Bytedance and the hypergrowth delusion

Published Summer 2020


Gelt VC's Turner Novak posted a chart on Twitter that illustrated how Bytedance's (ie TikTok) growth trajectory was hitting it out of the park



The problem with the chart is it doesn't account for the forecast growth of the underlying market


If you measure just market share you can see that Bytedance looks like a far superior business to Google or any other social platform launched in the past 20 years



But if you normalise the data for inflation in both dollar terms (1.4x) and the number of internet users (6x) you discover a very different story


Now you can see the growth stories look very similar



...and, if you adjust the growth to account for the lag period before Google discovered how to monetize search the comparision indicates Google still has the strongest growth trajectory in the history of the web



The lesson here?


It's the same one outlined 4 years ago in Uber, AirBnB and the Unicorn Delusion


When doing a startup valuation/momentum/growth forecast you must not only account for the growth in market share but also the growth in the market


Why? Because if the market is early and/or growing quickly your CoCA will be significantly lower than if you have to acquire customers in a slow growing or established mature market



Originally Published Summer 2020. What are we talking about today? Follow us on Twitter

Tymbals #Edge @Innovation

Copyright Digital Partners Pty Limited 2012-2020