Analysis of the Impact of ByteDance's AI Layout on the Valuation Logic of Its Advertising Business

Based on the collected information, I will systematically analyze how ByteDance’s AI layout has changed the valuation logic of its advertising business.

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In 2025, ByteDance completed the in-depth integration of core departments such as AI Lab, with Wu Yonghui fully overseeing basic research and application implementation of large models, and building the original Seed team into a core strategic business. This marks the shift of ByteDance’s AI strategy from scattered exploration to systematic operations [1].

Product	Functional Positioning	Core Data
Doubao	AI Chat Assistant	DAU exceeds 100 million, accounting for half of the monthly active user share of AIGC apps in China
CapCut	AI Video Editing Tool	Intelligent editing capabilities significantly improve content production efficiency
Kouzi	AI Agent Development Platform	Reduces the threshold for AI application development
Maoxiang	AI Virtual Companion Application	Explores new user interaction scenarios

Notably, Doubao’s DAU has exceeded 100 million, and its marketing costs during user growth are the lowest among all ByteDance products that have reached 100 million DAU in history, which directly reflects the efficiency advantages of AI-driven growth [1].

ByteDance operates the “Volcano Ark” MaaS (Model-as-a-Service) large model service platform through Volcano Engine, achieving remarkable market penetration:

• 80%
  of leading coffee and tea brands
• 90%
  of mainstream automotive brands
• 80%
  of leading securities firms
• 80%
  of systemically important banks
• 70%
  of 985 universities
• 9
  of the world’s top 10 smartphone vendors by shipment volume

The daily Token call volume of Volcano Engine’s large model has exceeded 50 trillion (a 200% increase in half a year), ranking third globally only after OpenAI and Google Cloud [1].

According to the latest disclosure, ByteDance plans to

, with half of the budget allocated to AI chip procurement. Based on the estimated 2025 net profit of $50 billion, this investment will account for nearly half of the full-year 2025 profit, demonstrating ByteDance’s firm commitment to its AI strategy [1][2].

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Indicator	2025 Data	YoY Change	Industry Comparison
Revenue	Approximately $186 billion	Over 20% growth	Close to Meta’s $200 billion
Net Profit	Approximately $50 billion	A record high	Close to Meta’s $60 billion
Q1 Revenue	$43 billion	-	Surpassed Meta’s $42.3 billion for the first time
Q2 Revenue	$48 billion	25% YoY growth	Maintained a growth rate of over 20% in line with Meta
Monthly Active Users (MAU)	Over 4 billion	-	Comparable to Meta

In Q1 2025, ByteDance surpassed Meta for the first time to become the world’s highest-revenue social media company, a milestone event of significant symbolic importance [2].

Time Node	Valuation Level	Valuation Institution/Event
Late 2024	Approximately $330 billion	ByteDance share repurchase (at $200.41 per share)
2025	Over $400 billion	SoftBank Vision Fund
2025	$410 billion - $450 billion	Fidelity Investments, T. Rowe Price
Late 2025	$480 billion	Capital Today equity transaction (the largest secondary market transaction of the year)

Based on the $480 billion valuation, ByteDance has surpassed SpaceX to become the world’s second-most valuable startup, second only to OpenAI with a valuation of $500 billion [1][2].

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The valuation logic of traditional internet advertising companies is mainly based on:

• User Scale
  (DAU/MAU)
• Traffic Monetization Efficiency
  (ARPU)
• Market Share
  (advertising revenue proportion)

ByteDance’s AI layout is restructuring the valuation logic into:

• Intelligence Density
  (penetration rate of AI capabilities)
• Data Asset Value
  (user interaction data transformed into AI training materials)
• Platform Tax Capability
  (enhanced bargaining power brought by AI tools)

The introduction of AI technology has fundamentally changed the efficiency boundary of advertising delivery:

Dimension	Traditional Model	AI-Driven Model
Campaign Launch Time	3-5 days to run a stable model	Launched in half an hour with intelligent tools
Reliance on Optimizers	Highly dependent on professionals	Novices can achieve near-professional results
Creative Material Generation	Produced manually with long cycles	AI-generated in batches with real-time iteration
Audience Targeting	Based on tag matching	Deep learning with dynamic optimization

This efficiency improvement directly translates to growth in advertising revenue and improvement in profit margins.

AI technology is helping large companies like ByteDance build more closed “walled garden” ecosystems:

┌─────────────────────────────────────────────────────────┐
│                  ByteDance Ecosystem Loop               │
│  ┌─────────┐    ┌─────────┐    ┌─────────┐             │
│  │ AI Model Layer │───▶│ Volcano Engine │───▶│ Enterprise Services │             │
│  └─────────┘    └─────────┘    └─────────┘             │
│       │              │              │                   │
│       ▼              ▼              ▼                   │
│  ┌─────────┐    ┌─────────┐    ┌─────────┐             │
│  │ Doubao APP │    │ Douyin/CapCut │    │ Pangle │             │
│  └─────────┘    └─────────┘    └─────────┘             │
│       │              │              │                   │
│       └──────────────┼──────────────┘                   │
│                      ▼                                   │
│            ┌─────────────────┐                          │
│            │   Core of Advertising Business   │                          │
│            │  Data + Algorithm Closed Loop  │                          │
│            └─────────────────┘                          │
└─────────────────────────────────────────────────────────┘

