Walne, a partner at Manhattan Venture Partners, said that the ByteDance transaction reflects the global consumer wave, and ByteDance can replace Facebook as the leading social network.

Although TikTok is very popular in India, it is also frequently involved in crisis events. The most recent one was involved in the "sulfuric acid attack" incident, which caused it to be scored by Indian users in the app store to 1.2 points. Prior to that, TikTok's operation in India was still facing great challenges due to its video content being repeatedly involved in events such as propaganda violence and child pornography.

This is an article from WeChat official accounts Caijingtuya(ID: caijingtuya), translated by Chris Yuan.