Big Tech dilemma: TikTok-rival app Zynn to shut down

Aug 09, 2021 Entertainment Social


Last week, Kuaishou officially announced that it plans to shut down its short video app Zynn later this month, marking a major setback to Kuaishou's plans to challenge TikTok in the North American market.

It was reported that Kuaishou told users in a notice that it will terminate services for Zynn on Aug. 20. The notice said the TikTok-like app, which launched in the North American market last year, will delete all user data after a 45-day grace period following the shutdown announcement. And it also confirmed the news in a statement, adding that its other overseas products will not be affected.

Although Kuaishou has repeatedly stressed that its overseas strategy will not be affected, Kuaishou relies heavily on Zynn in the North American market. Actually, the overseas strategy of Kuaishou is similar to that of Douyin, which expects to open up markets overseas with its sub-brands. It is well known that apart from Zynn, for markets outside China, Kuaishou operates Kwai, which is mainly popular in South America, and Snack Video.

According to statistics, in the first half of 2021, Zynn's downloads in the North American market were only 400,000 times, and TikTok's downloads for the same period were 455 million times, already leaving Zynn far behind.

Zynn's losing-money strategy

Kuaishou's co-founder and CEO Su Hua has told the media that Kuaishou is still not ready to meet the challenge in the U.S. market, and that Zynn may be an important layout for Kuaishou to launch in a hurry to counter TikTok when it comes out in 2020.

On May 9, 2020, Zynn was launched on the US App Store, and in just one week, it was ranked 32nd in the entertainment category. At that time, Zynn was also hailed as a "phenomenal product" by the market.

On May 27, Zynn was the highlight of the day when it became the top download in the US APP Store, surpassing TikTok and Zoom, both of which had been regulars in the APP Store before.

According to Tianyancha, Zynn is made by Beijing company Owlii, a startup developing 3D reconstruction technology for AR and VR applications. According to The Information, Owlii was acquired by Kuaishou in May 2020 - which is where things get interesting.

In other words, Zynn competes with TikTok in the North American market, which actually is backed by Kuaishou.

Zynn users, similar to TikTok, can view, comment, like and share an endless stream of portrait videos created by other users. And Zynn's operation mode is also focusing on losing-money method to absorb new users, which is why Zynn can top the US App Store only 19 days after its launch.

In the early stage of Zynn promotion, as long as the user registration can get $20 reward, after the user registered successfully, and then invite a new user can also get $20 reward, while inviting more than 5 people, the user can get an additional $10, the reward strength is tempting.

Such a generous reward once made Zynn in the entire U.S. social network hold a hot state. Many Americans were recommending Zynn on social networks, and the Zynn invitation codes were being reproduced everywhere, which at the time shocked the American media and made it a social phenomenon.

However, it did not last long, and Zynn was forced to remove from the App Store and Google Play after two months of its launch. Some media outlets reported that Zynn was taken down because of "user reports of plagiarism," but the real reason may be that Apple and Google's App Marketplace believed that Zynn has irregularities to guide users to download.

On July 21, 2020, Zynn reappeared on Apple and Google's app markets after a correction, but the cash reward mechanism was quietly removed and replaced by a new points feature, which greatly reduced users' interest and caused Zynn to fall down in the APP Store.

Currently, Zynn is the most successful of Kuaishou's overseas products in the North American market, but in terms of download data, it is far inferior to Kuaishou's other two products, Snack Video and Kwai, with Kwai's downloads exceeding 76 million in the first half of 2021, and Snack Video's downloads approaching 50 million, while Zynn's half-year downloads was only 400,000.

Under the current heavy pressure, it may be a right choice for Kuaishou to close Zynn.


Kuaishou's dilemma in the overseas layout

As competition within the track gets fierce and Chinese short-video user growth dividend bottoms out, both Douyin and Kuaishou are pinning their new growth hopes on overseas markets.

In 2021, the two platforms began to fight in overseas markets. According to reports, in 2021, Kuaishou is expected to invest $1 billion in overseas markets for expansion, and in just one quarter, it has already consumed $250 million, which shows the importance it attaches to overseas markets, but behind the crazy money burning is the mismatched user growth.

In the middle of 2021, Kuaishou CEO Suhua announced to the public that Kuaishou's monthly active users in overseas was 1 billion.

According to Kuaishou's quarterly report, Kuaishou's average monthly active user is about 500 million, and the average daily active user is 300 million. At that time, some media pointed out that the data of active user was not de-weighted, and Suhua said that the monthly active user is not daily active user data, which has a certain discrepancy with the facts.

The trouble with Kuaishou is not only from the mismatch between investment and growth and doubtful user data, but also from the stretched funding of Kuaishou.

From February 2021, the country's anti-monopoly efforts continue to strengthen, in the stock market reaction for the Internet companies experienced a round of precipitous decline, which fell the worst one of the Internet companies is Kuaishou.

Kuaishou was just listed on the Hong Kong Stock Exchange in February 2021, and its share price had reached a high of HK$517.8 per share on February 16, after which it began a "downward spiral". The total market value has evaporated 1.2 trillion Hong Kong dollars.

Kuaishou's quarterly earnings report also reflects its plight. The quarterly report shows that its revenue was 17.02 billion yuan, up 36% year-on-year, but down 5.97% month-on-month.

In addition, the quarterly report also shows that its DAU is 295 million, but to know that its DAU has reached 282 million last year, in other words, its DAU basically did not grow this year, and its MAU is 520 million, a year-on-year increase of 9%.

It shows that Kuaishou's expansion into overseas markets is now imminent, the user growth in China has fallen into a bottleneck, and the overseas layout needs a lot of financial support, but it is at this point in the loss of mire.

According to Kuaishou's quarterly report, its marketing and other expenses reached 11.7 billion yuan, a 44% year-on-year surge, with a net loss of 4.9 billion yuan, and its net loss was 4.345 billion yuan in the same period in 2020.

Kuaishou's losses are expanding further, which means that its losing-money model may not work in the expansion into overseas markets.

The current overseas strategy of Kuaishou is to burn money to promote, which will only exacerbate Kuaishou's woes. It may be a have-to-do choice for Kuaishou to shut down Zynn this time.

This is an article from WeChat official accounts BT Finance (ID: btcjv1), translated by Chris.