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Beijing’s Bytedance Steps Up Global Video and Entertainment Profile With Musical.ly Buy, Live.me Funding

Live, from China: It’s Bytedance.

If you live outside of Asia, you’re about to get more familiar with the five-year-old internet news and video aggregator. Bytedance is already a household name in China, where its Toutiao information and content-recommendation service garners north of 120 million daily active users in the country — and is on track to generate about $2.5 billion in revenue this year.

Now the Beijing-based company, with a valuation said to be in the neighborhood of $20 billion, is making bigger moves to crack into the world of mobile video, media and entertainment in the U.S. and beyond.

Bytedance has agreed to buy video-app maker Musical.ly in a deal reportedly worth up to $1 billion. Also this week, Bytedance entered into a pact with Chinese mobile-app developer Cheetah Mobile to provide $50 million in funding to Live.me, a top live-streaming app majority-owned by Cheetah, which has a community of about 40 million users.

Musical.ly has more than 215 million users (or “Musers” as it calls them) for its lip-syncing and short-video app, skewing toward teen girls. It also has a sister app, Live.ly, for live-streaming video.

Besides Musical.ly’s passionate user base, Bytedance will get inroads into Hollywood with the acquisition: Musical.ly has deals with Viacom, NBCUniversal and Hearst Magazines Digital Media, which have developed short-form shows for the video platform. Media execs will be keeping an eye on how those partnerships evolve under Bytedance’s well-funded auspices.

There’s no revenue associated with original content on Musical.ly at this point, but clearly the app has different paths toward monetization. “With Musical.ly, we are able to bring a new form of entertainment and a host of new video content to the millions of teens who engage with the app each day,” Brian Madden, VP of audience at Hearst Magazines Digital Media, said when the pact was announced this summer.

The Musical.ly and Live.me deals will give Bytedance, which has more than 4,000 employees, an expanding portfolio to push further into mobile video, including in the growing live-streaming space. Under the terms of Bytedance’s Live.me investment, Live.me will have priority to provide live-streaming services to Bytedance in overseas markets. Live.me broadcasters create 350,000 hours of unique content daily, while viewers spend an average of 40 minutes each viewing live broadcasts, according to the company.

Here’s how Zhang Yiming, Bytedance’s founder and CEO, explained the rationale for the Musical.ly deal: By “integrating Musical.ly’s global reach with Bytedance’s massive user base in China and key Asian markets, we are creating a significant global platform for our content creators and brands to engage with new markets,” he said in a statement.

This week’s deals come after Bytedance earlier this year acquired L.A.-based Flipagram, which lets users create short video stories from their photos, set to licensed music clips. The Chinese internet conglomerate also also owns several other short-form video apps for user-generated content.

How Bytedance brings together its assets to bear in catering to audiences in America, Europe and elsewhere remains to be seen.

But artificial-intelligence technology will certainly come into play. Bytedance last year formed an R&D division, called the Toutiao AI Lab, headed by Ma Wei-Ying, formerly Microsoft Research Asia’s assistant managing director. The lab’s mission is to develop machine-learning algorithms for personalized content recommendations.

According to Musical.ly co-founder Alex Zhu, “Bytedance’s leading AI technologies and top-notch AI developers can empower us to innovate faster and roll out new user offerings unlike anything users have experienced before.”

For now, users shouldn’t expect any huge changes for Musical.ly. The company’s co-founders, Alex Zhu and Louis Yang, are joining Bytedance and will continue to run Musical.ly. The startup had raised $147 million to date from investors including GGV Capital, GX Capital, Qiming Venture Partners and Susquehanna International Group. Also worth noting is that Cheetah Mobile was an early investor in Musical.ly, in which Cheetah held a 17.4% stake of the end of 2016.

Meanwhile Bytedance also made another acquisition this week, to augment its flagship Toutiao service (officially called Jinri Toutiao — which means”Today’s Headlines”): It’s buying News Republic, a global mobile news aggregation service based in Bordeaux, France, from Cheetah Mobile for $86.6 million.

News Republic, according to Bytedance’s Zhang, will give the company “access to high-quality content from thousands of high-profile media partners around the world, making an exciting step forward in our international expansion strategy.”

Here’s another interesting tidbit: Last year, Bytedance engaged in talks to buy Reddit, the popular discussion site majority-owned by Advance Publications, according to a report by the Information. The negotiations broke down over financial deal terms and “general skittishness” about selling to a company whose revenue numbers and user stats were difficult to assess, per the report. This summer, Reddit raised $200 million in new funding, giving it a valuation of $1.8 billion.

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