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Kuaishou, TikTok’s Chinese nemesis, surges 194% on IPO debut

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Kuaishou, a Chinese video app that’s largely underappreciated outside China, has just completed a massive initial public offering in Hong Kong. The app is by far the biggest rival for Douyin, TikTok’s Chinese version, and unlike many Western video platforms that make money from ads and subscriptions, Kuaishou’s cash cow is its tipping business.

Kuaishou’s shares opened in Hong Kong on Friday at HK$338 ($43.6) apiece, a 194% jump from its IPO price of HK$115 ($14.8). That catapults its market cap to nearly HK$1.4 trillion ($180 billion). The company pocketed approximately $5.4 billion from the listing with a total of 365,218,600 shares, excluding the overallotment option.

Kuaishou, which is backed by Tencent, now has a replenished coffer to invest in growth and hopefully work towards profitability. In the first nine months of 2020, the app posted an adjusted net loss of 7.2 billion yuan ($1.1 billion), compared to an adjusted profit of 1.8 billion yuan in the same period a year earlier.

Kuaishou’s stock is a huge hit with both institutional financiers and retail investors from China, many of whom are familiar with the app that boasted 481 million monthly users in the 11 months ended November. The app set a record as the most oversubscribed deal in Hong Kong, attracting retail investor demand totaling $164.8 billion, the South China Morning Post reported. Its share reached HK$322.8 on the gray market platform operated by Phillip Securities Group and HK$421 on online broker Futu Securities.

Like Douyin, Kuaishou began as a platform for people to create and share 15-second short videos (following a brief period as a GIF app) and later expanded into live streaming. The transition is natural, as creators who have built a name may seek further interaction with followers, and followers may want to express their loyalty and affection to creators. Live streaming and virtual gifting fill that need.

Kuaishou has three main monetization methods, with live streaming making up the majority of its revenue. Fifty-eight million users on Kuaishou spent on live videos monthly in the 11 months ended November, and on average every paying user brought 47.6 yuan ($7.36) in revenue.

The app also sells ads, with each user driving 71.4 yuan ($11) in marketing revenue for the period. Lastly, Kuaishou allows creators to hawk products. The gross merchandise value — an industry metric used loosely to measure e-commerce transactions — generated directly on Kuaishou reached 332.7 billion yuan ($51.4 billion) in the period.

For comparison, the live streaming feature on Alibaba’s Taobao bazaar generated over 400 billion yuan in GMV for the twelve months ended December.

While Kuaishou enjoys growing revenue from live streaming, regulatory risks loom in the background. The Chinese government has banned users under the age of 18 from purchasing virtual gifts. It has also urged platforms to put a cap on users’ monthly spending on virtual gifts, though regulators haven’t specified or suggested a limit.

Kuaishou is aware of the risk, noting in its prospectus that “any limits on user spending on virtual gifting ultimately imposed may negatively impact our revenues derived from virtual gifting and our results of operations.”

Until regulators take further action to rein in virtual gifting, Kuaishou will likely continue to thrive while it works on diversifying its business.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Facebook will pay $650 million to settle class action suit centered on Illinois privacy law

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Facebook was ordered to pay $650 million Friday for running afoul of an Illinois law designed to protect the state’s residents from invasive privacy practices.

That law, the Biometric Information Privacy Act (BIPA), is a powerful state measure that’s tripped up tech companies in recent years. The suit against Facebook was first filed in 2015, alleging that Facebook’s practice of tagging people in photos using facial recognition without their consent violated state law.

1.6 million Illinois residents will receive at least $345 under the final settlement ruling in California federal court. The final number is $100 higher than the $550 million Facebook proposed in 2020, which a judge deemed inadequate. Facebook disabled the automatic facial recognition tagging features in 2019, making it opt-in instead and addressing some of the privacy criticisms echoed by the Illinois class action suit.

A cluster of lawsuits accused Microsoft, Google and Amazon of breaking the same law last year after Illinois residents’ faces were used to train their facial recognition systems without explicit consent.

