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This Week in Apps: Apple bans party app, China loses 39K iOS games, TikTok births a ‘Ratatousical’

Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

The app industry is as hot as ever, with a record 204 billion total downloads and $120 billion in global consumer spend in 2019. Not including Chinese third-party app stores, iOS and Android users in 2020 downloaded 130 billion apps and spent a record $112 billion. In 2019, people spent three hours and 40 minutes per day using apps, rivaling TV.

Due to COVID-19, time spent in apps jumped 25% year-over-year on Android. Apps aren’t just a way to pass idle hours — they’re also a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus.

This week (after a week off for the holidays), we’re taking a look at holiday app store spending, how the Chinese gaming licensing rules have impacted the App Store, Apple’s move to ban a party app that could have helped spread COVID, and the collaborative musical created by TikTok users, among other things.

Top Stories

Christmas Day app spending grows 35% year-over-year

Global app spending didn’t seem to be impacted by the pandemic in 2020, according to data from Sensor Tower. The firm reports that consumers spent $407.6 million in apps from the iOS App Store and Google Play on Christmas Day, 34.5% from the $303 million spent in 2019. The majority of the spending was on mobile games, up 27% year-over-year to $295.6 million. Tencent’s Honor of Kings led the games category, while TikTok led non-game apps with $4.7 million in spending on Christmas Day.

Image Credits: Sensor Tower

As in prior years, Apple accounted for the majority of the spending, or 68.4% ($278.6M) vs Google Play’s $129M. The spending was led by the U.S., who accounted for ~$130 million of the total

Apple takes a stand on pandemic parties

Apple’s App Store Review guidelines don’t specifically detail how the company will handle apps that could contribute to the spread of COVID-19, but Apple found a way to draw the line when it came to a social app that encouraged unsafe gatherings. This past week, Apple banned the app Vybe Together, which had allowed people to locate “secret” indoor house parties in their area, sometimes including those held in violation of state guidelines.

NYT reporter Taylor Lorenz first called attention to the problem with a tweet. The app had been posting to TikTok to gain attention, but its account has since been removed. Following its removal, the company defended itself by saying that it was only meant for small get-togethers and the founder lamented being “canceled by the liberal media.”

There’s no good defense, really, for the unnecessary and ill-timed promotion of an app that encouraged people from different households to gather, which spreads COVID. And what the founder seemed to not understand, by nature of his recent tweets and statements on the app’s website, is that many cities and states also already prohibit small private gatherings of varying degrees, including those he believes are fine, like small parties in folks’ “own apartments with people in your area.”

The U.S. is coping with 346,000 COVID deaths, and in New York, where the app was promoting NYE parties, 74% of all COVID-19 cases from Sept.-Nov. 2020 have been linked to private gatherings.

The media may have reported on what the app was doing, but ultimately the decision to “cancel” it was Apple’s. And it was the correct one.

Apple removes 39K games from its China App Store.

Apple on Thursday, Dec. 31, 2020 removed 39,000+ games from China App Store. This was the biggest removal of games in a single day, Reuters reported, citing data from Qimai.

iOS games have long been required to obtain a Chinese gaming license in order to operate in the country, but Apple skirted this rule for years by hosting unlicensed titles even as Android app stores complied. Apple began to enforce the rule in 2020 and gave publishers a Dec. 31, 2020 deadline to obtain the license — a process that can be tedious and time-consuming.

Clearly, a large number of publishers were not able to meet the deadline. Included in the new sweep were Ubisoft’s Assassin’s Creed Identity and NBA 2K20. Qimai says only only 74 of the top 1,500 paid games remained following the removals. To date, Apple purged more than 46,000 titles from the China App Store, the report said.

TikTok births a “Ratatousical”

The TikTok musical version of Ratatouille has become a real thing. The pandemic forced a lot of creative types out of work in 2020, leading them to find new ways to express themselves online. On TikTok, this collective pent-up energy turned into a large-scale collaborative event: a musical version of Disney’s Ratatouille. (Or Ratatousical, as it was nicknamed.) TikTokers composed music, wrote lyrics and dialogue, choreographed dances, designed costumes, sets and more, as they worked together through the app.

Surprisingly, Disney is allowing a charity version of this collaboration to become a real event without any interference or lawsuits. The Ratatouille musical live-streamed on Jan. 1 at 7 p.m. Eastern, and will be available via video-on-demand through Jan. 4, for a minimum $5 donation to The Actors Fund.

The musical itself was lighthearted fun for a younger, Gen Z crowd. It also cleverly incorporated actual TikTok videos that featured the app’s well-known visual effects — like cloning yourself or the flashing colored lights typically associated with TikTok’s “you think you can hurt me” meme, for example. That made it more accessible and familiar to kids who had spent the past year being entertained via the internet.

TikTok users, of course, aren’t the only ones designing, creating and editing productions through remote and collaborative processes in 2020 — Hollywood itself has had to reorient itself for remote work at a much larger scale. TikTok was simply the platform of choice for theater kids looking for something to do.

It will be interesting to see if the TikTok-based collaborative process that birthed this musical ultimately becomes a one-off event that arose from the pandemic’s impacts — including the ability for many creative people to devote time and energy on side projects, for example, due to shuttered productions and stay-at-home orders. Or perhaps in-app collaborations have a real future? Time will tell.

TikTok has already proven it can drive the music charts, fashion trends, and app downloads, so it can probably generate an audience for this production, as well. But the cynic may wonder if such an event would have been as popular and buzzworthy had it been some entirely original production, rather than one based on already popular and beloved Disney IP.  But you may as well watch — it’s not like you have any other plans these days.

Weekly News

Platforms

Gaming

  • Samsung teams up with Epic Games on Apple battle over Fortnite. Samsung and Epic Games worked together on the “Free Fortnite” marketing campaign, which recently involving sending packages to influencers that contained a Free Fortnite bomber jacket and Samsung Galaxy Tab S7. Fortnite was the Samsung Galaxy Store game of the year in 2020, and the store also distributes the Epic Games app which distributes the Fortnite updates. This is an odd move as Epic alleges the app stores leverage their power to engage in monopolistic practices, but this makes it clear that Samsung is offering them distribution. Apple has the right to set its own pricing for its services (and it recently lowered commissions for small businesses, too). But even if Epic Games is not the knight in shining armor one would hope for, its lawsuit could help set precedent. And regulators may still decide one day that Apple can’t dictate rules about how businesses operate outside its app store — meaning, they should have the right to collect their own payments, for example.

