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TikTok’s Rival Goes Public This Week

Background on Kuaishou

Kuaishou, a Chinese short-video app backed by Tencent Holdings (TCEHY), is planning an IPO in Hong Kong this Friday. Analysts expect it will hit a valuation of over $60 billion.

More than 262 million users in China check Kuaishou an average of 10 times per day. Like its competitor TikTok, Kuaishou allows users to create, share, and watch short videos on their smartphones. Like TikTok, Kuaishou employs specialized algorithms to deliver personalized content to viewers.

Finding New Revenue Sources

One of Kuaishou’s main revenue streams comes from allowing viewers to send small virtual gifts to content creators as they watch livestreams. The app takes roughly a 45% cut of the money spent on these gifts. Three years ago the app generated 95% of its revenue in this way. That number has recently fallen to about 62% in part due to the economic downturn resulting from the pandemic.

In order to diversify its revenue sources, Kuaishou is ramping up its advertising business. Ad sales on the platform surged 213% during the nine month period ending in September, compared to the same period a year prior. Despite this rapid growth, Kuaishou is significantly behind its most direct rival, Douyin when it comes to ad revenue. Douyin is also owned by TikTok’s parent company Bytedance. The app earns more than three times the advertising revenue per user hour that Kuaishou does currently.

A Win for the Hong Kong IPO Market

In addition to facing intense competition, Kuaishou has also encountered regulatory roadblocks as it has tried to expand internationally. It has also struggled with censorship and regulations at home. Despite these challenges, investors are bullish about the company’s upcoming public debut.

Zooming out, Kuaishou’s choice to go public in Hong Kong further cements the city’s role as a market for Chinese tech companies. Hong Kong has welcomed companies making their public debuts, like the smartphone maker Xiaomi Corp and food delivery and travel booking company Meituan. Additionally, Chinese tech giants trading on US exchanges like Alibaba (BABA) and (JD) have recently pursued second listings in Hong Kong. Kuaishou’s IPO will be another big step for Hong Kong.

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