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How ByteDance is Challenging Alibaba in This Huge Growth Market

ByteDance is a company with a lot of potential. It has around 1.5 billion monthly active users spread across its collection of apps.

ByteDance also has great management that skillfully uses the latest technology to keep users coming back to its apps. Many TikTok users, for example, say they planned to spend only an hour on the app but ended up spending a lot more than that.

Lately, ByteDance has also begun to monetise its potential as it nears a potential IPO. To become more profitable, the company has bought some gaming studios and increased its game development efforts. This puts ByteDance om a collision course with Tencent Holdings Ltd (SEHK: 700).

ByteDance has also arguably increased its efforts into live shopping, one of the latest big trends in e-commerce.

Given e-commerce is partly-dominated by Alibaba Group Holding Ltd (NYSE: BABA) (SEHK: 9988), ByteDance’s efforts could affect Alibaba’s financial performance. Here’s what investors should know about this impending battle.

What is live shopping?

Live shopping, or live commerce, is the mixture of livestreaming and e-commerce. It’s basically the modern-day infomercial.

In live shopping, viewers watch opinion leaders (or “influencers”) describe and showcase products via livestream.

Those viewers can often ask real-time questions and those interested in purchasing can buy via the traditional e-commerce route of clicking and having the items delivered.

In many cases, live shopping also offers discounts to increase demand and includes celebrities selling the products.

Live shopping has been a hit in China as many users find the experience more exciting or fun.

Many users buy because they have more trust in the influencer or celebrity than other traditional content ways of selling products online.

Alibaba’s live shopping

Alibaba has a dedicated live shopping business called “Taobao Live” and according to Alibaba news site, Alizila, demand for Taobao Live has been strong.

Alizila writes in 2020 that:

“According to Taobao Live’s latest figures, the gross merchandise volume generated by the platform grew by 150% per year for three years in a row.”

In terms of how big live shopping is for Alibaba’s Taobao unit as a whole, Alizila states:

“Alibaba’s Taobao Marketplace generated more than RMB 100 billion (US$15.1 billion) in gross merchandise volume (GMV) through livestreaming sessions in 2018, an increase of almost 400% year-on-year.”

ByteDance’s live shopping operations

ByteDance has a lot of potential in live shopping. In some ways, ByteDance’s TikTok and live shopping go hand-in-hand given that TikTok has many celebrity influencers on the platform.

Currently, ByteDance is behind Alibaba in the category, however. In terms of the big players in China’s livestreaming e-commerce market, Taobao Live had around 79% of the market and TikTok (Douyin) had 13% of the market in 2019 in China according to Pandaily, which cites Everbright securities.

Given ByteDance’s fast growth, however, the company could gain market share. ByteDance has arguably made more efforts in live shopping by reportedly increasing support for its livestreaming operations last year.

With more live streaming comes the potential for more live shopping in the future.

Foolish takeaway

Given its huge user base, ByteDance could grow substantially in live shopping in the future.

ByteDance’s potential growth in live shopping makes Alibaba’s other divisions like the cloud more important.

Perhaps that’s another reason why Alibaba recently announced that it would invest billions more in its cloud division. Alibaba will need to continue to innovate to continue its strong growth.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Jay Yao doesn’t own shares in any companies mentioned.