Toutiao started out as a news aggregating platform that leverages machine learning to provide customized content to the reader. Nevertheless, today with a valuation greater than the combination of NewsCorp and New York Times and more than 100 million Daily Active Users, it has evolved into a media giant that does more than aggregating and delivering personalized content.
How does Toutiao create value?
Toutiao collects content online and recommends the relevant content to the reader, based on his or her interests. Toutiao initially presents general content to a first-time user and then uses machine learning to learn about the reader’s learning habits and interests through time. As the reader increases his or her interaction with the platform, Toutiao learns more about the user and provides more relevant content, which would make the user use the platform even more, making the platform even better at personalizing content. This ability to use machine learning to target specific content that the user enjoys creates value to the user but also through machine learning, the platform can capture that value to create even more value.
Furthermore, Toutiao has leveraged the data that it has collected and the learning it has made to create its own content through an artificial reporter called Xiaoming. This is another form, whereby Toutiao creates value, which can be captured through learning that will create even more value over time.
Using machine learning therefore can be a valuable tool to fend off competitors as the incumbent. Nevertheless, Toutiao understands that machine learning on its own is not sufficient to create value and compete with other media giants. Toutiao has done so by also taking advantage of crowd sourcing by attracting and rewarding a community of content creators by inciting them to create content specifically for the Toutiao platform. Toutiao understands to maximize value creation, it needs to rely on a community of content providers, which enables to make its content more unique to its platform.
How does Toutiao capture value?
Toutiao captures value through advertising, with estimated revenue for 2017 to be at $2.5 billion (or RMB 15 billion). As the platform learns about the reader, the platform can provide targeted advertising that is very relevant to the consumers. It therefore creates value to advertisers by providing them a means to reach out to a large population of more than 180 million Monthly Active Users, whilst knowing these consumers so well it can target them in an effective and cheap manner .
Machine vs Human
Although Toutiao has developed a very strong value proposition with its machine learning capability, it has increasingly relied on top talent, as it offers some of the top salaries in China with packages reported to be at $3 million for AI engineers. As of the end of last year, Toutiao was looking to hire an additional 200 AI engineers
At the beginning of the year, Toutiao was shut-down for 24 hours by the Chinese government  as its technology failed to weed out pornographic content. This is truly important as Toutiao relies on machine learning to identify fake news and filter content. Although Toutiao blamed Baidu for providing the content, Toutiao’s solution now relies on a hybrid model, as it hired over 1000 human editors to oversee content review.
It seems that the quest to fully replace humans by machine is one that will not happen overnight. The place for the human will shift but there might always be the place for human contributors – in this instance, whether it is in improving the technology with AI engineers, interpreting the data and making decisions with crowdsourced editors and internal management, or overseeing that technology does not fail or get exploited with human editors.