1. Data Monopoly
   : User behavior data is accumulated within its own ecosystem, forming an asset that is difficult for competitors to replicate
2. Computing Power Advantage
   : Large-scale AI training and inference capabilities form a technological moat
3. Centralized Settlement Rights
   : Advertisers’ delivery links are highly dependent on the platform, forming a “soft tax” capability
4. Increased Platform Tax
   : AI tools improve the monetization efficiency of ad inventory, indirectly increasing delivery costs [3]

In 2025, the advertising industry showed obvious “dumbbell-shaped” structural differentiation:

• The top 10 internet platforms account for
  91.6%
  of media advertising revenue (H1 2025)
• An increase of 0.8 percentage points compared to the same period in 2024
• The living space of small and medium-sized media and service providers is continuously squeezed [3]

• Amazon, Google, and Meta’s share of the total U.S. advertising market increased from 47% in 2020 to
  nearly 59%
  in 2025
• In the digital advertising market specifically, the three giants’ share reached
  71.9%
  [3]

This change in market structure means:

, and ByteDance is at the forefront of this concentration trend.

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Traditional valuation methods for internet advertising companies mainly include:

• P/S (Price-to-Sales Ratio)
  : A simple multiple based on revenue scale
• P/E (Price-to-Earnings Ratio)
  : Valuation based on profitability
• User Value Method
  : Value per user × number of users

These methods cannot fully reflect the following brought by AI:

• Marginal benefits of efficiency improvement
• Strategic value of data assets
• Enhancement of platform tax capabilities

The valuation restructuring brought by ByteDance’s AI layout can be understood from the following dimensions:

Valuation Dimension	Traditional Logic	AI-Driven Logic	Valuation Impact
Revenue Growth	Driven by user growth	AI improves monetization efficiency + explores new scenarios	Improved growth quality
Profit Margin	Diminishing economies of scale	AI automation reduces marginal costs	Expanded profit margins
Competitive Barriers	Network effects	Composite barriers of AI capabilities + data + computing power	Deepened moat
Growth Space	Competition in the existing market	AI creates new scenarios (short dramas, e-commerce, etc.)	Lifted growth ceiling

Currently, there is still a significant gap between ByteDance’s valuation of approximately $480 billion and Meta’s market value of approximately $1.7 trillion, which to some extent reflects:

1. Geographic Premium
   : As a U.S. listed company, Meta enjoys a higher valuation premium
2. Business Purity
   : Meta is a pure social media advertising company with clearer valuation logic
3. AI Premium Not Fully Priced In
   : ByteDance’s AI capabilities may not be fully reflected in its valuation

As the proportion of AI business increases and profitability is verified, ByteDance has room for further valuation upgrades.

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The RMB 160 billion AI investment (accounting for nearly half of 2025 profits) faces the following return risks:

• Technical Route Risk
  : The competitive landscape of large models is not yet stable
• Commercialization Progress
  : The monetization path of AI products still needs to be verified
• Intensified Competition
  : Continuous catching up from competitors such as Tencent and Alibaba

• Uncertainty of TikTok’s U.S. Business
  : Oracle, Silver Lake, and Abu Dhabi’s MGX will jointly hold 45% equity in the U.S. entity [4]
• Data Security and Privacy Regulation
  : The high dependence of AI applications on data may face stricter compliance requirements

• The growth rate of the global advertising market has fallen to a mid-single-digit level of 6%-7% [3]
• Macroeconomic fluctuations may affect advertisers’ budgets
• Increased platform tax may lead to the outflow of advertisers’ budgets

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ByteDance’s AI layout is fundamentally changing the valuation logic of its advertising business:

1. From a Traffic Game to an Intelligence Game
   : AI capabilities have become a new core competitive variable
2. From Scale Expansion to Efficiency Deepening
   : Improving monetization efficiency is more important than pure user growth
3. From Open Ecosystem to Walled Garden
   : The trend of centralization of data, computing power, and settlement rights is strengthened
4. From Valuation Discount to Valuation Repair
   : The AI strategy is gaining recognition from the capital market

Catalyst	Impact Degree	Verification Indicator
Commercialization of AI products such as Doubao	★★★★☆	Proportion of AI product revenue, user retention rate
Growth of Volcano Engine’s enterprise services	★★★★☆	B-end revenue, growth rate of Token call volume
Increased AI penetration in advertising business	★★★★★	Advertising delivery efficiency indicators, client ROI
Sustained verification of profitability	★★★★★	Net profit growth rate, profit margin expansion

Based on the current progress of AI layout and the response of the capital market, ByteDance’s valuation is expected to be further upgraded in the medium term. Key observation points include:

• Short-term (2026)
  : Short-term pressure on profit margins from AI investment vs. benefits from efficiency improvement
• Medium-term (2027-2028)
  : Independent valuation value of AI business vs. synergistic effects
• Long-term (2029+)
  : Maturity of AI-native advertising formats vs. global market expansion

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[1] Huxiu - “ByteDance Wins Another Bet” (https://m.huxiu.com/article/4821029.html)

[2] Sina Finance - “Record-Breaking This Year! ByteDance’s Profit is Said to Reach $50 Billion” (https://finance.sina.com.cn/stock/t/2025-12-20/doc-inhckkxx7307555.shtml)

[3] 36Kr - “Advertising Industry in 2025: AI is Booming, Big Tech is Imposing ‘Taxes’” (https://m.36kr.com/p/3619003993895429)

[4] Morketing - “2025 Ad Tech Transaction Review: 43% Premium, Total Volume of $120 Billion” (https://www.morketing.com/detail/28060)