Stories

Toutiao buys lip sync app Musical.ly for up to $1 billion

Toutiao, a Chinese personalized news app, has agreed to acquire lip-sync app Musical.ly. No financial terms were disclosed, but word is the price-tag was between $800 million and $1 billion, via a mixture of cash and stock.

Why it matters Beyond the fact that a VC-backed company is paying unicorn prices for another VC-backed company that has a demographic shelf life? Okay, how about because this deal was actually competitive, and helps Toutiao play offense against the Chinese tech trinity — Alibaba, Baidu and Tencent — that is trying to eat into its core business.

Cap tables: Music.ly had raised around $116 million from GGV Capital, Qiming Venture Partners, Greylock and DCM Ventures. The most recent round, in May 2016, put the post-money valuation at around $500 million. On the buy-side, Toutiao reportedly is raising new funding at around $20 billion valuation. Existing backers include Sequoia Capital China and CCB International.

Sell-side rational: Musical.ly hopes that Toutiao can help it improve its recommendation algorithm.

Bottom line: "Think of [Music.ly] as a mixture of Vine, Snapchat, and Dubsmash — users, or "musers" as they're called, can record 15-second music videos of their favorite songs, and share them in a totally new social space. When editing, musers can play with the speed of the video, add filters, and elect to play the video backwards." — Kate Dwyer, Teen Vogue