Augmented Reality

Image Credits: The New York Times

  • The New York Times gets into AR gaming. The media company has experimented with augmented reality as a way to augment storytelling both in its app and through other efforts on social media. But it has now taken AR into the world of gaming with an AR-enabled crossword puzzle where you swipe to rotate broken pieces floating above the puzzle to find clues.

Social & Photos

Telegram photo by Jakub Porzycki/NurPhoto via Getty Images

  • Telegram begins to make money. The messaging app, now nearing 500 million users, will introduce an ad platform for its public one-to-many channels that is “user-friendly” and “respects privacy.” The company says it needs to generate revenue to cover the costs of server and traffic. Telegram earlier abandoned a blockchain token project due to regulatory issues.
  • Mr. Beast announces the second annual “Finger on the App” challenge on Feb. 19. The game doles out $100,000 to whoever can keep their finger on their smartphone the longest, via an app designed for this purpose. Last year, it was a four-way tie after 70 hours, and the prize money was divided. The new app introduces in-app challenges to dissuade cheating. YouTuber Mr. Beast rose to fame for his philanthropic-based viral videos and stunts. He has made sizable donations to people in need and those impacted by the pandemic. But this year, the otherwise silly game has a darker tone as it involves competitors who will likely be in more desperate situations.
  • Bumble uproar over indoor bikini and bra photos. The dating app found itself in the middle of a small controversy this week when a woman who wanted to pose in her bra had her photos taken down. The company said its existing policy prohibits things like shirtless bathroom mirror selfies and indoor photos of people wearing swimsuits and underwear. Bumble’s policies were crafted in response to user data and feedback, but may also help to prevent adult sites from spamming with fake profiles. However, there’s still something weird about an app that markets itself as female-friendly telling a woman to go put some clothes on.
  • ByteDance filings reveal TikTok U.K. business recorded a $119.5 million loss over 2019. The losses were driven by advertising and marketing expenses, indicating the app is still very much in a growth mode.
  • TikTok launches its first personalized annual recap feature. The company “year on TikTok” in-app experience joins other personalized wrap-ups like the Top Nine for Instagram or Spotify’s Wrapped. It also introduces a floating, tappable button to connect users to the experience. This could pave way for other sorts of mini-applications in the future.
  • Clubhouse power users invited to special club. A select group of creators inside the already invite-only audio conversations app have now been given exclusive access to tools and private meetings with Clubhouse leadership and influencers. In one meeting, the creators discussed monetization strategies. The app grew to popularity amid the pandemic as people have been prevented from typical forms of networking, but it’s also struggled with moderation as conversations go off the rails. Today, Clubhouse also hosts many adult topics, as well, which would give the app a 17+ rating if it were actually submitted to the App Store instead of being in a private beta.

Streaming

  • HBO Max’s mobile app set a single-day download record following the release of “Wonder Woman 1984.” During the release weekend (Fri.-Sun.) the app saw 554K downloads, including 244K downloads on Sunday alone, reported Apptopia. The firm estimates the app now has just under 12M mobile users.

Health & Fitness

Government & Policy

Security & Privacy

Funding and M&A

Image Credits: Tappity

Downloads

Yayzy

Image Credits: Yayzy

This U.K. startup’s new app will calculate the environmental impact of what you buy using payment data via Open Banking standards. You you can use this information to adjust your spending or buy offsets in-app in order to become carbon neutral. iOS only.

Waterscope

Image Credits: Iconfactory

The popular app maker Iconfactory released a new app, Waterscope, that is a weather app more specifically designed to provide users with information on water conditions. Creator Craig Hockenberry explains the app is something he largely built for himself, an ocean swimmer often in need of information about the tides, wave heights, water temperature, wind speed, air temperature, forecasts and more. The app could be useful to those who live around the water, whether they’re swimming, fishing, boating or anything else. iOS only.

Run Boggo Run

Image Credits: BuzzFeed

This endless runner is BuzzFeed’s first mobile game, which makes it worth noting if not exactly recommending. The mental health-themed game, inspired by BuzzFeed’s animated series The Land of Boggs, was created by BuzzFeed Animation Studios. In the game, characters try to avoid things like stress monsters and gremlins, which is a humorous take on the anxieties of 2020. However, early user reviews indicate the game’s controls are too difficult and complain the game is too hard to be fun. How stressful! $0.99 on iOS and Android.

Enso

A new meditation game Enso promises to help users relax, meditate or fall asleep faster using gameplay that involves soothing visuals and sounds, composed by A.I. The app consists of 5-minute journeys where users concentrate on a task while guiding their movements and breath to achieve their goals. iOS and Android.

Portal

Image Credits: Portal

Not Facebook’s Portal! This sleep and relaxation-focused app, also called Portal, has been updated with Apple’s new privacy measures in mind. The company announced in December it will not collect user data from its app, and will now no longer use any in-app analytics tracking. The app also never required a login or collected personal information, and didn’t include third-party ads and ad trackers.

That’s resulted in an App Store rare find:

How refreshing.

The Portal app is a free download and offers a $35 per year membership for those who want access to the full content library.

ByteDance asks federal appeals court to vacate U.S. order forcing it to sell TikTok

In a new filing, TikTok’s parent company ByteDance asked the federal appeals court to vacate the United States government order forcing it to sell the app’s American operations.

President Donald Trump issued an order in August requiring ByteDance to sell TikTok’s U.S. business by November 12, unless it was granted a 30-day extension by the Committee on Foreign Investment in the United States (CFIUS). In today’s filing (embedded below) with the federal appeals court in Washington D.C., ByteDance said it asked the CFIUS for an extension on November 6, but the order hasn’t been granted yet.

It added it remains committed to “reaching a negotiated mitigation solution with CFIUS satisfying its national security concerns” and will only file a motion to stay enforcement of the divestment order “if discussions reach an impasse.”

Security concerns about TikTok’s ownership by a Chinese company were at the center of the executive order Trump signed in August, banning transactions with Beijing-headquartered ByteDance.

