When you think of ByteDance the first thing that comes to mind is TikTok (or its "almost" Chinese counterpart Douyin). Hugely popular social platforms with extraordinary growth.
Far fewer are those who know ByteDance's "business" path. Lark, or its Chinese equivalent Feishu, is a collaboration tool developed in the aftermath of the pandemic. A mix of Slack, Dropbox, Skype and Google Docs that is becoming increasingly popular in smartworking environments. And then there's Volcano Engine.
What the hell is Volcano Engine?
Huoshan Yinqing (or “Volcano Engine” in its Western version), is a project that just launched, just over 15 days ago. And my blog talks about the future: too good an opportunity not to deal with something like this. I can't help but wonder what the business strategy of a company like ByteDance is. A company that could have a stable role in the coming years, perhaps decades, of the planet. This is why I will talk about it in this post: but I will get there step by step.
Why does ByteDance want to enter the business sector?
Immediate answer: because it can do it. In some respects ByteDance can already rival Google and Facebook. For example, in 2020 he has already beaten the two giants in the growth of its presence on Blind, professional social network popular with technology operators.
In addition, a not obvious case, ByteDance has reached profitability even before the listing. In 2019 only it generated over $ 17 billion in revenue and over $ 3 billion in net profit.
In summary: ByteDance is sitting on a huge money bomb waiting to explode.
Obviously, ByteDance's premises as the "most valuable startup in the world" will be tested if and when (I would say when) it decides to go public.
Given the enormous expectations generated, however, the TikTok company needs a solid growth plan for its ambitions to surpass the prices of "masters" such as Alibaba and Tencent. Not to mention the most immediate objective: to dethrone Baidu among social platforms.
A mad rush
Douyin's daily active users went from 30 million in January 2018 to 400 million in January 2020. ByteDance has experienced its fastest growth in the first half of 2018, with an increase of 400% on a monthly basis and a peak of 733% on an annual basis in January 2019.
When you grow so quickly, you need to prepare parachutes to prevent small setbacks from creating strong disappointment (if not panic) on the part of financiers and investors.
The current dependence on advertising revenues (an amazing driving force, which placed ByteDance immediately behind Alibaba in terms of revenues in 2019) may represent a danger if some alternative is not structured. Despite Zuckerberg's certainties, who is probably right on this point, the damage suffered by Facebook (60 billion dollars) following the boycott by 500 major brands is an alarm bell.
The business option
Market observation is clear: business services can become a source of stable revenue when customers bond with a brand.
For example, Amazon revolutionized the cloud computing industry by introducing AWS, Amazon Web Services. Today, AWS runs the entire company and makes up at least two-thirds of Amazon's overall profit, much more than its e-commerce.
In China we are at year zero. Imagine, of the $825 billion that made up the valuation of China's entire software and technology services sector in 2017, business services were worth $2,5 billion. 0,3%.
However, the Covid-19 has also given a huge boost to collaborative tools in the workplace. Suddenly he added $ 2 billion to the fortunes of the founder of Zoom Eric yuanto the point that companies like Facebook and Tencent have run for cover to add similar features to their platforms.
And it is at this point in history that Volcano Engine enters the scene.
Quite simply: it is an intelligent technology platform that offers a list of tools for companies.
I said everything and nothing, didn't I? Xiao Mo, manager of Volcano Engine has more or less expressed the same concept, except to add a detail that will make you understand better.
“ByteDance,” he said, “is a global company that has grown rapidly over the past 8 years. In this process the accumulated operational tools played a vital role. With Volcano Engine we want to transform our tools and capabilities into services."
In practice: the TikTok method (or a large part of it) fragmented and sold to companies. A series of solutions that are not divided in the traditional way.
For example, Volcano Engine does not present services divided into CRM, HRM and ERP1. Present instead twelve technical products in four key areas: intelligent applications, visual intelligence systems, data intelligence systems and multimedia technology.
To put it more simply, Volcano Engine positions itself ahead of companies and is prepared to accompany them in more complex challenges based on intelligence.
In practice, its current products include video on demand, live video transmission, corporate live transmission, real-time communication, image services, messages, access control and video conferencing.
For example, Volcano Engine includes smart recommendation services that provide personalized recommendation algorithms for corporate customers.
There are obvious similarities with ByteDance's flagship products, which stand out thanks to their powerful search and recommendation algorithms.
The companies in ByteDance sauce
Such algorithms, when customized for enterprise applications, can be used for product discovery, internal enterprise database optimization, customer segmentation, and product testing, to name a few.
Volcano Engine also offers visual intelligence systems capable of detecting and following hand positions and limb movements for business use. For example, Hisense uses Volcano Engine products to equip its TV with gesture control.
Haier it uses it for its home automation technologies, starting from its Leader refrigerator line.
The tools currently offered on Volcano Engine are presented in a modular way and cover the entire data path. Data discovery, integration, analysis, optimization and verification, providing easy entry points to the data economy.
Who are Volcano Engine's target customers?
At the moment, the partners are big brands like Haier, Hisense and Samsung. This does not mean that Volcano Engine's solutions are also oriented towards the digital transformation of new companies in this world.
And it's a huge pool: according to Statista, as of 2019, SMEs made up more than 90% of businesses and 80% of jobs in China.
However, the largest customers are the most profitable and efficient ones. ByteDance will have to work hard to attract these "big targets". It might entice them by catching up with solutions like AWS (which I talked about earlier).
The Cloud, therefore.
In fact, in 2019, ByteDance filed a trademark application for the name “Bytecloud” and registered the domain “bytecloud.com.” This authorizes more than one speculation, despite the company's declarations to the contrary.
At the launch of Volcano Engine on June 22, 2020, a company spokesman He insisted that “ByteDance has no plans to enter the cloud industry.” Nobody believed him.
ByteDance for now relies on a mix of neutral third-party cloud providers and private clouds, but it is clear that it cannot last. Cloud computing is a key factor, albeit expensive to activate.
If Volcano Engine opens the way for “Bytecloud” in the future, it will mean that it is ready to launch the final attack on the big Western competitors. And frankly the time doesn't seem far away, given that Lark already offers 10GB of space to customers. And it calls itself “the best alternative to Google Drive”. Warlike resolutions!
Beyond ByteDance's cloud ambitions, Volcano Engine's mysterious journey will be observed special in the coming months.
1 CRM stands for Customer Relationship Management, HRM stands for Human Resource Management and ERP stands for Enterprise Resource Planning.
