No Gaps, Total Suppression: TikTok Spent $10 Billion to Dig a Moat
TikTok's first engine of globalisation was money and a code phrase: roughly $10 billion over a few years on user acquisition, content subsidies and servers. Any rival that wants to block it needs $20-30 billion ready.
The video won't play here. Listen to the audio instead:
The argument · tap a timestamp to hear it
Cutting the Facebook login API took one week
Between March and April 2020, TikTok added 110 million DAU in a single two-month cycle. During that window, Zhu Jun pulled a handful of key owners into a group on the enterprise software Feishu and asked, "What is the risk to us of removing the Facebook SDK login?" He wanted the discussion done by 1pm that day and feedback by end of day at the latest. Every department's assessment concluded there would be losses: without the API, they couldn't get precise profiles during acquisition, hurting growth and monetisation efficiency. Zhu Jun pressed on how much user experience would suffer, and the team jointly concluded: no more than 20%. He ordered it cut immediately. In under a week, TikTok had pulled out every last Facebook login API, and the author describes them as "resolutely cutting off their own pacifier."
— Zhang XiaojunNo gaps, total suppression is the highest order
In early 2020, Zhang Yiming handed over China and took the global CEO role himself; his two-month OKR contained the phrase "no gaps." People close to power say this was in fact a code phrase, whose full form was "no gaps, total suppression" — those eight characters were the highest order this taciturn, outwardly unaggressive boss issued to TikTok. Under the eight-character doctrine were two unwritten rules: wherever a competitor goes, TikTok must advance and crush them; and whenever a rival appears ahead on the rankings, they must be routed within a week, at any price. Even at a cost of a thousand enemies and eight hundred of your own, as long as you stand undefeated, no price is too high. The unit carrying out this order was the user growth platform, whose head Zhao Qi was a Peking University computer science PhD and former co-CEO of the startup Che Laile, described by colleagues as the person who has spent more money than anyone else in Chinese internet history.
— Zhang XiaojunIraq spent nothing and hit 6 million DAU
TikTok divided countries into four tiers, SABC, in descending strategic priority: S was the US, Japan, the UK and India; A was Germany and Brazil; B had 15 to 20 countries; C had 20 to 30; the remaining 160 to 170 countries got almost no spend. In the Middle East TikTok only bought in Saudi Arabia and the UAE, and surrounding countries grew by natural spillover: Iraq never spent a cent, yet during the pandemic it surged to 6 million DAU, against an Iraqi mobile internet population of roughly 25 million — a 24% DAU penetration rate and 40% MAU penetration. Employees sum up the biggest difference between TikTok and Kuaishou's internationalisation as this: TikTok took the developed countries first, with US content supplying the world and Douyin content supplying East and Southeast Asia, which made it extraordinarily powerful. Kuaishou, by contrast, used a horse-racing mechanism, gave each region a bizarre name, let small teams take root and fight independently, and rotated its leads like a carousel; today it only retains real volume in Brazil.
— Zhang XiaojunA moat dug with $10 billion
People close to strategy say that from 2018 to 2023 TikTok held a great deal of cash and spent it mainly in four directions: about $5 billion on marketing, growth and brand; about $2 billion on content building and subsidies; about $1.5-2 billion on servers and bandwidth; and finally personnel costs — all told, $10 billion invested, a sum equal to the valuation of 10 unicorns. This person argues that any platform wanting to build a rival product would need to multiply its user acquisition cost by at least two or three, meaning $20-30 billion — a huge sum for any giant, enough to make them frown and fret for a good while. Zhang Yiming dared to spend, and the money came from Zhang Lidong sitting downstairs from him: this "banknote printing machine" monetised Jinri Toutiao and Douyin, filling the company's coffers.
— Zhang XiaojunFour waves of localisation, servers given 15 days
Before the political storm knocked on the door, ByteDance had begun assessing isolation risk and preparing contingency plans; localisation formally started in Q3 2019 and took over a year, in four waves. The first wave was moderators: a review team of more than 300 people was cut. The second targeted operations staff, with authority in many regions moving overnight from China to overseas; the European operations team was nearly dissolved or reassigned, and two former Music.ly members were told to hand their work to the European team within a week. The third wave was servers: at the meeting, Zhu Wenjia, who oversaw algorithm technology, said splitting the algorithm code would take two months. Zhang Yiming couldn't wait, and asked whether it could be done in 15 days. The answer was yes. The fourth wave was product and technical staff, with TikTok executives including Zhu Wenjia transferring to Singapore. The principle of data isolation was China's data in China, overseas data overseas, and US data would not cross the US border even if other data centres were geographically better placed.
— Zhang XiaojunGMs don't know their own country's tier
Under Shou Zi Chew reporting ran on two lines: the Europe growth lead reported solid-line to Zhao Qi, head of the user growth platform, and dotted-line to Europe GM Rich, which gave Rich a sense of security. An analyst who studied TikTok says the essence of ByteDance's global management is being able to control and able to let go. The other side is an information-tiering mechanism: a GM who appears to hold sole authority has no right to see which SABC tier their countries fall into, and especially when the tier is bottom-rung B or C, the company is even less likely to let them know how much budget was allocated to other countries, for fear of breeding resentment and creating management friction. The author describes it as ByteDance sweeping away barriers with one hand to keep things running smoothly, while burying barriers with the other, placing power in the hands of a very few. In the past two years the PMO has also swept ByteDance, with Zhu Wenjia setting up a PMO department and more than 20 project teams after arriving; in April 2021, when Kuaishou was burning cash on overseas referral schemes, TikTok used it to set up a task force to block Kuaishou.
