Qutoutiao: a startup hitting 1.6B USD valuation in less than 2 years

China’s news aggregator APP Qutoutiao announced last month that it had completed its Series B financing round worth over 200 million US dollars, led by tech giant Tencent. Qutoutiao has successfully survived in the highly competitive news aggregator market in China, where it is competing with Toutiao and Tencent News. After merely founded less than two years, it is valued at over 1.6 billion US dollars regarding its valuation after this round of investment.

So, what is Qutoutiao?

It is a Chinese news aggregator that targets tier three and tier four cities in China to achieve growth. As the end of 2017, it has accumulated 70 million registered users, with 30 million monthly active users and 10 million daily active users. Compared to market leader – Toutiao, Qutoutiao differentiates itself through providing subsidies to its users. Users gain some digital coins when they register, check in, read news, invite friends and share news. One thousand coins are worth around 0.65 RMB (around 0.1 USD). Interestingly, it claimed that the value ratio between RMB and the coin depends on Qutoutiao’s advertising revenues. In other words, the more revenues Qutoutiao gain, the more valuable the coins are.

Why it is so successful?

• Multi-level marketing

It uses a Multi-level marketing user acquisition approach, by which they have acquired tons of users at low cost, with very fast speed.

More specifically, its users can gain 1.5RMB (0.24USD) every time when inviting one new user. Further, if the invitees read a new article, the inviters will gain some digital coins as well. Moreover, the inviters can also gain some digital coins when their invitees invite new users.

• Market positioning

Less well known than its larger rival, Qutoutiao has targeted third- and fourth-tier cities in China. As the internet industry is almost mature in tier 1 and tier 2 cities in China, apparently, tier 3 and tier 4 cities, with 300 million to 400 million people, is getting increasingly attractive to the internet companies. Besides, people who live in these cities have more time to spend as their lives is not as fast-pacing as the people living in tier 1 and 2 cities in China. In other words, it is more likely they need a APP to kill time rather than a APP to find high-quality news.

• Incentive ads

In terms of monetization mode, intuitively, Qutoutiao becomes an incentive mobile ad networks in the end. Most of its users read news in this APP not because the news is with high-quality but because they gain some digital coins after the reading. Meanwhile, other News aggregators like Toutiao and Tencent news have to build the competitive edge through continuous improvement of the quality of their news. Rumours have showed that the monthly income from ad business of Qutoutiao is around 60 million to 70 million RMB (9.6million USD to 11.1million USD).

Can its business model be copied to other markets?

Absolutely! Founded in 2016, Newsdog, with about 40 million daily users in India, has successfully copied this business model to India, and now is ranked as the No. 2 news app in India on Google Play. It wants to double its staff and open offices in all major cities this year as it targets 100 million users a day. It was reported on February that the news aggregator company is in talk to raise 35 million to 40 million dollars from Tencent as well.

In the end

Although it is highly competitive, Qutoutiao take a big pie in the news aggregator market in China, hitting 1.6 billion USD market capitalization in less than two years’ time. It built its competitive edge from its unique business model. And its peer, Newsdog, is growing at a very fast speed in India market.

Will anyone wonder which market will be next for this business model to extend to?

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