According to the Chinese financial media , Chinese internet giant ByteDance has decided to stop hosting TikTok and other overseas apps on Alibaba Cloud. This decision by ByteDance is a blow to the e-commerce giant’s cloud-computing branch. The revenue growth rate was significantly slower in the first quarter. Alibaba attributed it to the loss of “a top-class customer in the internet industry.”
A little about Alibaba’s cloud service
According to market research firm IDC, Alibaba is China’s largest cloud service provider. Its market share is more than 40%. Alibaba is also the world’s third-largest cloud service provider after Amazon and Microsoft.
It made its foray into the US market in 2014. It now runs two data centers in the country. ByteDance runs most of its domestic services on its in-house data centers in northern China’s Hebei province.
Why ByteDance could have made this decision?
ByteDance seems to be responding to mounting regulatory pressure from the US and the European Union related to personal data concerns. The company decided to move its servers for TikTok from Alibaba Cloud to Amazon Web Service and Oracle. The contract is worth approximately $800 million per year, said the sources of the Chinese financial media.
The slow growth of its cloud business that Alibaba has seen during the first quarter is apparently because of the loss of ByteDance’s contract. Last week the company said the revenue from its cloud business grew 37% year on year to RMB 16.7 billion (around $2.6 billion) in the first quarter. The growth of its cloud business in the first quarter last year was 58%. The segment grew 50% in 2020 from the previous year.
In an earnings call with investors last week, Maggie Wu, the chief financial officer of Alibaba said that the slower growth rate was “due to a change in our relationship with a top-class customer in the internet industry.”
Wu further added, “This customer has a sizable presence outside of China that used our overseas cost services. They have decided to terminate their relationship with us with respect to their international business due to non-product-related requirements”.
While Wu didn’t mention the name of the company. Two sources told the financial media that it was ByteDance. They said that TikTok had used Alibaba Cloud’s data centers in Singapore to back up user data in the US and serve the South East Asian market.
No comments have yet been made by the companies.