Report: ByteDance Did Not Lose $84.9B in 2021 as Claimed

The Wall Street journal reported recently that, according to an internal financial statement disclosed to employees, TikTok parent company ByteDance achieved revenue of $61.7 billion in 2021, an increase of 80% year-on-year. Meanwhile, net losses reached an astonishing $84.9 billion.

Some individuals close to ByteDance have confirmed the authenticity of the data to STAR Market Daily. The high losses were apparently due mainly to changes in the fair value of convertible bonds at $75.6 billion, decreasing by more than 76% compared with 2020.

However, according to analysis by Chinese media outlet LatePost, ByteDance didn’t really lose so much money. The change of fair value of convertible bonds is only significant on paper, reflecting ByteDance valuation rather than its profitability, and it will not lead to significant losses.

Suppose investors buy ByteDance when they are valued at $10 billion. When the firm is valued at $50 billion, investors earn $40 billion on their books, and ByteDance will have to record a “loss” of $40 billion, which will be offset after listing. Theoretically, the more ByteDance’s valuation increases before an IPO, the higher the recorded losses. The prospectuses of internet companies such as Meituan and Kuaishou all showed net losses of tens of billions of yuan for similar reasons.

SEE ALSO: TikTok Parent ByteDance Says No Plans to Go Public

Besides, in terms of horizontal comparison, Alibaba‘s revenue in 2021 was 836.4 billion yuan, a year-on-year increase of 29.8%. Tencent‘s operating income reached 560.1 billion yuan, a year-on-year increase of 16%.‘s revenue was 951.6 billion yuan, a year-on-year increase of 27.6%. The revenues of Baidu did not exceed 200 billion yuan. From the perspective of revenue growth, ByteDance has gradually become the third-largest internet company in China.

Last year, the main operating costs of ByteDance were about $27.4 billion, up 79% year-on-year. Revenue minus costs yields a gross profit of $34.3 billion, corresponding to a gross profit margin of 55.5%. For reference, Tencent‘s gross profit margin in 2021 was about 43.91%. According to the exchange rate at the end of last year, the total income of ByteDance is about equal to the sum of the income of Meituan, Baidu and Pinduoduo.

After deducting $14.6 billion in R&D expenses, $19.2 billion in marketing expenses and other expenses, ByteDance operating loss in 2021 was $7.15 billion, 3.34 times that in 2020. At the end of the year, ByteDance cash reserves were about $34.1 billion. In the first quarter of this year, ByteDance revenue increased by nearly 54% year-on-year, reaching about $18.3 billion, and achieved operating profit. ByteDance has not commented on the above data.

It is worth mentioning that, affected by the downward trend in global economic environment, cost reductions and efficiency improvements have become keywords in the internet technology industry. At the ByteDance “All-Hands” staff meeting held at the end of August this year, CEO Liang Rubo bluntly said that he would “raise standards when establishing new business projects” and cut down on projects with unclear prospects. In addition, Liang said that ByteDance has no large-scale layoff plans.

Another ByteDance insider revealed that although there have been no large-scale staff cuts, the company has been shrinking its recruitment plan and has made small-scale layoffs. Some business lines, including Feishu (known as Lark overseas) will adopt rapid recruitment strategies to achieve a survival-of-the-fittest model.