Tencent said to invest $2b in Chinese short-video app Kuaishou

This article is co-written by Minghe Hu.

Tencent Holdings, China’s biggest gaming and social media company, is reported to be in the final stages of a new round of investment into short-video app Kuaishou as competition heats up with Bytedance, operator of popular video platforms Douyin and TikTok.

Shenzhen-based Tencent is set to finalize a new US$2 billion investment in Kuaishou, which would boost the startup’s valuation to US$28 billion, according to a report by The Information on Tuesday, citing people familiar with the matter. The Beijing-based video platform recorded a strong financial performance in the first three quarters, posting nearly 2 billion yuan (US$284 million) in net profit on revenues of 27 billion yuan (US$3.9 billion), the report said.

Photo credit: piotrkt / 123RF

The investment from Tencent, a longtime backer of Kuaishou, would be part of a new US$3 billion round of funding that the startup is expected to close by the end of December, which includes injections from Chinese private equity firm Boyu Capital and Singaporean sovereign wealth fund GIC, according to the report.

With the latest funding, Tencent is betting that Kuaishou can outcompete rival Bytedance, which is increasingly challenging Tencent’s social media platforms in terms of user attention time, while Tencent’s own short-video products are still struggling to stand out.

Bytedance overtook search engine giant Baidu and Tencent to become China’s second-largest earner of digital advertising revenues in the first half of 2019, only behind ecommerce giant Alibaba Group Holding, according to a report by consultancy R3 last month.

Tencent and Kuaishou did not immediately respond to requests for comment. Bytedance declined to comment.

Kuaishou and Douyin share similar functionalities as platforms for short-video sharing and livestreaming. But Kuaishou, more popular among male users, is stronger among China’s rural communities and migrant workers, while Douyin targets college students and office workers with content that appeals more to females.

Kuaishou reached more than 200 million daily active users as of June, doubling the number from a year ago, the company said in July. Its livestreaming platform has more than 100 million daily active users, according to company figures released on Tuesday.

Kwai, the overseas version of Kuaishou, has also been topping app store charts in Brazil, showing its potential to be the next viral video app in the South American market after TikTok.

Its domestic rival Douyin has more than 320 million daily active users, according to a company statement in July. Its overseas version TikTok has become the first Chinese social media app to achieve success in major overseas markets, which has put it under the regulatory spotlight in Washington amid ongoing US-China trade tensions.

Seven-year-old Bytedance, reportedly valued at US$78 billion last year, is facing mounting pressure from US lawmakers concerned over national security issues and alleged censorship by TikTok of videos that criticize Beijing.

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