The executive order claimed that TikTok posed a threat to national security, though ByteDance maintains that it does not. But in order to prevent the app, which has about 100 million users in the U.S., from being banned, ByteDance reached a deal in September to sell 20% of its stake in TikTok to Oracle and Walmart. With the Biden administration set to take office in January and ByteDance’s ongoing legal challenge against the divestment order, however, the future of the deal is now uncertain.

The new filing is part of a lawsuit TikTok filed against the Trump administration on September 18. It won an early victory when the court stopped the U.S. government’s ban from going into effect on its original deadline that month.

In a statement emailed to TechCrunch, a TikTok spokesperson said it has been working with the CFIUS for a year to address its national security concerns “even as we disagree with its assessment.”

Facing continual new requests and no clarity on whether our proposed solutions would be accepted, we requested the 30-day extension that is expressly permitted in the August 14 order,” the statement continued.

“Today, with the November 12 CFIUS deadline imminent and without an extension in hand, we have no choice but to file a petition in court to defend our rights and those of our more than 1,500 employees in the US.” 

TikTok asks U.S. federal appeals court to vacate U.S. divestment order by TechCrunch on Scribd

PUBG Mobile plots return to India following ban

PUBG Mobile, the sleeper hit title that was banned in India two months ago over cybersecurity concerns, is plotting to make a return in the world’s second largest internet market, two sources familiar with the matter told TechCrunch.

The South Korean firm has engaged with global cloud service providers in recent weeks to store Indian users’ data within the country to allay New Delhi’s concerns about user data residency and security, one of the sources said.

The gaming giant has privately informed some high-profile streamers in the country that it expects to resume the service in India before the end of this year, the other source said. Both the sources requested anonymity as they are not authorized to speak to the press. PUBG Corporation did not respond to a request for comment Thursday.

The company could make an announcement about its future plans for India as soon as this week. It also plans to run a marketing campaign in the country during the festival of Diwali next week, one of the sources said.

In recent weeks, PUBG has also engaged with a number of local firms including SoftBank-backed Paytm and telecom giant Airtel to explore whether they would be interested in publishing the popular mobile game in the country, an industry executive said. A Paytm spokesperson declined to comment.

Chinese giant Tencent initially published PUBG Mobile apps in India. After New Delhi banned PUBG Mobile, the gaming firm cut publishing ties with Tencent in the country. Prior to the ban, PUBG Mobile’s content was hosted on Tencent Cloud.

Late last month, two months after the ban order, PUBG Mobile terminated its service for Indian users. “Protecting user data has always been a top priority and we have always complied with applicable data protection laws and regulations in India. All users’ gameplay information is processed in a transparent manner as disclosed in our privacy policy,” it said at the time.

With more than 50 million monthly active users in India, PUBG Mobile was by far the most popular mobile game in the country before it was banned. It helped establish an entire ecosystem of  esports organisations to teams and even a cottage industry of streamers that made the most of its spectator sport-friendly gameplay, said Rishi Alwani, a long-time analyst of Indian gaming market and publisher of news outlet The Mako Reactor.

PUBG Mobile’s return, however, could complicate matters for several industry players, including some that are currently building similar games to cash in on its absence and their conversations with venture capital firms over ongoing financing rounds.

It would also suggest that more than 200 other Chinese apps that India has banned in recent months could hope to allay New Delhi’s concerns by making some changes to where they store their users data. (That was also the understanding between TikTok and Reliance when they engaged in investment opportunities earlier this year.)

TikTok stars got a judge to block Trump’s TikTok ban

TikTok has won another battle in its fight against the Trump administration’s ban of its video-sharing app in the U.S. — or, more accurately in this case, the TikTok community won a battle. On Friday, a federal judge in Pennsylvania issued an injunction that blocked the restrictions that would have otherwise blocked TikTok from operating in the U.S. on November 12.

This particular lawsuit was not led by TikTok itself, but rather a group of TikTok creators who use the app to engage with their million-plus followers.

According to the court documents, plaintiff Douglas Marland has 2.7 million followers on the app; Alec Chambers has 1.8 million followers; and Cosette Rinab has 2.3 million followers. The creators argued — successfully as it turns out — that they would lose access to their followers in the event of a ban, as well as the “professional opportunities afforded by TikTok.” In other words, they’d lose their brand sponsorships — meaning, their income.

This is not the first time that the U.S. courts have sided with TikTok to block the Trump administration’s proposed ban over the Chinese-owned video sharing app. Last month, a D.C. judge blocked the ban that would have removed the app from being listed in U.S. app stores run by Apple and Google.

That ruling had not, however, stopped the November 12 ban that would have blocked companies from providing internet hosting services that would have allowed TikTok to continue to operate in the U.S.

The Trump administration had moved to block the TikTok app from operating in the U.S. due to its Chinese parent company, ByteDance, claiming it was a national security threat. The core argument from the judge in this ruling was the “Government’s own descriptions of the national security threat posed by the TikTok app are phrased in the hypothetical.”

That hypothetical risk was unable to be stated by the government, the judge argued, to be such a risk that it outweighed the public interest. The interest, in this case, was the more than 100 million users of TikTok and the creators like Marland, Chambers and Rinab that utilized it to spread “informational materials,” which allowed the judge to rule that the ban would shut down a platform for expressive activity.

“We are deeply moved by the outpouring of support from our creators, who have worked to protect their rights to expression, their careers, and to help small businesses, particularly during the pandemic,” said Vanessa Pappas, Interim Global Head of TikTok, in a statement. “We stand behind our community as they share their voices, and we are committed to continuing to provide a home for them to do so,” she added.

The TikTok community coming to the rescue on this one aspect of the overall TikTok picture just elevates this whole story. Though the company has been relatively quiet through this whole process, Pappas has thanked the community several times for its outpouring of support. Though there were some initial waves of “grief” on the app with creators frantically recommending people follow them on other platforms, that has morphed over time into more of a “let’s band together” vibe. This activity coalesced around a big swell in voting advocacy on the platform, where many creators are too young to actually participate but view voting messaging as their way to participate.

TikTok has remained active in the product department through the whole mess, shipping elections guides and trying to ban QAnon conspiracy spread, even as Pakistan banned and then un-banned the app.

 

 

 

Triller follows TikTok in banning QAnon conspiracy content

Triller follows TikTok in banning QAnon conspiracy content

Triller, the short-form video app aggressively competing for a piece of TikTok’s pie, has belatedly followed its rival in attempting to ban content relating to the QAnon conspiracy theory.

