After the acquisition, Acfun will be independent in branding, operation, team building, and future development. Kuaishou will provide support in technology and resources such as capital and channels.
The acquisition is a strategic move to increase survival chances in fierce competition. The two parties also hope to integrate possible resources to combat major players such as Douyin and Bilibili.
Kuaishou, targeting rural and lower tier city users, though holding around 100 million daily active users (DAU) and good traffic, is frequently under investigation due to improper content.
In 2016, famous Chinese new media author Huo Qiming published the article Cruel Stories from the Bottom: Chinese Rural Areas in a Video App (残酷底层物语: 一个视频软件的中国农村). The article depicted the world of Kuaishou where people from rural areas post videos including self-mutilation to win attention.
Recently, the government investigated cases of teen mothers showing off their young husbands, kids, and their elopements. Su Hua, CEO of Kuaishou, apologized publically and stressed “using the right value to guide algorithms.”(in Chinese)
The platform has built its business model on live streaming and advertisement. Amid tight content censorship and commercial competition, however, compared to Douyin’s 150 million DAU and stable commercial cooperation with major global brands, Kuaishou’s RMB 8 billion revenue and net profit RMB 700 million don’t seem that impressive
Meanwhile, Acfun itself has been under scrutiny for its content and lack of profit. Speculation puts the company’s loss in 2017 at around RMB 100 million. On February 2, 2018, Acfun temporarily closed. The platform resumed operating on February 12th.
Though facing funding problems, Acfun’s reputation’s in Generation Z and domestic video sharing has brought powerful investors who are interested in taking over the business.
In 2017, there were rumors that YC Capital (云峰基金), a private equity firm co-founded by Alibaba’s Jack Ma, was in talks with Acfun to acquire 20% of the business for around RMB 1 billion. Due to its close relationship with Alibaba, the market often read YC Capital’s moves as part of Alibaba’s intentions. In March, 2018, source close to the matter said YC Capital had abandoned the deal, and ByteDance instead was in frequent talks with Acfun.
Since ByteDance is behind Kuaishou’s major rival Douyin, Acfun will not be in any commercial deals with ByteDance in the near future.
-This article originally appeared on TechNode.