TikTok owner ByteDance, which have recently laid-off employee from its online gaming and tutoring businesses amid China's stricter regulation, pushed further diversification of its business portfolio to enter into the real-estate sector after setting up real-estate brokerage firms in multiple Chinese cities.
According to Chinese corporate data platform Tianyancha, ByteDance's Chongqing and Hongkong branches have added real-estate brokerage service into the scope of its business operations starting from July. The Beijing-based tech firm rapidly built up its real-estate portfolio in just three months by establishing a new business unit and acquisition.
Haifeng Youxing Information Technology, a Beijing-based wholly-owned subsidiary of ByteDance, has set up six branches in various China's tier 2 and 3 cities, including Hefei, Fuzhou, Lanzhou, which are capital cities of Anhui, Fujian, Gansu province.
In September, ByteDance deepened its foray into China's real estate market after Hanfang Youxing fully acquired Beijing Fuwang Real Estate Agency Co. Ltd., a unit of China's third-largest real-estate brokerage firm-Beijing Maintain Real Estate Brokerage Co. Ltd.
China's housing market slid into a deep freeze. The number of Chinese property developers going out of business skyrocketed in 2021 as smaller developers struggled to borrow money from banks amid China's "Three Red Lines" policy aiming to deleverage property developers' debt.
So far this year, 339 property developers have filed for bankruptcy, which means roughly an average of 1.1 builders went bankrupt per day between January 1 and October 28, 2021, according to the bankruptcy document filed with the People's Court Announcement.
Some big builders are also close to bankruptcy. A recent, high-profile example was China Evergrande Group, which deals with more than USD300 billion in debt, including USD20 billion in international bonds, hundreds of unfinished residential buildings, and angry investors who demand repayment of loans on overdue financial products.
As pressure on Chinese property developers continues, brokerage firms and service providers also feel the heat from a sharp drop in property sales. In September, residential property sales in China's 28 major cities reported a double-digit decline year-over-year basis. The sale volumes of second-handed houses in Beijing for September stood at 12,575, down 27% from 17,259 of the same period last year, down 21% month-over-month.
ByteDance bought cheap assets and accelerated real-estate push as Chinese real-estate brokerage firms are bleeding, owning to a downturn in China's property sector. Even Ke Holdings, China's biggest online property agency, has been downsizing operations to stay alive. E-commerce behemoths JD and Alibaba have ventured into the property market with their respective online real estate trading platform launched in May and September this year.
ByteDance has been on a spending spree to expand beyond its blockbuster short video app into gaming, online tutoring, semiconductor, virtual reality.
Expanding into gaming is a way of counterattacking Tencent, whose major presence in China's entertainment and gaming market has restricted the growth of ByteDance's advertising revenue contributed by its short video platforms. ByteDance began gaming push in 2019 when Douyin, TikTok's Chinese version, released its first in-app mini-game, and Jinri Toutiao, Bytedance's owned news aggregator app, had pre-marketed the mini-games on its personalized news distribution platform.
In February 2021, ByteDance has launched a brand and official website for its gaming unit Nuverse Games. Before this, ByteDance posted 1,000 new games jobs that target fresh graduates and included 700 business positions and 200 technical positions on its website. The Beijing-based Douyin operator has acquired at least eight gaming companies this year, including Moonton Technology, the maker of Mobile Legends: Bang Bang.
A note well explained the ideas behind business diversification from ByteDance founder and CEO Zhang Yiming. Back in November 2019, a note from Zhang Yiming said, "In order to keep growth momentum, we will continue to diversify TikTok's growth in weaker markets and increase investment in more fields." It was a dark time of ByteDance when TikTok faced regulatory challenges and political pressure in countries including the US and India.
As an idiom suggest, "things do not always go according to plan." ByteDance's diversification is slowing down due to China's unexpected and stricter regulation on gaming, education, and beyond.
Last week, ByteDance laid off junior-level employees from Ohayoo, a gaming unit in 2018, to mitigate the uncertain effects of China's stricter scrutiny on gaming. Previously in August, ByteDance has shut down a significant part of its online education businesses to comply with China's new regime so-called "Double Reduction" policy for the after-school tutoring industry.
TikTok's owner has also invested in virtual reality and semiconductors to keep pace with global innovation and China's favorable policy.
Following Facebook's new metaverse plan, ByteaDance has acquired VR startup Pico Interactive in August.
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