According to a report by Insider, the company has said it will not allow QAnon content going forward, and hashtags #QAnon and #QAnonBeliever have been disabled on the app. Mashable confirmed that while those tag searches appear empty, other hashtags popular with the theory’s adherents, including #q, #WWG1WGA and other workaround tags, were still surfacing QAnon content.

QAnon is a cultish, baseless conspiracy theory whose followers believe that President Trump is actually a leader in a secret war against a worldwide cabal of celebrities and politicians who engage in human trafficking, as claimed by a series of anonymous posts on messageboards including 4chan and 8kun. The FBI considers the “movement” to be a domestic terrorism threatRead more…

More about Qanon, Tiktok, Triller, Tech, and Social Media Companies

The TikTok deal solves quite literally nothing

Well… that was pointless.

After debasing the idea of free commerce in the U.S in the name of a misplaced security concern, stringing along several multi-billion dollar companies that embarrassed themselves in the interest of naked greed, and demanding that the U.S. government get a cut of the profits, the TikTok saga we’ve been watching the past few weeks finally appears to be over.

A flurry of announcement late Saturday night indicate that the TikTok deal was actually a politically-oriented shakedown to boost the cloud infrastructure business of key supporters of the President of the United States.

Oracle, whose cloud infrastructure services run a laughable fourth to AWS, Alphabet*, and Microsoft, will be taking a 20 percent stake in TikTok alongside partner Walmart in what will be an investment round before TikTok Global (as the new entity will be called) goes public on an American stock exchange.

According to a statement from TikTok, Oracle will become TikTok’s “trusted technology partner” and will be responsible for hosting all U.S. user data and securing associated computer systems to ensure U.S. national security requirements are fully satisfied. “We are currently working with Walmart on a commercial partnership as well,” according to the statement from TikTok.

pic.twitter.com/jWxjnAIwZQ

— TikTok_Comms (@tiktok_comms) September 19, 2020

Meanwhile, Oracle indicated that all the concerns from the White House, U.S. Treasury, and Congress over TikTok had nothing to do with the service’s selection of Oracle as its cloud provider. In its statement, Oracle said that “This technical decision by TikTok was heavily influenced by Zoom’s recent success in moving a large portion of its video conferencing capacity to the Oracle Public Cloud.”

Here’s how CNBC reporter Alex Sherman has the ownership structure breaking down, per “a person familiar with the matter. Oracle gets 12.5%, Walmart gets 7.5% and ByteDance gets the remaining 80%. The Trump administration is claiming that US investors will own 53% of TikTok because ByteDance (TikTok’s parent) is backed by venture capital investors that hold a 40% stake in the parent company.

So the ownership of TikTok Global will be, according to a person familiar with the matter:
Oracle – 12.5%
Walmart – 7.5%
ByteDance – 80% …

But 40% of ByteDance’s ownership is US venture capital funding. That’s how the Trump admin is calculating this deal as “majority US $”

— Alex Sherman (@sherman4949) September 20, 2020

 

The deal benefits everyone except U.S. consumers and people who have actual security concerns about TikTok’s algorithms and the ways they can be used to influence opinion in the U.S.

TikTok’s parent company ByteDance gets to maintain ownership of the U.S. entity, Oracle gets a huge new cloud customer to boost its ailing business, Walmart gets access to teens to sell stuff, and U.S. customer data is no safer (it’s just now in the hands of U.S. predators instead of foreign ones).

To be clear, data privacy and security is a major concern, but it’s not one that’s a concern when it comes to TikTok necessarily (and besides, the Chinese government has likely already acquired whatever data they want to on U.S. customers).

For many observers, the real concern with TikTok was that the company’s Chinese owners may be pressured by Beijing to manipulate its algorithm to promote or suppress content. Companies in China — including its internet giants — are required to follow the country’s intelligence and cloud security law mandating complete adherence with all government orders for data.

The Commerce Department in its statement said that “In light of recent positive developments, Secretary of Commerce Wilbur Ross, at the direction of President Trump, will delay the prohibition of identified transactions pursuant to Executive Order 13942, related to the TikTok mobile application that would have been effective on Sunday, September 20, 2020, until September 27, 2020 at 11:59 p.m.” So that’s a week reprieve.

So all this sound and fury … for what? The best investment return in all of these shenanigans is almost certainly Oracle co-CEO Safra Catz’ investment into Trump, who in addition to being a heavy donor to the Trump administration, also joined the presidential transition committee back in 2016. Thank god the U.S. saved TikTok from the crony capitalism of China. Let’s just hope they enjoy the crony capitalism of Washington DC.

*An earlier version of this article referred to AWS, Amazon and Microsoft. AWS and Amazon are the same company. I was typing fast. I’ve corrected the error.

And now Triller is trying to buy U.S. TikTok, report claims

And now Triller is trying to buy U.S. TikTok, report claims

If you can’t beat ’em, buy ’em.

That appears to the thinking of Triller, a U.S.-based “social streaming” app, which according to Bloomberg teamed up with an asset management firm in an attempt to buy TikTok for $20 billion. Or, more specifically, to buy parts of TikTok for $20 billion. 

Those parts include TikTok’s U.S., Australian, New Zealand, and Indian components — locations where the ByteDance-owned company ran into various legal troubles, faced security concerns, and risks possible shuttering. India went so far as to ban TikTok outright in June for “[engaging] in activities which is prejudicial to sovereignty and integrity of India, defence of India, security of state and public order.”  Read more…

More about Social Media, Tiktok, Triller, Tech, and Social Media Companies

TikTok CEO Kevin Mayer resigns, citing ‘political environment’

TikTok CEO Kevin Mayer resigns, citing 'political environment'

Kevin A. Mayer, the chief executive officer of TikTok, has resigned after less than four months in the job, citing current political pressure on the company. 

“In recent weeks, as the political environment has sharply changed, I have done significant reflection on what the corporate structural changes will require, and what it means for the global role I signed up for,” Mayer wrote in an email to staff, according to the New York Times. “Against this backdrop, and as we expect to reach a resolution very soon, it is with a heavy heart that I wanted to let you all know that I have decided to leave the company.” Read more…

More about Trump Administration, Tiktok, Tech, Social Media Companies, and Big Tech Companies

TikTok CEO Kevin Mayer resigns after 100 days

Kevin Mayer, the chief executive of TikTok, announced on Wednesday that he is resigning, just over 100 days after the former Disney executive joined the world’s largest short video app in mid-May.

