ByteDance Is Undervalued: TikTok’s Parent Could Be Worth More Than Tencent and Possibly Meta

ByteDance, the Chinese short video tech titan, could be undervalued given its rapid expansion both domestically and internationally. With substantial room for growth in its e-commerce sector, ByteDance is poised for significant advancements. Its forays into global markets are set to propel continued high revenue growth, potentially elevating its valuation to rival that of tech behemoths Tencent and even American giant Meta.

Let’s first look at ByteDance’s performance and valuation:

Let’s compare ByteDance with some of its industry peers. Meta’s 2023 full-year revenue is expected to reach US$125.33 billion, up 7.5% year over year. Meta has a market valuation of US$948 billion.

Tencent’s estimated revenue for 2023 is HK$685 billion (US$88 billion), compared to 2022’s US$82 billion. Tencent has a market valuation of US$340 billion.

Given the impressive domestic and international performance of Douyin and TikTok, it’s quite plausible that ByteDance’s valuation could surpass Tencent and perhaps even Meta in the coming years.

Douyin’s e-commerce is still experiencing rapid growth. In the fourth quarter of 2023, its GMV (Gross Merchandise Volume, which is the total value of merchandise sold) increased by over 50% year-over-year, reaching about 650 billion yuan. The overall GMV for 2023 is expected to surge to 2.2 trillion yuan, according to media reports citing insiders.

Douyin is trying to turn its marketplace into a major aggregation point for products. Currently, the commercialization tools in the marketplace are only available to a select group of merchants. The marketplace is still operating on an invitation-only basis for merchants, having invited only about 10,000 businesses so far.

Specifically, food and daily necessities are among the fastest-growing categories on Douyin in 2023. This is because Douyin’s brand presence has been mainly in clothing and beauty, leaving significant room for growth in other consumer categories.

It’s worth noting that the advertising costs in Douyin’s marketplace are relatively higher than those in Tmall and Douyin seems to have attracted a different set of sellers on its platform. The number of sellers migrating from Douyin to competitors like Taobao is small.

Additionally, Douyin is working to achieve sustainable operation and retain merchants by reducing merchant costs. Its main measures include lowering commissions, lowering weighting to top authors, controlling slot fees, and supporting merchants’ self-broadcasting.

Moreover, the lifestyle services business could represent a "new oasis" that ByteDance can cultivate and grow more alongside its live streaming ventures. The team behind lifestyle services has been developing rapidly, with its GMV (Gross Merchandise Volume) expected to reach between 250 to 270 billion yuan in 2023.

On Douyin, there are now over 2.8 million active creators. Among these, creators with less than 1 million followers constitute the majority, while there are also over 2,000 creators with 10 million or more followers.

It is this vast team of creators that feeds back into a diverse and all-encompassing content supply ecosystem. Douyin is emulating e-commerce platforms like Vipshop, Pinduoduo, and Taobao, relying on strategies such as value shopping, live broadcast competitions, and low-price traffic attraction.

These methods are being used to further optimize the marketplace’s positioning and pricing structure, and they are set to be one of the main directions for Douyin’s marketplace reform in 2024.

Despite the majority of ByteDance’s revenue still came from the Chinese market in 2023, TikTok’s performance in overseas markets was no less impressive.

TikTok has made inroad with localization in many international markets. As early as the end of 2020, ByteDance’s CEO Zhang Yiming identified cross-border e-commerce as a new direction for the group’s business growth.

Taking the Southeast Asian market as an example: TikTok is a natural traffic platform, and in the long term, converting traffic into sales is a viable model.

The platform’s rich UGC (User Generated Content) circulates and extends beyond its original ecosystem through secondary creations. The recommendation algorithm ignites a cycle of content, users, and secondary creations, representing a particularly rare and valuable product capability.

TikTok only needs to consider how to combine traffic with goods. Additionally, more and more sellers are actively embracing TikTok. The Indonesian market is growing rapidly, and it’s easy for sellers to attract others to try it out.

In an environment surrounded by international giants like Amazon, Facebook, YouTube, and Instagram, TikTok has found a way to reshape consumer interest graph. As it penetrates from a young audience to a broader demographic, its user base, monetization capabilities, and influence are increasingly approaching the role of a rule-setter in the era of short videos.

Certainly, ByteDance is navigating through significant challenges as it evolves into a global tech giant. One of the foremost hurdles is regulatory scrutiny. TikTok, a ByteDance subsidiary, has been under intense examination by governments worldwide, including the United States, India, and European nations, primarily due to concerns about data privacy, user data management, and its connections to China.

Another potential obstacle for ByteDance is the ongoing geopolitical tensions. The escalating discord between China and other nations, particularly the U.S., has notably influenced ByteDance’s business operations and strategies.

Moreover, as ByteDance expands its international footprint, it encounters various unforeseen challenges. A case in point is the abrupt halt of TikTok’s e-commerce operations in Indonesia last year. ByteDance has been compelled to tailor its platforms to align with the distinct legal, cultural, and regulatory frameworks of each market it enters.

However, barring any major unforeseen adverse developments in these areas, ByteDance is on a trajectory to become one of the world’s leading tech corporations and worth a lot more than its current valuation.

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