ByteDance, the parent company of TikTok, has laid off hundreds of employees as it shuts down parts of its online education brand Dali in early August. This decision was made due to China’s new "double reduction" policy against after-school tutoring businesses banning private organizations from earning profit by teaching school subjects to kids.
"Dali (hard-working) leads to a miracle" is the motto of Zhang Yiming, founder and former CEO of ByteDance. With high expectations, Dali Education was the first publicly independent business brand under ByteDance, meaning it has its own product line and can make its own business decisions. Obviously, EdTech products were once considered a new driving force for the whole company. ByteDance's education business team had been expanding rapidly until the layoffs - as of the first half of this year, the unit had more than 20,000 employees.
After the layoff, ByteDance has switched its focus of development back to the game industry. So much so that the parent company of Qingbei Online School, which was previously acquired by ByteDance as part of Dali Education, has now been rebranded into a video game company. Yan Shou, ByteDance’s Head of Game Business, has also become the new game company’s juridical person.
Video games were once the main focus of ByteDance, however, the gaming department has had difficulties meeting the success that is expected of them.
ByteDance ventured into the game business through joint operations. In 2018, Electric Soul’s Tianyuan Studio started promoting a few of their games, such as "Roasting the Three Kingdoms", on TikTok and TouTiao. Noticing the revenue coming from the game advertising business, ByteDance launched their own game platform Ohayoo a year later. This platform is mainly responsible for the release of casual games.
Casual games are relatively easy to operate - after all, ByteDance can just direct its users to these games, and the numbers would look great. After the initial success, ByteDance turned to investing and acquiring independent video game companies. From ShinroGame to Dream (Ragnarok M: The Birth of the New Generation), to Mooton (Magic Rush: Heroes), ByteDance has been constantly expanding. According to public information, ByteDance has established game studios in Beijing, Shanghai, Hangzhou, and Shenzhen respectively. All studios except for the Shenzhen one are focused on the development of hardcore games.
As for the overseas market, Ragnarok M: New Generation has long been ranked among the top 10 iOS best-seller in Hong Kong, Macau, and Taiwan markets, and in November 2020 it even ranked 19th in Chinese mobile games with a revenue of $17 million. Considering the fact that ByteDance’s gaming department has more than 10 studios and 2,000 employees, it’s very difficult to say these successful cases justified the investment yet.
It is worth mentioning that along with the announcement of the layoffs at Dali Education, the head of Ohayoo, Xu Peixiang, has also left the company for personal reasons. After Xu’s departure, Ohayoo's business will be redefined. Rumor says that Ohayoo's incubated short video platform Momoyu (“Slacking”) has been identified as one of ByteDance's most important commercialization projects, and it will start to expand its operations to include game distribution and some marketing operations outside China in 2021. That means the re-division of Ohayoo's business could be a part of Byte's new strategic layout for their gaming business, rather than a move to deprioritize its importance.
Although being a newcomer to the gaming industry, the massive investments in indie developers and cloud gaming technology show that ByteDance’s ambition is projected far beyond current market trends. With its massive checkbook and technical know-how, it’s only a matter of time for ByteDance to figure out how to make games that can find critical and financial success. However, in the highly competitive gaming industry, the time has always been a luxury.