The news came just days came on the heel of TikTok’s move to sue the U.S. government over its forthcoming ban. The app, owned by Chinese internet upstart ByteDance, is caught in tensions between Beijing and Washington, which accuses the app of posing a national security threat to the U.S.

On August 6, President Donal Trump signed an executive order to shut down TikTok if ByteDance doesn’t sell the app’s U.S. operations. The app has until mid-November to divest itself.

“We appreciate that the political dynamics of the last few months have significantly changed what the scope of Kevin’s role would be going forward, and fully respect his decision. We thank him for his time at the company and wish him well,” said a TikTok spokesperson in a statement to TechCrunch.

The New York Times reported earlier that Mayer announced his decision in a note to employees as TikTok came under pressure from the Trump administration over its links to China. Mayer “did not anticipate the extent to which TikTok would become involved in tensions between China and the U.S.,” sources told the Financial Times, and the executive “didn’t sign up for this.”

Vanessa Pappas, currently general manager of TikTok, will reportedly become the interim head.

The looming TikTok sale has attracted investor interest across the board, from Microsoft which publicly announced its intention through to the less expected bidder Oracle.

This is an updating story…

As it adds Jeremy Milken to the partnership, Watertower Ventures nears $50 million close for its new fund

Derek Norton and Jeremy Milken have known each other for twenty years. Over their longtime personal and professional relationship, the two Los Angeles-based serial entrepreneurs have invested in each other’s companies and investment firms, but never worked together until now.

Milken is taking the plunge into institutional investing, joining Norton as a partner in Watertower Ventures just as the firm prepares to close on a $50 million new fund.

It’s an auspicious time for both Los Angeles-based businessmen, as the LA venture community sees a wave of technology talent relocating from New York and San Francisco in the newly remote work culture created by the COVID-19 epidemic.

“I see two things happen. One people look at the effects of where the market’s going. We’re seeing a lot more companies that are starting up now as a result of a [the pandemic],” said Norton. “New company formation is happening faster than before covid. [And] a lot of venture capitalists that have relocated to LA. They’ve moved down to LA for lifestyle reasons and they’re saying that they don’t need to go back to San Francisco.”

For Milken, the opportunity to get into venture now is a function of the company creation and acceleration of digital adoption that Norton referenced. “The pandemic is accelerating change in the marketplace. Things that might have taken a decade are taking two years now,” Milken said.

These opportunities are creating an opening for Watertower Ventures in markets far beyond the Hollywood hills. The firm, whose original thesis focused on Los Angeles, San Francisco, and New York, is now cutting checks on investments in Texas and Utah, and spending much less time looking for companies in the Bay Area.

Derek Norton, founder, Watertower Ventures: Image Credit: Watertower Ventures

Norton’s latest fund is the only the most recent act in a career that has seen the investor traverse the financial services digital media and the early days of the internet. Norton built Digital Boardwalk, a pioneering internet service provider and the second commercial partner for the trailblazing browser service, Netscape.

Later, at Jeffries Technologies, and the $120 million Entertainment Media Ventures seed and early stage venture capital fund, Norton was intimately involved in bringing tech to market and focusing on early stage investments. With that in mind, the Watertower Ventures group, which launched in 2017 with a small, $5 million fund, is a return to those roots.

The plan, even at the time, was always to raise a larger fund. After founding and running the boutique investment banking business at Watertower Group, Norton knew he had to raise a starter fund to prove the thesis he was working on.

That thesis was to provide a bridge between early stage companies and large technology companies using the network that Norton has built in the Southern California tech and entertainment community over decades.

“We want to take our contacts at Google, Apple, Facebook, Disney, Microsoft, Cisco, Verizon, AT&T, Comcast, and other companies we believe should have a relationship with our portfolio companies, and help the CEOs and management teams more effectively do business development,” Norton told SoCal Tech when he closed his first fund in 2017. “We want to connect them to the right person at those companies to create a commercial relationship. That has a really large impact on early stage companies, who typically don’t have a deep network of relationships, and the ability to get to those type of people. It’s because of our advisory business that we have those relationships, and that’s also why those relationships stay fresh and active, versus people who aren’t in those businesses. It’s almost a full time job to maintain that, and that’s where our value-add is.”

Milken, who has spent his professional career in entrepreneurship, was ready to try investing, and was intimately familiar with Watertower and its portfolio, as an investor in the firm’s first $5 million fund.

“Two years ago we started having those conversations,” said Norton in an interview. “As Jeremy exited his business in September it created the opportunity to go out and raise together as the evolution of our partnership.”

Jeremy Milken, general partner, Watertower Ventures. Image Credit: Watertower Ventures

With the new capital coming in, Norton expects to back some 30 to 35 companies, he said. And, in a testament to the first fund’s performance, which has it in the top decile of venture funds for its vintage, Norton said he was able to raise the capital amidst the economic uncertainty caused by the COVID-19 pandemic. Some 70 percent of the existing portfolio has been marked up, according to Norton.

Even though limited partners, the investors who back venture funds, were reluctant to commit capital to new firms in March and April, fundraising returned with a vengeance in June and July, according to Norton. The paper performance likely was enough to woo additional limited partners and individual investors including TikTok chief executive Kevin Mayer, the former head of streaming at Disney.

Mayer’s presence in the firm’s investor base is a testament to the firm’s pitch to founders. “We view fundraising as a massive distraction for these early stage companies from their business. We try to deliver that network that’s ours to those founders,” said Norton.

“I think we’re in a unique position starting with a fresh fund here,” says Norton. “Uncertainty creates opportunity and people are bringing solutions. We haven’t noticed any slowdown whatsoever, we’re working with twenty five companies per week. Since the inception of the fund, we haven’t seen deal flow at this level.”

ByteDance to shut down Vigo apps in India

Chinese internet giant ByteDance has announced plans to discontinue two of its apps in India, its biggest overseas market, and urged users to move to TikTok.

Vigo Video and Vigo Lite, two apps that allow users to create and share short-form sketches and lip-syncing to Bollywood songs, posted a message early Monday (local time) to announce that they would be discontinued at the end of October this year.

