Tencent Holdings Ltd has led a pre-IPO investment of more than US$100 million in Chinese personalized news recommendation app Qutoutiao, valuing the start-up between US$1.3 billion to US$1.5 billion, according to local media.
Qutoutiao, which means "fun headline" in English, is rumored to be seeking a U.S. initial public offering of up to US$3 billion as early as this year. Neither Tencent nor Qutoutiao responded immediately to China Money Network’s email seeking comments.
The investment illustrates Tencent’s ambition to expand in news-related media and further rival Toutiao, the personalized news unicorn with a valuation of US$20 billion.
Founded in 2016 and less well known that its larger rival, Qutoutiao has targeted third- and fourth-tier cities in China to achieve growth. It currently ranks 4th in App Store’s news app ranking in China, after Toutiao, Alibaba’s UC Web Browser and Tencent News. Its existing investors include Redpoint China Ventures, Chengwei Capital and China Media Capital.
While Qutoutiao’s app looks similar to Toutiao, it differentiates itself by providing subsidies to attract users. Users receive digital coins when they register, check in, read news, invite friends and share news. One thousand coins are worth around RMB0.5. The value ratio between RMB and the coin depends on Qutoutiao’s advertising revenues. The more revenues they earn, the more valuable the coins are.
Tencent secretly made an earlier investment in Qutoutiao last year, according to local media.
Before Tencent began investing in Qutoutiao, there were reports that the tech giant was interested in a tie up with Toutiao. However, Toutiao’s founder and CEO Zhang Yiming said publicly that he had no intention of working for Tencent when rumor about Tencent interest in Toutiao spread.