Toutiao, an AI-powered News Platform

Jinri Toutiao (means today’s headlines), a tech unicorn in China, is a news and information content platform powered by Artificial Intelligence. The company is China’s largest mobile platform of content creation, aggregation and distribution, with 120 million daily active users as of Sep 2017. Founded in 2012, the company now values at $22billion.

Value Creation

• Meet underserved market demand: Toutiao launched its mobile-oriented news platform in 2012, at a time when the smartphone was taking off in China but few news apps existed and few news portals had developed mobile-friendly products. Meanwhile, Chinese consumers access digital news and entertainment content mainly via major news portals, Weibo (Chinese twitter) and WeChat, while most foreign news portals and social network (Facebook) were banned in China. The Chinese consumers’ demand for content was relatively underserved, and Toutiao seized the chance to enter the market and provided consumers an easy-to-use product.
• Technology enables personalized experience: a key value proposition of Toutiao is to use AI to distribute personalized content feed for each user. By tracking user’s taps, swipes, time spent on each article, comment, pauses and location, Toutiao can identify the preference of each user and thus push personalized recommendations to everyone.
• Content with variety and speed: traditional news portals have their own reporters and editors who provide and pick news for customers, while Toutiao has 800,000 accounts of content creators, including professional media outlets, bloggers, and influencers, to provide more diversified content. More interestingly, Toutiao leveraged its AI technology and created the bot (machine writers) to pull information from online sources and create content in a faster and cheaper way.

Value Capture

Toutiao doesn’t charge fees to consumers and earns revenue solely from advertising. Because of its AI capability, it can help advertisers target their consumers more efficiently and precisely, and thus can charge higher rates than competitors. For users, seeing advertisement they might be interested in will make them less annoyed, and Toutiao is able to include more advertisements to increase its revenue.

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Key success factor of a quick Scale Up

“Toutiao is one of the fastest growing apps in terms of revenue in the history of the internet.” It reached large scale in a short time frame without any resource to leverage as a start-up (the company doesn’t have any tie with tech giants, like Alibaba, Tencent, Baidu). I think its key success factors include strong network effect, learning effect, and stickiness.

• Learning effect:
  The free, easy-to-use and AI-powered product penetrated into the market and gained market share quickly in 2012. With more users, it collects more data and understands users better, and thus can refine algorithm model and user experience. The strong learning effect enabled Toutiao to update the app almost weekly throughout the first year and quickly improved its product. Additionally, the learning effect enables Toutiao to develop machine writer, a much cheaper and faster content generator. For example, during Olympic 2016, the machine writer created 450 stories that had read rates on par with those produced by slower and more expensive human writers.
• Network effect:
  The platform has a strong network effect, with users on one side and content creators on the other side. More users attracted more content creators to join the platform, and the network effect is strong. Users have less tendency to multi-homing once they found Toutiao knows them very well. To reduce the risk of multi-homing of content creators, Toutiao shares advertising revenue, offer office space and tools, or sign exclusive contract with creators. Because of the strong network effect and low multi-homing tendency, Toutiao, as a first mover in the market, enjoyed a first-mover advantage, making it difficult for followers to catch up.
• Stickiness:
  The personalized content recommendation makes it very addictive for users. According to a report, Toutiao users spend 74 minutes in the app every day, compared to 50mins of Facebook, 30 mins of Snapchat. The stickiness enables the company to retain its customers and increase chances of monetization (longer time on app means seeing more advertisements).
  

The future, from one platform to many platforms…

With a proved success in news platform, Toutiao is now expanding to other platforms to build up a chain of entertainment content, from image, video, live to Q&A.  The company has built watermelon video (short-video platform) and Wukong (Q&A community like Quora), and acquired companies like Flipagram, Musical.ly, and Faceu.

Sources:

[1] https://www.economist.com/news/business/21731416-remarkable-success-smartphone-app-claims-figure-users-out-within-24

[2] https://technode.com/2017/08/21/toutiao-bat-alarm-bells/

[3] https://blog.ycombinator.com/the-hidden-forces-behind-toutiao-chinas-content-king/

[4] https://www.toutiao.com/

[5] https://technode.com/2018/02/01/topbuzz/