Online literature: the next battleground for Chinese social media giants ByteDance and Tencent?
- A ByteDance subsidiary has become the third-largest shareholder of Beijing Dingtian Culture Entertainment, which runs multiple online reading platforms
- The e-book sector is dominated by China Literature, backed by ByteDance rival Tencent Holdings
Changes to Beijing Dingtian Culture Entertainment’s company registry records last week showed that a ByteDance subsidiary had taken a stake of about 10 per cent, becoming the literature-focused company’s third-largest shareholder.
Dingtian Culture runs three book-reading sites, Sweetread, Guazixs and Dmread, and also produces television dramas adapted from novels.
ByteDance did not immediately respond to a request for comment on the investment. A spokesman for Beijing Dingtian declined to disclose the size of the investment or details of its partnership with ByteDance.
The deal marks yet another step by ByteDance to move into an area dominated by Tencent, which is the largest shareholder of the country's top e-book publisher, Hong Kong-listed China Literature.
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While the market is not currently worth as much as gaming, social media or office productivity apps, online literature has an enormous audience in China: it had an estimated 455 million readers – over half of the country’s 900 million netizens – as of June 2020, according to the China Internet Network Information Center. Chinese research firm iiMedia projects that the online literature sector will surpass 20 billion yuan (US$2.8 billion) in value this year.
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Tencent, whose WeChat and QQ messaging apps had 1.2 billion and 693 million monthly active users respectively as of the end of March 2020, has leveraged its massive social media empire to distribute content from China Literature.
Tencent and China Literature did not immediately respond to separate requests for comment on ByteDance’s latest move into the web novel space.
“The advantage [of ByteDance] in e-books is the huge traffic” on its apps, according to Ge Jia, an independent internet analyst who has followed the industry for more than two decades.
This is not the tech powerhouse’s first foray into online reading either. Last year, it launched its own e-book app, Tomato Novel, which has attracted more than 10 million daily active users. Content from the app can be accessed via Jinri Toutiao, while Douyin actively advertises it.
Unlike many other online businesses in China that provide free content to lure users, China Literature has cultivated a stable group of paying readers for its web novels, even before its 2015 purchase by Tencent.
“But the industry is going to reach its ceiling soon, given the user scale compared with the entire internet user base,” Ge said. “So companies are again publishing free e-books to stimulate the market.”
In April, ByteDance took down Tomato Novel’s paywall and started offering the web novels on the app to readers for free.
“But it is the authors that have been sacrificed,” Ge said, adding that writers stand to lose a share of subscription income from platforms, although they will still earn money from copyright licence fees.