The Illinois privacy law has tangled up some of tech’s giants, but BIPA has even more potential to impact smaller companies with questionable privacy practices. The controversial facial recognition software company Clearview AI now faces its own BIPA-based class action lawsuit in the state after the company failed to dodge the suit by pushing it out of state courts.

A $650 million settlement would be enough to crush any normal company, though Facebook can brush it off much like it did with the FTC’s record-setting $5 billion penalty in 2019. But the Illinois law isn’t without teeth. For Clearview, it was enough to make the company pull out of business in the state altogether.

The law can’t punish a behemoth like Facebook in the same way, but it is one piece in a regulatory puzzle that poses an increasing threat to the way tech’s data brokers have done business for years. With regulators at the federal, state and legislative level proposing aggressive measures to rein in tech, the landmark Illinois law provides a compelling framework that other states could copy and paste. And if big tech thinks navigating federal oversight will be a nightmare, a patchwork of aggressive state laws governing how tech companies do business on a state-by-state basis is an alternate regulatory future that could prove even less palatable.

 

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AWS reorganizes DeepRacer League to encourage more newbies

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AWS launched the DeepRacer League in 2018 as a fun way to teach developers machine learning, and it’s been building on the idea ever since. Today, it announced the latest league season with two divisions: Open and Pro.

As Marcia Villalba wrote in a blog post announcing the new league, “AWS DeepRacer is an autonomous 1/18th scale race car designed to test [reinforcement learning] models by racing virtually in the AWS DeepRacer console or physically on a track at AWS and customer events. AWS DeepRacer is for developers of all skill levels, even if you don’t have any ML experience. When learning RL using AWS DeepRacer, you can take part in the AWS DeepRacer League where you get experience with machine learning in a fun and competitive environment.”

While the company started these as in-person races with physical cars, the pandemic has forced them to make it a virtual event over the last year, but the new format seemed to be blocking out newcomers. Since the goal is to teach people about machine learning, getting new people involved is crucial to the company.

That’s why it created the Open League, which as the name suggests is open to anyone. You can test your skills and if you’re good enough, finishing in the top 10%, you can compete in the Pro division. Everyone competes for prizes as well such as vehicle customizations.

The top 16 in the Pro League each month race for a chance to go to the finals at AWS re:Invent in 2021, an event that may or may not be virtual, depending on where we are in the pandemic recovery.

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Free 30-day trial of Extra Crunch included with TC Sessions: Justice tickets

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TC Sessions: Justice is coming up on Wednesday, and we’ve decided to sweeten the deal for what’s included with your event pass. Buy your ticket now and you’ll get a free month of access to Extra Crunch, our membership program focused on founders and startup teams with exclusive articles published daily.

Extra Crunch unlocks access to our weekly investor surveys, private market analysis and in-depth interviews with experts on fundraising, growth, monetization and other core startup topics. Get feedback on your pitch deck through Extra Crunch Live, and stay informed with our members-only Extra Crunch newsletter. Other benefits include an improved TechCrunch.com experience and savings on software services from AWS, Crunchbase and more.

Learn more about Extra Crunch benefits here, and buy your TC Sessions: Justice tickets here.  

What is TC Sessions: Justice? 

TC Sessions: Justice is a single-day virtual event that explores diversity, equity and inclusion in tech, the gig worker experience, the justice system and more. We’ll host a series of interviews with key figures in the tech community. 

The event will take place March 3, and we’d love to have you join. 

View the event agenda here, and purchase tickets here

Once you buy your TC Sessions: Justice pass, you will be emailed a link and unique code you can use to claim the free month of Extra Crunch.

Already bought your TC Sessions: Justice ticket?

Existing pass holders will be emailed with information on how to claim the free month of Extra Crunch membership. All new ticket purchases will receive information over email immediately after the purchase is complete.

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We’re happy to extend a free month of access to existing users. Please contact extracrunch@techcrunch.com and mention that you are existing Extra Crunch members who bought a ticket to TC Sessions: Justice. 

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