** 33rd book of 2021: Red Ocean Strategy **

  • “We must face the fact that for 96% of people, their needs are so vulgar,” explained Gao Han, a senior UI designer, and ByteDance employee number twenty-two. He confirmed the app’s reputation was well-earned, “Toutiao is of course trashy. It’s all click-bait, all kinds of messy news.” *

In the west tech companies like to think of themselves as innovators, pursuing a ‘blue ocean strategy’ where competition can be ignored and innovation is paramount. The culture created by original tech giants Google and Microsoft has led to an entire industry that pulls its punches and operates with cozy margins. The Chinese alternate reality of tech after the establishment of BAT (Baidu, Alibaba, and Tencent), is the opposite: a red ocean where oxygen has been depleted and sharks abound. * Business was conducted like a brutal guerilla war in which developers, engineers, and operations staff worked themselves to death under grueling schedules in which speed of execution was everything. *

Bytedance, with its flagship products of Toutiao 今日头条 and Tiktok 抖音 has emerged from the brawl as a winner on a grand scale. With Toutiao, the race to the bottom in eyeballs for newsfeed had been accomplished long ago. With sections filled with nothing but pretty girls (美女) Toutiao’s topic selection was low brow but successful. Since BAT was missing the feed-based company analog to Facebook, there was an opening for Bytedance to succeed. Pony Ma’s *“stance at the time towards algorithmic recommendation could be described as, at best, suspicious, at worst, dismissive.” *

Tiktok itself is * arguably the clone of a clone of a clone. * Bytedance was only able to emerge from a crowded field by copying the key to retention around the combination of music + short form videos and then pouring gasoline on it quick enough to pull away from the copycats. Adding music to videos produced the same results as adding filters to pictures, effectively transforming smartphone cameras into a karaoke engine. The true irony is that this strategy didn’t first gain traction in China; most students were too busy studying for exams to produce content. So bytedance turned to inorganic growth for both content production and consumption. For content production: * “You have to attract immigration, and in order to do so, you’ve got to make a small percentage of people rich first” Bootstrapping an entire community of content creators to get the flywheel started for a new form of content is something that could only happen in China, and it took a company like Bytedance willing to spend billions to make it happen. Once the growth started, it was explosive: “Over October, Douyin’s daily users doubled from seven to fourteen million; two months later, they reached 30 million.” * By 2020, this strategy had worked. Advertising revenue from short form video had estimated to reach 17% of the overall advertising market beating out social media’s 10% and even search engine’s 15% according to SCMP.

Now that TikTok has been growing in the US for a few years, for the first time, American tech giants have something from China to fear.