— Zhang XiaojunShou Zi Chew changed out of his suit in month two
After May 2021, TikTok's top job was held neither by the Chinese Zhang Nan or Zhu Jun, nor by the Americans Mayer or Pappas, but by Shou Zi Chew, a Singaporean national educated in the UK and US. Business people initially worried he understood only finance, strategy and investment and lacked business understanding; after a while they found he exceeded expectations. The most visible change: from the suited CFO bearing he had at Xiaomi, he immediately downgraded to a plaid shirt — one employee pinpoints the change as happening in his second month, because in the first month the company expected him to send it to the capital-market altar as he had at Xiaomi, and in the second month ByteDance urgently announced the IPO was cancelled and indefinitely postponed. He also quietly cleared his Twitter and Instagram, rarely opined on business details, but put forward one priority direction: depoliticisation, turning it into a purely entertainment product.
— Zhang XiaojunThe moment TikTok's DAU overtook Douyin's
India's ban knocked TikTok's DAU back by over 100 million, and it took more than a year to catch up again. According to multiple people familiar with the matter, by early 2022 TikTok's DAU had passed 700 million and was still growing very fast, while Douyin had barely grown over the past year at about 670 million DAU — TikTok had comprehensively overtaken it as it wanted, and the two combined passed 1.3 billion DAU globally; at the same time its downloads surpassed the reigning Facebook to rank first among global social products. Organisationally, Zhao Qi handed all growth for mature domestic businesses to the various business units, keeping only overseas growth himself, and also took over the monetisation product Chuan Shan Jia, with UG becoming a second-level department. Monetisation still had a lot of room: foreign media reported TikTok's 2022 revenue could reach $11 billion, and internally there was a more aggressive target of between $11 billion and $20 billion, while the biggest risk remained geopolitics.
— Zhang XiaojunIn their own words · checked verbatim
The team jointly concluded: no more than 20%. Zhu Jun relayed the order: cut it immediately.
团队共同得出结论 不超过20% 朱骏传达命令 立马砍掉
Zhang Xiaojun4:05
At TikTok's two-month review, Zhu Jun warned managers: don't get smug — we are pigs in a wind tunnel.
在TikTok双业总结会上 朱骏告诫管理者 不要沾沾自喜 我们是风口上的猪
Zhang Xiaojun5:06
Whenever a rival appears ahead on the rankings, they must be routed within a week, at any price. Even at a cost of a thousand enemies and eight hundred of your own, as long as you stand undefeated, no price is too high.
但凡榜单出现竞品排名超前 必须在一个星期内 无论以什么价格把对方击溃 哪怕杀敌一千自损八百 只要立于不败之地 任何代价都在所不惜
Zhang Xiaojun6:06
In the Middle East TikTok only bought in Saudi Arabia and the UAE, and surrounding countries grew by natural spillover. Take Iraq: TikTok never spent a cent, yet during the pandemic TikTok surged to 6 million DAU.
在中东TikTok只投放了沙特和阿联酋 周围国家也靠自然辐射 如伊拉克 TikTok从未花过一分钱 但疫情间 TikTok激增至600万日活
Zhang Xiaojun9:09
Splitting the algorithm code would take two months. Could it be done in 15 days? Zhang Yiming couldn't wait. The answer was yes.
算法代码切割要花两个月 能不能在15天内搞定 张一鸣等不及了 答案是肯定的
Zhang Xiaojun18:17
From the suited CFO bearing he had at Xiaomi, he immediately downgraded to a plaid shirt.
他从小米10西装革履一族CFO派头 立马降格换上了格子衬衫
Zhang Xiaojun35:45
Figures
| TikTok DAU in early 2020 | under 250 million | 2:03 |
| TikTok DAU added in the March-April 2020 two-month cycle | 110 million | 3:05 |
| Iraq TikTok DAU (during the pandemic) | 6 million | 9:09 |
| Iraq TikTok DAU penetration | 24% (MAU penetration 40%) | 9:09 |
| Change in TikTok's paid acquisition share of new users | from 70-80% down to 20-30% | 12:10 |
| TikTok total investment 2018-2023 | about $10 billion | 13:11 |
| User acquisition cost for a rival to resist TikTok | $20-30 billion | 13:11 |
| TikTok DAU in early 2022 | over 700 million | 39:48 |
| Douyin DAU | about 670 million (combined global total over 1.3 billion) | 39:48 |
Glossary
- UG / user growth platform
- ByteDance's platform department responsible for spending on user acquisition and rolling products up to scale
- PMO / project management office
- A role serving specific projects, managing planning and scheduling, and acting as firefighter when something blows up
- GDPR / General Data Protection Regulation
- The EU data protection law passed in 2016, with maximum fines of 4% of global annual turnover or €20 million
- All-Hands Meeting
- A company-wide meeting for all employees; Mayer held one lasting under 5 minutes during the India ban
How to listen
Product and growth leads running overseas businesses, investors watching ByteDance and globalisation, managers studying organisational mechanics.
The closing section on Liang Rubo and The Social Network can be skipped.