In its post, titled “a farewell letter,” ByteDance said it was saddened to shut down the apps but did not offer an explanation for the decision. Indian news outlet Entrackr first spotted the letter.

Unlike TikTok, ByteDance’s most popular app, Vigo Video and Vigo Lite have struggled to make inroads in the world’s second largest internet market. While TikTok has more than 200 million users in India, Vigo Video had about 4 million monthly active users last month and Vigo Lite could only amass 1.5 million users, according to one of the top mobile insight firms — data of which an industry executive shared with TechCrunch.

While Vigo Video gained fewer than 1 million users in a year, Vigo Lite shredded just as many in the same period, the data showed.

Both the apps counted India as their biggest market but have been available in several other markets, including neighboring nation Bangladesh, for instance. It’s unclear whether ByteDance is discontinuing the apps in every market. The company did not immediately respond to a request for comment.

The move, despite the apps’ poor reception in India, comes as a surprise. Recruitment posts submitted by ByteDance as late as last month described Vigo as one of the company’s biggest businesses in India.

ByteDance also operates Helo app, which enables users to share their thoughts with friends, and Lark, a productivity suite similar to Google Drive. The company recently stopped charging Lark customers in India for the foreseeable future in response to the coronavirus crises.

Other recent job recruitment posts reveal that the company is looking to hire executives to aggressively explore ways to monetize its services in the country.

ByteDance’s TikTok app has been scrutinized in India in recent weeks for failing to actively remove videos that promoted violence, animal cruelty, racism, child abuse, and objectification of women.

In its message to users on Vigo apps today, ByteDance said it will help them migrate their videos to TikTok. On TikTok, “you will be able to show your talent to a larger group of friends. We are eager to see you [there]!” the message reads.

TikTok donates $3 million to Arnold Schwarzenegger’s charity feeding kids affected by school closures

The social media giant TikTok said that it would donate $3 million to AfterSchool All-Stars, a charity founded by actor and former California Governor Arnold Schwarzenegger, to feed families whose food security was affected by the close of public schools in response to the COVID-19 outbreak.

TikTok said in a statement Thursday that families in 60 cities with After-School All-Stars chapters would receive food vouchers and gift cards that can be spent on food and other essentials through local grocery stores.

“We are all operating in uncertain times, and it’s more important now than ever before for both our local and global communities to come together to help those in need,” said Vanessa Pappas, General Manager of TikTok U.S., in a statement. “This pledge to ASAS will help more students get access to meals, safely provided to them, during this crisis. While this alone won’t mitigate the impact of the current situation, we hope it can relieve one worry for parents who are balancing social distancing mandates, work and caring for children who can no longer go to school each day.”

Chapters in cities that have been hardest hit by the epidemic will receive the aid, including Los Angeles, Miami, New York, Newark, San Francisco, Seattle and Washington. Corporate partners in the initiative include Food Land, Giant, Kroger, Publix, Ralphs, Safeway, Target and Walmart .

TikTok, which is owned by the Chinese media company Bytedance, also said it would match up to $1 million in employee donations to the ASAS to boost the organization’s ability to provide food.

“During a crisis, improvisation is critical and everyone has to look at new ways to help the most vulnerable,” said Arnold Schwarzenegger, former California Governor and Founder of After-School All-Stars, in a statement. “The After-School All-Stars programs are paused with schools closed, but we remain committed to supporting the 100,000 families we work with year-round. When I founded After-School All-Stars in 1992, the goal was always to support the families who need it the most. I’m grateful to TikTok for their donation which allows us to shift our priorities so our team can safely deliver groceries and gift cards for groceries to the families we help.”

 

TikTok apologizes for removing viral video about abuses against Uighurs, blames a “human moderation error”

TikTok has issued a public apology to a teenager who had her account suspended shortly after posting a video that asked viewers to research the persecution of Uighur people and other Muslim groups in Xinjiang. TikTok included a “clarification on the timeline of events,” and said that the viral video was removed four days after it was posted on November 23 “due to a human moderation error” and did not violate the platform’s community guidelines (the account @getmefamouspartthree and video have since been reinstated).

But the user, Feroza Aziz, who describes herself in her Twitter profile as “just a Muslim trying to spread awareness,” rejected TikTok’s claims, tweeting “Do I believe they took it away because of an unrelated satirical video that was deleted on a previous deleted account of mine? Right after I finished posting a 3 part video about the Uyghurs? No.”

In the video removed by TikTok, Aziz begins by telling viewers to use an eyelash curler, before telling them to put it down and “use your phone, that you’re using right now, to search up what’s happening in China, how they’re getting concentration camps, throwing innocent Muslims in there, separating families from each other, kidnapping them, murdering them, raping them, forcing them to eat pork, forcing them to drink, forcing them to convert. This is another Holocaust, yet no one is talking about it. Please be aware, please spread awareness in Xinjiang right now.”

TikTok is owned by ByteDance and the video’s removal led to claims that the Beijing-based company capitulated to pressure from the Chinese Communist Party (Douyin, ByteDance’s version of TikTok for China, is subject to the same censorship laws as other online platforms in China).

Though the government-directed persecution of Muslim minority groups in China began several years ago and about a million people are believed to be detained in internment camps, awareness of the crisis was heightened this month after two significant leaks of classified Chinese government documents were published by the New York Times and the International Consortium of Investigative Journalists, confirming reports by former inmates, eyewitnesses and researchers.

Aziz told BuzzFeed News she has been talking about the persecution of minority groups in China since 2018 because “as a Muslim girl, I’ve always been oppressed and seen my people be oppressed, and I’ve always been into human rights.”

In the BuzzFeed News article, published before TikTok’s apology post, the company claimed Aziz’s account suspension was related to another video she made that contained an image of Osama Bin Laden. The video was created as a satirical response to a meme about celebrity crushes and Aziz told BuzzFeed News that “it was a dark humor joke that he was at the end, because obviously no one in their right mind would think or say that.” A TikTok spokesperson said it nonetheless “violated its policies on terrorism-related content.”

