It won’t be an easy task for Kuaishou to narrow its losses.

While Douyin brought in nearly 108 billion yuan in ad revenue for ByteDance last year, according to Reuters, Kuaishou made only around 13.4 billion yuan from marketing services, including advertising, during the first nine months last year. And ByteDance, which reportedly made $37 billion in revenue last year, can continue to fund Douyin’s expansion, say observers.

Both Kuaishou and Douyin, facing fierce competition, are learning from each other’s advantages.

“Kuaishou is being ‘Douyinized,” while it is vice-versa for Douyin. While the two products look increasingly similar, when the growth of video platforms reaches its limit, the competition for users will come down to users’ preference for content,” wrote Kong from Everbright Securities.

There’s another thing both platforms have in common: uncertainty about how China’s increasing regulatory pressure on tech firms will affect their future expansion.

Previously, the flamboyant Jack Ma’s fintech giant Ant Group saw its $37 billion IPO thwarted by Beijing, which is increasingly worried about both the company’s dominance and potential financial risks, and Ma’s rising influence. In 2018, Kuaishou and Toutiao, a news aggregator under ByteDance, were told by regulators to temporarily suspend users from adding new content, while removing those deemed as violent or obscene. On Jan. 29, China’s top cyberspace regulator said it will enhance scrutiny of content that “disrupts the order of online communications” on online platforms such as short video apps, asking the platforms to always prioritize “the correct political direction.”

“Given that the internet business is highly regulated in China, intensified government regulation of the short video, live streaming and e-commerce industries in China could also restrict our ability to maintain or increase our user base or the user traffic,” said Kuaishou in its prospectus.

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