Tencent-Toutiao legal battle signals intensification of competition in industry: analysts

Battle between China’s online media giants heats up

Toutiao and Tencent are suing each other for unfair competition and defamation, announced both companies on Friday (June 1). The lawsuits signal the escalation of the conflict between the two major internet companies, with likely consequences for the entire digital media industry in China, analysts said Sunday.

Tencent moved first, with a spokesman claiming on Weibo that "we can't bear it anymore." Tencent accused Toutiao of slander through its news-aggregating app. It demanded a public apology and 1 yuan ($0.16) in compensation for defamation.

Toutiao quickly shot back with a lawsuit against Tencent claiming unfair competition. It demanded a public apology and 90 million yuan in compensation, according to court documents sent to Chinese media on Saturday.

"Tencent has been using a variety of excuses to block our content in their platforms, even using their security software to block and slander our products," a Toutiao PR representative told the Global Times on Sunday.

Toutiao also accused Tencent of deliberately disseminating fake news accusing its video-sharing app Douyin (also known as Tik Tok) of showing content harmful to children, playing on the increasing concern in China about internet media.

Tencent told the Global Times on Sunday that it is still dealing with the legal proceedings and declined to comment.

Xiang Ligang, chief executive of telecom industry website cctime.com, sees the battle between Toutiao and Tencent as a "meaningless competition," saying one solution to this might be more specific regulations in the internet sector.

Nevertheless, the phenomenon could not be eliminated totally since "it's normal in market competition, especially in those industries where market competition is fierce,"

Xiang told the Global Times on Sunday.

Artificial intelligence-powered news-aggregator Toutiao and sister company short-video sharing app Douyin are one of the biggest success stories in recent times in China's internet industry. The popularity of the apps has given Toutiao a valuation of more than 200 billion yuan, said the Hurun Report.

But Toutiao's ascendance has also put the company on a collision course with regulators worried about the impact of its content and with more established competitors such as Tencent.

On May 8, Toutiao founder Zhang Yiming accused Tencent of plagiarizing Douyin on a post in WeChat Moments, leading to an angry personal response by Tencent CEO Ma Huateng, a rare case of Chinese business leaders airing their differences in public.

On May 19, Tencent blocked video-sharing platforms from WeChat, leading to protests by Douyin that Tencent was blocking external apps in order to promote its own services.

Experts said that Tencent sees Toutiao as a direct threat to its business model. Tencent's app WeChat includes a Facebook-style wall, where users can share news, videos and other content, putting it in direct competition with Toutiao's apps.

"Tencent's strategy is to keep customers inside WeChat as long as possible, preventing them from leaving the app. Toutiao directly threatens that by attracting them to their news and video content apps," said Liu Dingding, a veteran industry analyst in Beijing.

Tencent also operates Tiantian Kuaibao, a news aggregator, and Weishi, a video-sharing app, but they are much less popular than Toutiao's offerings. Weishi had only 5.1 million monthly active users in April, while Douyin had 166 million users, according to research firm Analysys.

In a surprising twist, a spokesman of Alibaba openly came out in defense of Toutiao, stating through a Weibo post on Friday that Tencent's lawsuit was "an attempt to make people shut up."

"Toutiao is being very bold in confronting Tencent to this degree, very likely because it knows that it can count on Alibaba's support. Alibaba and Tencent are competing in too many areas, so it makes sense for them to help contain Tencent whenever possible," said Liu.

(Source: Global Times)