Tencent-backed news app Qutoutiao nabs $171M from Alibaba

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The race to give Chinese users their daily dose of news intensifies as Qutoutiao, a rival to TikTok parent Bytedance, net an installment of sizable backing.

Alibaba is injecting $171 million in a convertible loan to Qutoutiao, the three-year-old news and video aggregation startup, according to an announcement released Thursday. The transaction will convert into about 11.4 million shares of Qutoutiao at a price of $15 per American depositary shares, representing about 4 percent of Qutoutiao. The deal arrived just six months after Qutoutiao raised $84 million in a downsized initial public offering through Nasdaq.

TechCrunch has reached out Qutoutiao for more details on its new funding and will update the story if we hear back.

Qutoutiao, which means “Fun headlines” in Chinese, runs a news app that feeds users content based on their past habit and an e-book reading app for those with a longer attention span. The Shanghai-based company is among a handful of startups alongside ecommerce challenger Pinduoduo that are piling into the largely untapped, smaller cities outside China’s major urban centers of Beijing and Shanghai for growth.

The fresh capital will make Qutoutiao one of the unusual Chinese tech startups with backings from both Alibaba and Tencent, the arch-foes that compete in many realms. The other companies that have enjoyed fundings from both heavyweights include car-hailing service Didi Chuxing and youth-focused media company Bilibili.

Alibaba’s support is also a significant boost for Qutoutiao as it fights a relentless battle with Bytedance, a growing threat to China’s tech veterans. Unlike most of China’s emerging startups, Bytedance has not taken fundings from Baidu, Alibaba and Tencent, collectively known as the “BAT” to acknowledge their dominance in the Chinese internet.

Bytedance has had a history of hostility with social media leader Tencent while it has been more pally with Alibaba the e-commerce giant, which agreed to facilitate ecommerce sales for Bytedance influencers.

Bytedance runs an empire of popular new media products that include short-form video app Douyin and news distribution platform Jinri Toutiao. TikTok, which is the international version of Douyin, is turning heads across the globe including in the United States and has reportedly spurred a Facebook clone.

Battling in the relentless Chinese market has come at huge costs for Qutoutiao, which sees itself spending heavily on marketing to collect and retain users. While its 2018 revenues jumped 484 percent to $440 million, net loss soared to $283 million in the year compared to just $14.3 million in the previous period. But the startup is ready to spend more as it works on a new app that could take on Douyin in China’s blossoming short-form video market.