Summary of Key Points
ByteDance’s AI business is experiencing a paradox of extreme success and challenges: On one hand, its services represented by Volcano MaaS (Model as a Service) and the Seedance video generation model are growing rapidly. The usage of DouBao’s large model tokens has increased tenfold in a year, with MaaS accounting for nearly 50% of the market share, making Seedance a lucrative asset. On the other hand, high computational costs (tens of millions consumed daily) and substantial capital expenditures (over 200 billion yuan in 2026) pose difficulties in commercialization. With 200 million daily active users (DAUs), daily revenue is less than one million yuan, and ByteDance faces fierce competition from rivals such as Bilibili, iQiyi, Alibaba, and Tencent in the fields of video generation and office coding.
I. Sweet Moments for ByteDance’s AI Business: MaaS Soars, Seedance Becomes a Hit
ByteDance’s AI business has been booming recently. The Volcano MaaS service, in particular, has seen a dramatic increase in activity—by June this year, DouBao’s large model processed over 180 trillion tokens per day, a tenfold increase from the previous year. One out of every two tokens used by Chinese companies comes from the Volcano engine, accounting for 49.5% of the market share. Even more impressive is the Seedance video generation model, which generates over 1 billion yuan in revenue monthly, with agency fees exceeding 10 million yuan and a demand that far exceeds supply. The number of smart devices (excluding smartphones and cars) connected to DouBao has surpassed 10 million units. This indicates that ByteDance has successfully targeted a market pain point with its AI video generation technology, making it highly sought after in the industry.
II. The Trouble Behind the Sweet Success: High Computational Costs
However, this growth comes at a high cost. The DouBao app is used by 200 million people daily, but its daily revenue is less than one million yuan, while computational costs amount to tens of millions. To address this, ByteDance plans to invest 200 billion yuan in building computing centers in 2026, which represents 60% of last year’s profits. The reason for the high costs is that the majority of the profit goes to upstream players: GPU hardware manufacturers take at least 60%, cloud service providers earn another 50%, and application developers receive little. To make up for these losses, ByteDance has introduced a premium version with monthly fees of up to 500 yuan, and Volcano has also started charging API fees to partners (e.g., 6 yuan per year for AI toy manufacturers with a prepayment of 10 million yuan). Users complain that generating a 30-second video consumes nearly 40% of their quota, indicating a challenging path to commercialization.
III. Seedance’s Impact on the Market: Bilibili and iQiyi Feel Threatened
Seedance’s success has caused concern in the video industry. Leading AI video startups are urgently seeking funding to stabilize their teams, while Bilibili and iQiyi are directly competing with ByteDance for market share. Seedance solves the problem of low efficiency in short video editing, making it difficult for users to switch back to other platforms. It has also targeted Bilibili’s “secondary creation” market, collaborating with Stephen Chow to license films for remakes and plans to release Seedance 2.5, which could potentially compete with traditional film production methods. Moreover, Seedance is expanding into industrial applications, such as generating extreme weather data for autonomous driving and reducing costs in augmented intelligence training—demonstrating ByteDance’s ambition to apply AI across various industries.
IV. The Office Coding Arena: Alibaba and Tencent Lead the Way; Can ByteDance Catch Up?
With the launch of its premium version, ByteDance is entering the office coding market. Its solutions support computers, browsers, and Office software, as well as image and video generation, but users complain about insufficient quotas. Competitors like Alibaba’s Qoder and Tencent’s WorkBuddy have already established a foothold in this area: Alibaba’s Qoder has over 5 million users and annual subscription revenue of over 60 million US dollars, with recent promotional offers to attract customers; WorkBuddy is also in the beta phase. Although ByteDance’s TRAE Work has seen a 50-fold increase in token consumption, it lags behind its competitors. To catch up, ByteDance needs to accelerate the development of products like Coze (low-code) and HiAgent (high-code) to stay competitive.
V. ByteDance’s Long-Term Strategy: Focusing on Production-Grade Applications
Despite the challenges, ByteDance remains committed to long-term AI investment. Tan Dai, President of the Volcano Engine, stated that “AI is still in its early stages, but this year it has crossed a critical point of practical application.” For example, 20 leading AI animation and short-story companies have adopted Volcano’s solutions, integrating with Douyin and music services for IP creation. Seedance 2.5 will also be used in industrial applications. Although the computational costs are daunting, ByteDance prioritizes model capabilities and production-grade applications, believing that current investments will secure a foothold in the AI industry in the long run.
In summary, ByteDance’s AI business is like driving on a highway: there is rapid growth, but challenges such as high computational costs and fierce competition exist. However, the company continues to push forward, recognizing that success in AI depends on who reaches the finish line first.