On the eve of its IPO, the Chinese short-video giant secured USD 3 billion led by the Internet behemoth Tencent.
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Kuaishou (快手) has completed Series F of financing round worth USD 3 billion, with Tencent leading this round of funding, investing approximately USD 2 billion. The news initially speculated by the Chinese media on December 3, and EqualOcean has confirmed the funding information with the people familiar with this matter.
Singaporean state-backed Temasek Group, Boyu Capital (博裕资本), YF Capital (云锋基金) and Sequoia Capital have also joined in the financing event. It is said that this is the last financing round that Kuaishou will hold before filing for an IPO.
Launched in 2011, Kuaishou is a social media platform that not only allows users to post and share short videos, but also provides live-streaming channels. It utilizes Artificial Intelligence to generate personalized recommendations, hence the extended average periods of viewing time.
So far, Kuaishou had accumulated at least USD 4.75 billion from a total of eight financing rounds. Tencent has also participated in Kuaishou’s previous three funding rounds. Thanks to the final round of funding, Kuaishou successfully boosts its valuation to USD 28.6 billion, with Tencent accounting for 20% of its share.
For Tencent, which is lagging behind in its short-video functionality, investing in Kuaishou might be one of the best options, allowing each to mutually benefit each other. Not only might this increase traffic, collaborating with Kuaishou allows Tencent to compete with market leader Douyin (抖音) from ByteDance (字节跳动).
Further discussions on strategic cooperation between Kuaishou and Tencent is still ongoing, after their previous failed attempt on a joint venture based on a gaming entertainment product.
Due to its easy-to-use functionality, Kuashou's platform successfully appeals to China's both rural and urban poor communities. As of July 2019, the Beijing-based company boasts an astonishing 200 million daily active users, and over 400 million monthly users, with 70% of its daily active users coming from China's lower-tier cities.
The platform simultaneously provides the opportunity for users to earn extra allowance by sending ads to their followers.
On the other hand, Douyin conquered 250 million active daily users, of whom only 30% reside in China’s third and fourth-tier cities. While Kuaishou focuses on domestic market, Bytedance has expanded internationally, and is currently present in 150 countries.
Other Chinese competitors seeking to snatch the lower-tier cities market share, include Huajiao Live Video (花椒网) and SAIF Partners-backed Yinke (映客直播).
Other popular similar platforms outside China include Instagram and Snapchat.
According to research company iResearch, China’s short video industry is experiencing an outstanding performance, with revenue amounting to CNY 46.71 billion (equivalent to USD 6.63 billion) in 2018, with a phenomenal growth of 744.7% from the previous year. Advertisement from top platforms remains the engine for revenue growth in China’s short video industry. The figure is estimated to continue at a rapid rate, exceeding USD 221 billion in 2021.