“While we recognize that this video may have been intended as satire, our policies on this front are currently strict. Any such content, when identified, is deemed a violation of our Community Guidelines and Terms of Service, resulting in a permanent ban of the account and associated devices,” a TikTok spokesperson told BuzzFeed, adding that the suspension of Aziz’s second account, which the makeup tutorial video was posted on, was part of the platform’s blocking of 2,406 devices linked to previously suspended accounts.

In TikTok’s apology post today, TikTok US head of safety Eric Tan wrote that the platform relies on technology to uphold community guidelines and human moderators as a “second line of defense.”

“We acknowledge that at times, this process will not be perfect. Humans will sometimes make mistakes, such as the one made today in the case of @getmefamouspartthree’s video,” he added. “When those mistakes happen, however, our commitment is to quickly address and fix them, undertake trainings or make changes to reduce the risk of the same mistakes being repeated, and fully own the responsibility for our errors.”

Aziz told the Washington Post, however, that “TikTok is trying to cover up this whole mess. I won’t let them get away with this.”

The controversy comes as TikTok faces an inquiry by the U.S. government into how it secures the personal data of users. Reuters reported yesterday that TikTok plans to separate its product and business development, and marketing and legal teams from Douyin in the third quarter of this year.

 

TikTok owner ByteDance’s long-awaited chat app is here

In WeChat -dominated China, there’s no shortage of challengers out there claiming to create an alternative social experience. The latest creation comes from ByteDance, the world’s most valuable startup and the operator behind TikTok, the video app that has consistently topped the iOS App Store over the last few quarters.

The new offer is called Feiliao (飞聊), or Flipchat in English, a hybrid of an instant messenger plus interest-based forums, and it’s currently available for both iOS and Android. It arrived only four months after Bytedance unveiled its video-focused chatting app Duoshan at a buzzy press event.

Screenshots of Feiliao / Image source: Feiliao

Some are already calling Feiliao a WeChat challenger, but a closer look shows it’s targeting a more niche need. WeChat, in its own right, is the go-to place for daily communication in addition to facilitating payments, car-hailing, food delivery and other forms of convenience.

Feiliao, which literally translates to ‘fly chat’, encourages users to create forums and chat groups centered around their penchants and hobbies. As its app description writes:

Feiliao is an interest-based social app. Here you will find the familiar [features of] chats and video calls. In addition, you will discover new friends and share what’s fun; as well as share your daily life on your feed and interact with close friends.

Feiliao “is an open social product,” said ByteDance in a statement provided to TechCrunch. “We hope Feiliao will connect people of the same interests, making people’s life more diverse and interesting.”

It’s unclear what Feiliao means by claiming to be ‘open’, but one door is already shut. As expected, there’s no direct way to transfer people’s WeChat profiles and friend connections to Feiliao, and there’s no option to log in via the Tencent app. As of Monday morning, links to Feiliao can’t be opened on WeChat, which recently crossed 1.1 billion monthly active users.

On the other side, Alibaba, Tencent’s long-time nemesis, is enabling Feiliao’s payments function through the Alipay digital wallet. Alibaba has also partnered with Bytedance elsewhere, most notably on TikTok’s Chinese version Douyin where certain users can sell goods via Taobao stores.

In all, Flipchat is more reminiscent of another blossoming social app — Tencent-backed Jike — than WeChat. Jike (pronounced ‘gee-keh’) lets people discover content and connect with each other based on various topics, making it one of the closest counterparts to Reddit in China.

Jike’s CEO Wa Nen has taken noticed of Feiliao, commenting with the 👌 emoji on his Jike feed, saying no more.

Screenshot of Jike CEO Wa Ren commenting on Feiliao

“I think [Feiliao] is a product anchored in ‘communities’, such as groups for hobbies, key opinion leaders/celebrities, people from the same city, and alumni,” a product manager for a Chinese enterprise software startup told TechCrunch after trying out the app.

Though Feiliao isn’t a direct take on WeChat, there’s little doubt that the fight between Bytedance and Tencent has heated up tremendously as the former’s army of apps captures more user attention.

According to a new report published by research firm Questmobile, ByteDance accounted for 11.3 percent of Chinese users’ total time spent on ‘giant apps’ — those that surpassed 100 million MAUs — in March, compared to 8.2 percent a year earlier. The percentage controlled by Tencent was 43.8 percent in March, down from 47.5 percent, while the remaining share, divided between Alibaba, Baidu and others, grew only slightly from 44.3 percent to 44.9 percent over the past year.

Douyu, China’s Twitch backed by Tencent, files for a $500M U.S. IPO

Douyu, a Chinese live streaming service focused on video games, has filed with the U.S. Securities and Exchange Commission as it prepares to raise up to $500 million on the NYSE less than a year after its archrival floated on the same stock market.

Wuhan-based Douyu, whose name translates as “fighting fish”, is the second Twitch -like service backed by Tencent to go public in the United States. Its direct competitor Huya, who has a similarly fierce name “tiger’s teeth” and also counts Tencent as a major investor, raised $180 million from its NYSE listing last May.

It’s not surprising for Tencent to hedge its bets in esports streaming, given the giant relies heavily on video games to make money. For example, Tencent can use some of its portfolio companies’ ad slots to get the word out about its new releases. Indeed, Douyu’s filing shows it received a hefty 27.48 million yuan ($4.09 million) in advertising fees from Tencent last year.

As Douyu warns in its prospectus, its alliance with Tencent can be tenuous.

“Tencent may devote resources or attention to the other companies it has an interest in, including our direct or indirect competitors. As a result, we may not fully realize the benefits we expect from the strategic cooperation with Tencent. Failure to realize the intended benefits from the strategic cooperation with Tencent, or potential restrictions on our collaboration with other parties, could materially and adversely affect our business and results of operations.”

But there are nuances in the giant’s ties to China’s top two live streaming services that could mean more affinity between Tencent and Douyu. The social media and gaming behemoth is currently Douyu’s largest shareholder with a 40.1 percent stake owned through its wholly-owned subsidiary Nectarine. Over at Huya, Tencent is the second-largest stakeholder behind YY, the pioneer in China’s live streaming sector that had spun off Huya.

When it comes to the financial terms, the rivaling pair is in a head-on race. In 2018, Douyu doubled its net revenues to $531.5 million. Huya held an edge as it earned $678.3 million in the same period, also doubling the amount from a year ago.

