China bans ads on booming video app
‘The opportunities here are bigger ... but the risks are higher,’ one analyst says
An app called Douyin has won over millions of Chinese fans by serving up an eclectic array of 15-second videos featuring lipsyncing teenagers, cute dogs doing tricks and fabulouslooking people flaunting designer fashions.
One thing viewers aren’t seeing right now are advertisements. Chinese authorities ordered Douyin’s parent company, Beijing Bytedance Technology Co., to suspend ads indefinitely after a search engine ran a promotional spot for the app that officials said made light of Qiu Shaoyun, a venerated Chinese soldier in the Korean War.
Short-video apps are surging in popularity, analysts say — slowing the growth in time spent on rival apps such as WeChat — and one estimates the ban could be costing Bytedance as much as 10 million yuan (about $1.98 million Canadian) a day in lost revenue.
“The opportunities here are bigger than they are everywhere else, but the risks are higher,” said Ben Cavender, a senior analyst at China Market Research Group.
The Beijing Cyberspace Administration didn’t reply to requests for comment. It said in a statement that Bytedance is one of five companies ordered to suspend advertising over ads that it said insulted Chinese heroes. The statement didn’t elaborate, but a new law makes it a crime to disrespect China’s “heroes and martyrs.”
The agency said the companies, which include the search engine, are under investigation, with punishments to be announced “in time.”
This isn’t Bytedance’s first run-in with authorities. Its popular news app Jinri Toutiao came under investigation in June for having a comic’s video on its site that allegedly slandered a different Chinese war hero. In April, Chinese authorities permanently shut down its humour app for hosting lewd content.
“They are trying to be a little edgy and allow a venue for selfexpression, which is sensitive,” Mr. Cavender said. “It’s very easy to cross the line — that’s why the government is looking more closely at them.”
Bytedance declined to comment. The Beijing-based company, which last year acquired Musical.ly Inc., a popular lip-syncing app in the U.S., is privately held and valued at $30 billion.
Fans say the Douyin videos, typically 10 seconds to 15 seconds long, are addictive, allowing them to peek into other people’s lives, share a laugh or learn how to braid hair.
“I swipe through morning and night,” said Xiao Li, 35, a makeup saleswoman from Nantong in Jiangsu province. “Whenever I have free time, I’ll open it and browse.” The ads it ran were typically stand-alone short videos promoting products such as videogames.
Douyin was the most downloaded short-video app for the first five months of the year in China, with nearly 501 million downloads, research firm QuestMobile said. Secondranked Kuaishou was far behind with 279 million downloads.
The app appeals to a young, educated user base living in big cities thanks to its hip marketing and algorithms that push out content tailored to users’ interests, analysts said.
Chinese users spent more than 7 per cent of their online time on these short videos, in April, up from1.6 per cent a year earlier, according to the latest estimate from market research firm QuestMobile. Analysts say that may help explain why the portion of online time spent on Tencent Holdings Ltd.’s ubiquitous WeChat app fell to less than 25 per cent that month from 26.6 per cent a year earlier. Total online time was higher, so the actual time spent on WeChat grew slightly, but much less than time spent on short videos.
As smartphones sales slow in China, tech firms increasingly rely on poaching users from other apps instead of wooing new ones. Bytedance, with a stable including Toutiao, Douyin, and other short-video apps Huoshan and Xigua, poses a growing challenge to WeChat, said Canaan Guo, a digital-media analyst at Pacific Epoch.
Across all of its apps, Bytedance earned 50 per cent more advertising revenue than WeChat in the first quarter of 2018, he said. “They are gaining share and Tencent is losing share,” Guo said.
Tencent declined to comment. It has been pushing its own short-video app, Weishi, and it also owns a stake in rival Kuaishou, which analysts say appeals more to people in smaller cities and rural areas.
Tencent and Bytedance have had several high-profile runins. The latest came last month, when Bytedance sued Tencent, alleging it had intentionally blocked its links to limit its reach. ByteDance is seeking 90 million yuan (about $14 million) in damages. Tencent didn’t respond to a request for comment.
Short videos have also taken off in the U.S., but not as they have in China. Their special appeal to Chinese viewers is offering a glimpse into worlds they have never seen, said Thomas Graziani, co-founder of WalktheChat, an agency that helps foreign companies use social media in China.
“There is definitely something a bit more aspirational in content consumption in China,” he said. “People from smaller cities basically are discovering the lives of people either living abroad or in larger cities and have lifestyles they can’t access directly.”