Bytedance: Celebrating innovation while apologizing for its political crimes

Dear reader,

Three things for you today, with the usual bunch of links at the bottom of the newsletter:

1. Bytedance: Celebrating innovation while apologizing for its political crimes

Founded in 2012, Bytedance is a Chinese tech company that came out of nowhere to become one of the world’s most-talked-about startups: In December 2017, it raised funds with a valuation of $30 billion. Bytedance’s flagship product is Jinri Toutiao. Usually just called Toutiao, it’s a mobile app that uses artificial intelligence (AI) to customize news feeds for individual users, and it runs a number of services based on similar technology.

But trouble started not long after the $30 billion figure hit the tech headlines:

• The People’s Daily published an editorial (in Chinese) in September last year that criticized Toutiao and other news apps for spreading misleading medical information, exaggerated advertising, and “useless information.”
• In December, the Cyberspace Administration of China (CAC) ordered Toutiao to suspend updates for 12 hours in punishment for “circulating pornographic and vulgar information” and causing a “negative impact on public opinion.”
• The State Administration of Press, Publications, Radio, Film and Television (SAPPRFT) on April 4 issued a notice (in Chinese) that denounced Toutiao and its video platform for not having the correct licenses and streaming programs against social morality (违社会道德节目 wéi shèhuì dàodé jiémù).
• On April 9, Toutiao and three other news apps were taken down, by order, from Chinese app stores. Toutiao has been suspended for three weeks. A report on Sohu.com, since deleted, said that suspension of the apps was “to regulate the dissemination [of news] in a legal manner.”
• Yesterday, SAPPRFT issued another warning to Toutiao (in Chinese), ordering it to clean up content on all its apps and to permanently shut down Neihan Duanzi, an app for sharing jokes and viral videos.
• Today, Kejixun reports (in Chinese) that Bytedance’s short video app, Douyin, has temporarily removed its live stream and comment feature for a “complete system upgrade” (对系统进行全面升级 duì xìtǒng jìnxíng quánmiàn shēngjí). “Server maintenance” and “system upgrades” are common euphemisms in China for censorship.

Also today, Bytedance CEO Zhang Yiming 张一鸣 published a letter of apology for Toutiao’s sins. China media scholar David Bandurski has partially translated and commented on the letter. He says that “this is a mea culpa made under extreme political pressure, in which Zhang, an engineer by background, ticks the necessary ideological boxes to signal his intention to fall into line.” Bandurski concludes:

[T]his letter offers an essential view of the deep tension in China right now between technological innovation and economic reform on the one hand, and the urgency of political controls on the other. Here we have a technologist celebrating innovation and apologizing at the same time for its political crimes.

Should Bytedance’s investors be worried? The New York Times quotes one investor (paywall) who isn’t:

Hans Tung of GGV Capital, a venture firm that operates in both China and the United States and is a Bytedance shareholder, said he is confident the company will continue to add more types of material — not just the lowbrow kind — to its platforms. “The Toutiao we see today is not the Toutiao it will be five years from now,” he said.

“It’s better to go through this rodeo a few times,” Mr. Tung said of the latest rebuke from regulators. This way, he said, the company will be motivated to move more quickly in courting users who want higher-minded stuff.

Disclosure and note: The China Project partners with GGV Capital to produce the 996 Podcast, and you can listen to this episode in which Hans Tung and his colleague Zara Zhang interview interview Liu Zhen, the senior vice president of Bytedance.

2. WeWork to buy Shanghai-based Naked Hub for $400 million

China Money Network reports that “global coworking giant WeWork’s China unit is reportedly buying Chinese shared office space startup Naked Hub for $400 million.” This would be WeWork’s first major deal in China. Last year, investors valued WeWork at $20 million. Two fun facts:

• The China Project’s New York offices are in a WeWork building.
• Naked Hub’s founder Grant Horsfield, is like your editor, from South Africa. Here he is on YouTube talking about his co-working business, or watch a short video about the WeWork deal on The China Project.

3. Et tu Cathay Pacific?

One of the joys of travel in East Asia — although sadly not in mainland China — is the comfort of the airlines. Maybe not for much longer. The South China Morning Post reports that Cathay Pacific “will add an extra row of seats to its Boeing 777s to create a 10-abreast cabin,” which the company hopes will add US$89.7 million to its annual revenues.