Huya may have learned a few things about monetizing live streaming from 14-year-old YY as it managed to pull in more revenues despite owning a smaller user base. While Douyu claimed 153.5 million monthly active users in the fourth quarter, Huya had 116.6 million.

How the two make money also diverge slightly. In the fourth quarter, 86 percent of Douyu’s revenues originated from virtual items that users tipped to their favorite streaming hosts, with the remaining earnings derived from advertising and more. By contrast, Huya relied almost exclusively on live streaming gifts, which made up 95.3 percent of total revenues.

douyu

Screenshot of a Douyu live streaming session 

As Douyu grows its coffers to spend on content as well as technologies following the impending IPO, competition in China’s live streaming landscape is set to heat up. Just earlier this month, Huya raised $327 million in a secondary offering to invest in content and R&D. Like many other businesses anchored in content, Huya and Douyu depend tremendously on quality creators to keep users loyal. Both have offered sizable checks to live streaming hosts, promising to grow the internet celebrities into bigger stars.

And they’ve extended the battlefield outside China as emerging media forms, most exemplified by short video services Douyin (TikTok’s China version) and Kuaishou, threaten to steal people’s eyeball time away. Both bite-size video apps now enjoy a much bigger user base than their live streaming counterparts.

“We intend to further explore overseas markets to expand our user base through both organic expansion and selective investments,” noted Douyu in its IPO filing.

In a similar move, Huya’s overseas expansion is also well underway. “In addition to our vigorous domestic growth, we have successfully leveraged our unique business model to enter new overseas markets. We believe we are delivering long-term value through strategic investments in overseas markets in 2019 and beyond,” said Huya chief executive Rongjie Dong in the company’s Q4 earnings report.

PicsArt hits 130 million MAUs as Chinese flock to its photo editing app

If you’re like me, who isn’t big on social media, you’d think that the image filters that come inside most apps will do the job. But for many others, especially the younger crowd, making their photos stand out is a huge deal.

The demand is big enough that PicsArt, a rival to filtering companies VSCO and Snapseed, recently hit 130 million monthly active users worldwide, roughly a year after it amassed 100 million MAUs. Like VSCO, PicsArt now offers video overlays though images are still its focus.

Nearly 80 percent of PicsArt’s users are under the age of 35 and those under 18 are driving most of its growth. The “Gen Z” (the generation after millennials) users aren’t obsessed with the next big, big thing. Rather, they pride themselves on having niche interests, be it K-pop, celebrities, anime, sci-fi or space science, topics that come in the form of filters, effects, stickers and GIFs in PicsArt’s content library.

“PicsArt is helping to drive a trend I call visual storytelling. There’s a generation of young people who communicate through memes, short-form videos, images and stickers, and they rarely use words,” Tammy Nam, who joined PicsArt as its chief operating officer in July, told TechCrunch in an interview.

PicsArt has so far raised $45 million, according to data collected by Crunchbase. It picked up $20 million from a Series B round in 2016 to grow its Asia focus and told TechCrunch that it’s “actively considering fundraising to fuel [its] rapid growth even more.”

picsart

PicsArt wants to help users stand out on social media, for instance, by virtually applying this rainbow makeup look on them. / Image: PicsArt via Weibo

The app doubles as a social platform, although the use case is much smaller compared to the size of Instagram, Facebook and other mainstream social media products. About 40 percent of PicsArt’s users post on the app, putting it in a unique position where it competes with the social media juggernauts on one hand, and serving as a platform-agnostic app to facilitate content creation for its rivals on the other.

What separates PicsArt from the giants, according to Nam, is that people who do share there tend to be content creators rather than passive consumers.

“On TikTok and Instagram, the majority of the people there are consumers. Almost 100 percent of the people on PicsArt are creating or editing something. For many users, coming on PicsArt is a built-in habit. They come in every week, and find the editing process Zen-like and peaceful.”

Trending in China

Most of PicsArt’s users live in the United States, but the app owes much of its recent success to China, its fastest growing market with more than 15 million MAUs. The regional growth, which has been 10-30 percent month-over-month recently, appears more remarkable when factoring in PicsArt’s zero user acquisition expense in a crowded market where pay-to-play is a norm for emerging startups.

“Many larger companies [in China] are spending a lot of money on advertising to gain market share. PicsArt has done zero paid marketing in China,” noted Nam.

Screenshot: TikTok-related stickers from PicsArt’s library

When people catch sight of an impressive image filtering effect online, many will inquire about the toolset behind it. Chinese users find out about the Armenian startup from photos and videos hashtagged #PicsArt, not different from how VSCO gets discovered from #vscocam on Instagram. It’s through such word of mouth that PicsArt broke into China, where users flocked to its Avengers-inspired disappearing superhero effect last May when the film was screening. China is now the company’s second largest market by revenue after the U.S.

Screenshot: PicsArts lets users easily apply the Avengers dispersion effect to their own photos

A hurdle that all media apps see in China is the country’s opaque guidelines on digital content. Companies in the business of disseminating information, from WeChat to TikTok, hire armies of content moderators to root out what the government deems inappropriate or illegal. PicsArt says it uses artificial intelligence to sterilize content and keeps a global moderator team that also keeps an eye on its China content.

Despite being headquartered in Silicon Valley, PicsArt has placed its research and development center in Armenia, home to founder Hovhannes Avoyan. This gives the startup access to much cheaper engineering talents in the country and neighboring Russia compared to what it can hire in the U.S. To date, 70 percent of the company’s 360 employees are working in engineering and product development (50 percent of whom are female), an investment it believes helps keep its creative tools up to date.

Most of PicsArt’s features are free to use, but the firm has also looked into getting paid. It rolled out a premium program last March that gives users more sophisticated functions and exclusive content. This segment has already leapfrogged advertising to be PicsArt’s largest revenue source, although in China, its budding market, paid subscriptions have been slow to come.

picsart 1

PicsArt lets users do all sorts of creative work, including virtually posing with their idol. / Image: PicsArt via Weibo

“In China, people don’t want to pay because they don’t believe in the products. But if they understand your value, they are willing to pay, for example, they pay a lot for mobile games,” said Jennifer Liu, PicsArt China’s country manager.

And Nam is positive that Chinese users will come to appreciate the app’s value. “In order for this new generation to create really differentiated content, become influencers, or be more relevant on social media, they have to do edit their content. It’s just a natural way for them to do that.”