Added 0.5% to Kuaishou @ HKD 102.
This is a tough one. Kuaishou is the number two player in the short video sector and lags behind Douyin in almost any operating metrics. Usually, it is not a good idea to invest in the number two player in the Internet sector with strong winner-take-all or winner-take-most dynamics. In the case of Kuaishou, I think it is still a differentiated short video platform where it has ~30% of private traffic versus almost zero private traffic at Douyin. Douyin distributes the content from creators to maximise users’ video consumption while Kuaishou makes a conscious effort to allow creators to build stronger relationships with their fans. Kuaishou does this by placing more weight on followership-based traffic distribution as opposed to Douyin’s algorithm-driven content distribution which optimises user time spend, retention rate and active daily user size on the Douyin platform.
Kuaishou’s management team, while less aggressive than those at Bytedance, has proven their appetite to evolve with the industry. It took them a while to recognise the power of Douyin’s algorithm-based distribution model and adapt accordingly. They also aggressively expanded to compete with Bytedance in the international market. The founders at Kuaishou seem to get the balance between the pursuit of efficiency and user interests. But one could still argue they have been too slow to react and in such a competitive market, one cannot afford to be slow.
I think at this valuation, the upside to Kuaishou in the event that SV turns out to be a duopoly in China is at least 3x. But I could be wrong and the risks are numerous. If it turns out that content creators are indeed commodities, then Douyin might actually become a winner-take-all market.