Some U.S.-based investors in ByteDance, the parent company of TikTok, argue that the company’s success is not heavily reliant on its U.S. operations, including TikTok’s presence in the U.S. market. This perspective stems from ByteDance’s significant revenue concentration in China, which accounts for approximately 77-80% of its total revenue, primarily driven by its Chinese apps like Douyin and Toutiao. In 2024, ByteDance generated $146 billion in revenue, with $112 billion coming from China and only $27 billion (18.6%) from TikTok’s U.S. operations.
Table of Contents
China as ByteDance’s Revenue Engine
ByteDance’s Chinese business is the cornerstone of its financial performance. Douyin, the Chinese counterpart to TikTok, is a major driver of revenue through advertising and live broadcasting. The company has also built China’s largest advertising business and is expanding into e-commerce, rivaling giants like Alibaba and JD.com. This dominance in China provides a robust financial foundation that many investors believe can sustain ByteDance even if TikTok faces challenges in international markets like the U.S..
TikTok’s Role and Challenges
TikTok remains a high-potential asset for ByteDance, especially in the U.S., which is the world’s largest advertising market. However, TikTok’s U.S. operations are not yet profitable and face regulatory uncertainties. The U.S. government has mandated that ByteDance divest its interest in TikTok by January 2025 or face a nationwide ban due to national security concerns. While a ban could result in a loss of up to $27 billion in annual revenue, some investors view this as manageable given ByteDance’s broader global footprint and dominant position in China.
Investor Perspectives
U.S.-based investors are divided on the importance of TikTok’s U.S. operations:
- Some argue that losing TikTok in the U.S. would not be catastrophic because ByteDance’s valuation is largely driven by its Chinese business.
- Others highlight that while TikTok’s U.S. revenue is smaller compared to China, it represents significant growth potential due to its large user base (170 million monthly active users) and robust advertising market.
Strategic Implications
If TikTok were banned or sold in the U.S., ByteDance could still thrive by focusing on its core markets in China and other international regions where TikTok remains popular. A sale of TikTok’s U.S. unit could also provide a substantial payout to investors, potentially fetching $40-50 billion. Additionally, resolving the uncertainty surrounding TikTok could improve ByteDance’s prospects for an IPO, which has been delayed partly due to geopolitical tensions.
In summary, while losing TikTok’s U.S. business would be a setback, many investors believe ByteDance’s strong performance in China ensures its long-term success. This reliance on China’s market underscores the company’s resilience but also highlights risks tied to regulatory shifts within China itself.