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For the last few years, ByteDance, the parent company of short video app TikTok, has been working to diversify its revenue streams beyond advertisement and find more ways to monetize its hundreds of millions of users. One area it is targeting is gaming, which has historically been a lucrative business in China’s internet economy.

China is the world’s largest gaming market, generating revenues of $40.85 billion in 2020, according to market research firm Newzoo. The United States trailed behind at $36.92 billion.

But competition is also intense. Giants Tencent and NetEase have long dominated and smaller players like Mihoyo and Lilith are making breakthroughs. According to market research firm Analysys, Tencent occupied over half of the Chinese gaming market in 2019, while NetEase and 37 Interactive respectively commanded around 16% and 10%, leaving little breathing room for smaller rivals.

Regardless, ByteDance is forging ahead, giving a brand name, Nuversegame, and a website to its gaming business for the first time last month. Its strategy consists of a genre-spanning portfolio, a hiring spree, a proven monetization scheme, and a focus on both the domestic and overseas markets. During his short-lived stint with ByteDance, Kevin Meyer was put in charge of multiple overseas businesses, including gaming.

ByteDance, the David when it comes to games, seems undeterred by the Goliaths. As one of the company’s gaming executives Yan Shou wrote in a social media post a year ago: “Gaming is a content business. A monopoly is difficult to maintain [in this industry] as long as there is patience.”

Battle for talent

In recent years, ByteDance has hired a large number of ex-employees from the BAT, the acronym for three of the most prominent tech firms in China: Baidu, Alibaba, and Tencent. Yan himself worked on strategy at Tencent for over two years before joining ByteDance in 2015. While poaching and job-hopping are common in China’s fast-changing tech industry, ByteDance is known for doling out generous paychecks and many tech workers are lured by the prospects of receiving employee options before the firm goes public someday.

Ambitious staff may also feel stagnant after a long period at Alibaba and Tencent, which are both over 20 years old and where room for career advancement is limited. ByteDance, in comparison, is merely nine years old and is still in a fast-growth phase, a Beijing-based headhunter for technology firms tells TechCrunch.

“The current stage of ByteDance and the new businesses it is incubating provide the right platform for these people to achieve their ambitions,” the headhunter says.

In gaming, too, ByteDance has gone on a recruiting spree. The company’s gaming headcount numbers nearly 3,000 today, up from only 1,000 last year, according to a person with knowledge. These employees are scattered across China’s major tech hubs, from Beijing, Shanghai, Hangzhou to Shenzhen, working in various gaming studios under ByteDance.

How big is a 3,000-person team? 37 Interactive, the third-largest gaming firm in China, had around 4,000 gaming staff as of January, according to a company executive. It took the company 10 years to reach this scale. ByteDance began exploring games only around five years ago.

ByteDance declined to comment on the story.

Factory of games

Being late to the game could bring advantages. Having seen how Tencent and other predecessors tackle the gaming market allows ByteDance to learn. For one, ByteDance is working on a diverse range of genres simultaneously, from disposable mobile games to indie titles with unorthodox design or topics. This makes ByteDance different from Tencent, says Daniel Ahmad, a gaming analyst at Niko Partners. Tencent, the world’s largest gaming firm, cut its teeth on board and card games in the 2000s before gradually expanding into other genres.

Of course, only a deep-pocketed upstart like ByteDance could strive for a diverse portfolio from day one. With a well-oiled advertising business built upon its short video app Douyin and news aggregator Toutiao, as well as over $7 billion raised from equity funding over the years, ByteDance has been able to fund its horizontal expansions in not just games but also education and SaaS.

Aside from hunting down talent from other tech giants, ByteDance also relies on swallowing smaller companies to boost its workforce. Since 2018, ByteDance has invested in at least 11 gaming companies, six of which were full acquisitions, according to public disclosures. The acquired assets and talent were subsequently incorporated into ByteDance’s gaming studios. Acqui-hiring is an old and proven formula at ByteDance. Kelly Zhang, the product manager credited for taking Douyin, the Chinese version of TikTok, off the ground, also joined after her photo-sharing startup was bought by ByteDance.

Like many gaming firms, ByteDance’s monetization scheme is two-pronged: distribution of third-party titles and original creation. Quality games don’t come overnight, so the strategy allows its gaming unit to have some revenue as it bets on one of its own works to be a cash cow. Casual games are great for ads, which are normally placed between levels. More complex games rely on user loyalty and the natural way to make money is through in-app purchases.

A number of ByteDance’s licensed casual games have so far made it into the Top 10 iOS free games in China, including car racing game Drift Race, music game Yinyue Qiuqiu, and puzzle game Brain Out. While these collaborations don’t make big bucks yet, the initial traction proves the viability of ByteDance’s traffic strategy.

ByteDance said in 2019 it had 1.5 billion monthly users across its app family (there can be user overlap between apps). One way ByteDance is marketing games is by inserting native ads into users’ content feeds. Videos, says Niko Partners’ Ahmad, are “interactive, easy to use, easy to click through and can get much higher conversion than traditional ads.”

In some cases, the ad may prompt users to download a standalone gaming app. But like WeChat and most of China’s popular apps,  Douyin and Toutiao support third-party “mini apps” within their own platforms. Users can, for instance, play a lite game on Douyin just as they can on WeChat.

With hundreds of millions of monthly users, ByteDance already has a good grasp of people’s tastes and behavior, so it knows what games to recommend. In theory, the more people see and react, the more accurate its predictions become.

“Through targeted ‘recommendations’, our ‘algorithms’ will automatically show users mini games presented in various forms,” explains ByteDance’s gaming developer handbook. “All games have a fair and equal chance of getting initial exposure.”

