Social-Media App Musical.ly Is Acquired for as Much as $1 Billion

Musical.ly Inc., the maker of a social-media app popular among teens and tweens, has agreed to be acquired by Chinese news and information site Beijing Bytedance Technology Co. for as much as $1 billion, according to people familiar with the matter.

The deal comes three years after Musical.ly’s 30-something co-CEOs Alex Zhu and Luyu Yang launched the social-media app to capture the YouTube phenomenon of teenagers sharing videos of themselves singing or dancing to popular music.

Users—or Musers as they are known on the app—create video selfies with a musical soundtrack and share them with friends. The most popular Musers have tens of millions of fans on the app and share revenue from brand partnerships with Musical.ly. The startup, which is based in Shanghai with an office in Santa Monica, Calif., has 60 million monthly active users, the company says.

The purchase price—in the range of $800 million to $1 billion, these people say—roughly doubles the valuation Musical.ly received in a 2016 round of funding. Investors in the startup include GGV Capital, Greylock Partners and Susquehanna International Group’s China arm.

Bytedance, best known for its personalized news app Toutiao in China, made the acquisition to find ways to coordinate content between the two platforms, and help its effort to expand overseas, a person close to the deal said.

A rising star on China’s technology scene, Bytedance was recently raising capital at a valuation over $20 billion, according to people familiar with the matter. This is a big leap from its last funding round at the end of last year, when the company raised $1 billion at a valuation of $11 billion, data from S&P Global Market Intelligence shows. The company’s investors include Sequoia Capital China and Russian billionaire Yuri Milner, who made his name with early bets on Facebook Inc. and Twitter Inc.

Alex Zhu, above, and Luyu Yang, launched Musical.ly three years ago.
Alex Zhu, above, and Luyu Yang, launched Musical.ly three years ago. PHOTO: QILAI SHEN/BLOOMBERG NEWS
Bytedance’s attraction for investors is its access to a huge user base, and its ability to offer targeted advertising by breaking down user segments by age, location and interest. Its news app Toutiao—which means “headlines” in Chinese—pulls together customized third-party content for users based on their interests and viewing history, and its 120 million daily active users spend 74 minutes each day on the platform, the company says.

The Musical.ly transaction, expected to close at the end of November, may give Bytedance access to original content from the video platform’s media partners, which include MTV, NBCUniversal and Hearst. It also expands Bytedance’s reach in developed markets such as North America and Europe.

Bytedance, founded in 2012 by serial Chinese entrepreneur Zhang Yiming, has plans to expand overseas in those markets, and in others such as Japan, Korea and fast-growing countries such as India and Brazil, said Liu Zhen, its senior vice president. It recently acquired Los Angeles-based social video app Flipagram and has invested in news apps in India and Indonesia.