TikTok’s parent company, ByteDance, has agreed to invest in one of China’s largest e-book readers and publishers, Zhangyue. The company plans to invest 1.1 billion yuan or $170 million to acquire an 11.23% stake in Zhangyue, according to a Shanghai Stock Exchange filing.
ByteDance appears to be constantly looking to expand its horizons. The company has entered the market of online education under a new brand name called Dali, under which it recently released its first gadget—a smart lamp. It has also entered the enterprise software business with its collaboration platform called Lark.
In a bid to diversify its revenue sources, ByteDance is now eyeing the rapidly growing e-book and online literature market in China. The company already has a reading app called ‘Fanqie Xiaoshuo’ which operates on a free model, and has reported 10 million daily active users as of April. Some of the companies that ByteDance has recently invested include Wuli Culture, Xiuwen Technology, Dingtian Culture, Tadu Literature, and Jiuku Literature.
Zhangyue was founded in 2008, and is the developer of the app called iReader. The company provides novels, audiobooks, anime/manga, and other literature publications which its users can read on its app.
According to the company’s website, it has 110 million monthly active users on its app. The Chinese e-book reader company currently has a market cap of 12 billion yuan. One of its biggest rival, Tencent’s China Literature, receives about 217 million monthly users. Alibaba’s Shuqi is also competing with China Literature and Zhangyue, and these three platforms make up the top three leaders of China’s online literature market.
The funding for the ByteDance-Zhangyue deal is going to be done through ByteDance’s wholly owned subsidiary company, Beijing Liangzi Yuedong Technology Co Ltd. This deal will allow both the Chinese companies to benefit from each other in different ways. According to the agreement, the 11% stakeholder, ByteDance, will get to assign one board member to Zhangyue and will get to license the publisher’s intellectual property. Zhangyue, on the other hand, will receive the support of ByteDance’s already existing online resources and expertise in areas like advertising and monetization.
More and more people read e-books and listen to audiobooks on their smartphones, and e-book readers like Amazon’s Kindle app and Zhangyue’s iReader are their go-to platforms.
The online reading market in China is currently booming. According to an iResearch report, in 2019, users spent almost an hour a day on e-book reader apps. By 2020, the sector is expected to produce 20.6 billion yuan in revenue, up from 6.6 billion yuan in 2015. As of March 2020, China registered 455 million online readers which grew from 23.37 million reported in 2018. According to the report, 34.1% of the readers are under 24 years old, and 85.8% are under 35 years old. Thus, with Zhangyue’s support ByteDance is looking to establish a stronghold in this thriving market.