Under ongoing regulatory pressure in the US, ByteDance is moving its overseas operations away from its Chinese parent stake and operating in a completely independent manner. Although the process has been low-key for months, there has been new developments in recent days, with sources saying that ByteDance’s internal staff in China have been banned from accessing the code store for overseas products.
ByteDance’s overseas spin-off has now come to an end. After disbanding domestic overseas business teams, hiring foreign executives and re-arranging investor relations, ByteDance has built a firewall at the code level to send a stronger signal of goodwill to overseas markets. Like the “black domain” setting in The Three-Body Issue, ByteDance is using the move to create a “security statement.”
On another level, Byte Dance’s move also represents the ultimate state of Chinese companies going out to sea.
At first, Chinese companies went out to sea to sell Chinese manufacturing overseas; then slowly, some companies set up offices overseas; and later, some companies had the ability to integrate production and marketing overseas. Now, for a company with a market capitalisation of more than 100 billion dollars, it already needs to build a complete overseas company if it is to have more autonomy overseas.
The Tiktok on target
ByteDance’s out-of-the-sea story began in 2015 with the launch of the overseas edition of Today’s TopBuzz, the investment in the Indian news app Dailyhunt, the acquisition of Musical.ly incorporated into the overseas version of Tiktok… After five years of development, a series of applications led by Tiktok, Indian social software Helo and others have become the benchmark case for Chinese companies to go out to sea.
Based on Tiktok, for example, its total number of downloads to the App Store and Google Play App Store worldwide has exceeded 2 billion by May 2020, according to Sensor Tower. In three of the four quarters of 2019, Tiktok was in the top three of the World’s Most Downloaded Apps. Looking at Apple’s App Store data alone, the results were even more impressive, with Tiktok sitting at the top of the world in the first, third and fourth quarters of last year.
Tiktok’s growth boom in 2019 has been accompanied by a series of regulatory pressures.
At first, Tiktok was blamed and punished more by water and soil from the information protection regulations. For example, in February 2019, Tiktok paid a $5.7 million fine to the U.S. Federal Trade Commission for violating the Children’s Online Privacy Protection Act for collecting personal information from users under the age of 13 without parental consent.
Subsequently, the U.S. government’s regulatory involvement deepened, with several hearings over the past two years focusing on national intelligence.
In November 2019, a Tiktok beauty blogger was taken off the shelves after demonstrating how eyelash clips were used while discussing ethnic sensitivities in China in a video about make-up. The hearing was held after U.S. lawmakers suspected the Chinese government had access to Tiktok’s content. The incident ended with Byte Dance publicly apologizing to the user.
Tiktok’s regulatory problems are not confined to the United States. As a result of the punishment in the UNITED States in February 2019, an investigation was launched in the United Kingdom. In July, the UK sued Tiktok for a fine of 17.9 million pounds, or 4% of its annual revenue, for breaching GDPR regulations.
In India, Tiktok was banned for pornography in 2019. Earlier this year, a number of Indian users branded Tiktok on Google Play, expressing anger and resistance with hashtags such as #BanTikTok, #IndiansAgainstTikTok, after a TikTok blogger uploaded a video of the sulphuric acid attack and mocked the victim. The incident then spread to other Chinese apps, an app called Remove China Apps, which quickly rose to fame in India.
Let overseas return to overseas
To address the regulatory problems that have recurred in overseas markets, ByteDance has taken a big step in slinking overseas and Chinese companies. Not only will the business grow more closely suited to the overseas context, but it will also allow ByteDance to target global markets and investors in a more neutral manner.
In March, on the eighth anniversary of its founding, ByteDance announced an organizational upgrade. After the upgrade, Zhang Yiming focused more on the company’s global strategy and development, the Chinese business was handed over to the number two Zhang Lidong and shiyin CEO Zhang Nan responsible. Kevin Mayer, a former head of Disney’s streaming service, later joined ByteDance as CEO of Tiktok.
Mayer is not the only foreign executive at ByteDance. In order to build a thoroughly overseas company and help the company’s future, Mr. Zhang has chosen a deep Western face for executive appointments.
In addition to Mayer, ByteDance has to date seven core overseas executives. They include Erich Andersen, a former Microsoft chief intellectual property consultant, Roland Cloutier, a cyber security expert at the U.S. Air Force and Defense Department, Theo Bertram, a veteran of Google’s government relations, Blake Chandle, former head of Facebook’s global business partnerships, Ole Obermann, a former Warner music executive, and Former Hulu executive Nick Tran. In terms of investor relations, Former SoftBank investor Michelle Huang is the director of investor relations for his overseas company.
The background of overseas executives not only covers front-office responsibilities such as commercialization, but also focuses on back-office capabilities such as intellectual property rights, cyber security, and investor-government relations. The latter, which is also Byte Dance’s short board in overseas markets, is the case.
Along with the formation of overseas teams, ByteDance is also cutting off domestic teams from overseas products. In March, ByteDance disbanded a 100-person team based in Beijing tasked with reviewing Tiktok’s overseas content. At the same time, ByteDance’s worldwide recruitment is ongoing. ByteDance is reportedly recruiting engineers in Mountain View, California, Singapore, Jakarta and Warsaw, and poaching companies such as Google and Facebook at high salaries.
Zhang Yiming has said that the Internet industry has now come to the “born to be global” stage after the era of “copy to China” and “copy from China”. In order to allow his overseas company “born to be global”, Zhang Yiming chose to divide with domestic companies from all aspects such as team, product, business, corporate management structure, capital structure, etc.
Such a drastic move is partly to give the world a “security statement” and, on the other, to seek a new starting point for its global expansion. From a business perspective, the move could be seen as the ultimate state of chinese companies going to sea, or as the start of a new global market for a Chinese-born company.