In the last few months, the short-videos app TikTok became the must-have social media, especially among teenagers, but market experts are forecasting that the fame could end as fast as started. ByteDance, the Chinese company that owns the app, went from investor’s sweetheart to a trouble maker at the moment that the company had to start dealing with several inquiries from the market about its future and ability to generate profit, according to the Brazilian media outlet Valor Econômico.
After two global huge fails, starting with Uber’s IPO and, especially, because of the recent WeWork chaos, investors that once were amazed by new unicorn’s IPOs, are now more concern and realistic about it. And they have reasons to be, mostly because ByteDance and WeWork have a huge problem in common: both companies were overvalued.
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According to ByteDance, the company’s valuation already reached $ 75 billion which means that the Chinese organization have the highest unicorn valuation worldwide, but it still not being able to generate profit or keep its audience without a huge investment in paid media. “I really doubt that this valuation could be achieved in an IPO”, revealed a Guodu Securities’ Chinese analyst according to Valor Econômico.
[TikToK] They are growing, but they are spending a lot of money to promote it
Mark Zuckerberg, Facebook’s CEO, in an audio recorded from a meeting and released in October
Furthermore, the company hasn’t any clear way to generate revenue besides advertisement, which has a direct impact on the investor’s confidence in what the future holds for TikTok.
The truth is that the world was living on a honeymoon with the unicorn companies, but 2019 is marking the start of a new era for venture capital, with more mature judgments and solid public offers, and the latest huge fails have all to do with this legacy. If ByteDance wants to keep its crown of the most promising app at the moment, it’s better to work hard to prove how strong and sustainable its business could be.