Luminar Technologies has deepened ties with Volvo Cars to develop and eventually sell an automated driving system for highways to other automakers. The partnership, announced Thursday, is between Luminar and Volvo’s self-driving software subsidiary Zenseact.

The two companies are combining their tech to create what Luminar founder and CEO Austin Russell described as a “holistic autonomous vehicle stack”  made for production vehicles. Volvo will be the first customer. Russell and Zenseact CEO Ödgärd Andersson said Thursday they plan to also offer this system to other automakers.

It’s worth noting how Luminar and Zenseact define highway autonomy. The system they’re developing would allow hands-free, eyes free autonomous driving on highways. That means the driver would be out of the loop, and not expected to take over the vehicle. The transition between this level of autonomy and manual driving is a tricky one that has stumped automakers in the past.

“This is something that’s being solved for just in the next couple of years, this going to be available on vehicles that you can buy starting with Volvo and then expanding outwards — that’s the distinction,” Russell said in a webinar discussing the announcement.

The stack that will be offered to other automakers is called Sentinel, which will integrate Zenseact’s OnePilot autonomous driving software solution alongside Luminar’s Iris lidar, perception software, and other components as a foundation. The system is designed to handle highway autonomy and a number of safety measures to proactively avoid collisions with evasive maneuvers, reducing accident rates by up to seven times, according to Zenseact. The Sentinel product also has the capability of updating wirelessly, or over-the-air, to expand the operating domain of autonomy and further improve safety of vehicles over time, the companies said.

Zenseact might not sound familiar, but its 550-person team has been working on ADAS and software for years. Volvo created Zenseact after ending its joint venture with Veoneer.

Luminar and Zenseact noted that while the wider autonomous industry largely focuses on robotaxi applications, they are focused on delivering systems into series production vehicles. Lidar sensors are considered by many automakers and tech companies an essential piece of technology to safely roll out autonomous vehicles. As the timeline to deploy commercial robotaxi fleets has expanded, automakers have turned back to developing nearer term tech for production vehicles.

“The whole point of autonomous driving technology is to reduce accidents and save lives. This alliance enables us together to make that technology more broadly accessible and thus even more impactful,” Andersson said in a statement.

The announcement comes about 10 months since Volvo announced it would start producing vehicles in 2022 equipped with Luminar’s lidar and a perception stack to deploy an automated driving system for highways. Volvo has said it will take full liability for the automated driving system.

The artist Beeple scores a huge NFT sale, Twitter Spaces are coming soon and Seth Rogen’s weed startup launches in the U.S. This is your Daily Crunch for March 11, 2021.

The big story: NFT artwork sells for $69M

For the first time, auction house Christie sold a digital-only artwork: “Everydays — The First 5000 Days,” a collage of several years of sketches from the artist Mike Winkelmann, who’s known online as Beeple.

Yes, it’s another one of those NFT (non-fungible token) sales you’ve been hearing so much about for the past few weeks. And this one came with the most eye-catching price tag so far, with bids in the final two hours escalating from $14 million to $69 million.

While crypto and NFT enthusiasts likely drove much of that bidding, this is certainly going to make the art world sit up and take notice — not just when it comes to selling digital art, but also potentially as a means to record and transfer proof of ownership for any art.

The tech giants

Twitter Spaces to launch publicly next month, may include Spaces-only tweets — The social network’s Clubhouse rival is working toward a public launch in April.

Facebook is bringing ads to shorter videos and Stories — Facebook is expanding its monetization options for video creators, which probably means more ads for viewers.

Google paves way to monetize Pay users’ data in India — Google says it will roll out an update to Google Pay next week asking users to choose whether they wish to share data with the company.

Startups, funding and venture capital

Seth Rogen and Evan Goldberg want to be your weed dealer — Seth Rogen and four friends-turned-co-founders have been building Houseplant for close to 10 years, and its products are now available in the United States.

Epidemic Sound raises $450M at a $1.4B valuation to ‘soundtrack the internet’ — Epidemic’s audio marketplace currently features around 32,000 music tracks and 60,000 sound effects.

Indy-based High Alpha Capital launches new $110M fund — The firm focuses on B2B SaaS startups.

Advice and analysis from Extra Crunch

Five takeaways from the Coursera IPO filing — The company is still unprofitable, despite the pandemic’s boost to its business and customer base.

Does your VC have an investment thesis or a hypothesis? — OpenVC has identified six common patterns of how VCs articulate their theses and some best practices in doing so.

Bessemer’s 2021 cloud report provides context for soaring software startup valuations — Growth rates among cloud companies should prove more durable than nearly anyone expected.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

Everything you missed from TC Sessions: Justice — If you didn’t have a chance to join us last week, you can still catch up on all the conversations.

The 2021 Volkswagen ID. 4 ticks all the boxes, except one — The electric crossover offers plenty of range at an affordable price.

Eye, robot — Our latest robotics roundup covers the surgical, food delivery and ocean mapping robots, as well as the return of an adorable friend.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

Another day brings another pubic debut of a multibillion dollar company that performed well out of the gate.

This time it’s Coupang, whose shares are currently up just over 46% to more than $51 after pricing at $35, $1 above the South Korean e-commerce giant’s IPO price range. Raising one’s range and then pricing above it only to see the public markets take the new equity higher is somewhat par for the course when it comes to the most successful recent debuts, to which we can add Coupang.

The company’s mix of rapid growth and slimming deficits appear to have found an audience among public money types, so let’s quickly explore the price they paid. What was the company worth at its IPO price, and what is worth now? And, of course, we’ll want to calculate revenue run rates for each figure.

Oh — we’ll also need to calculate how much money SoftBank made. Inverted J-Curve indeed!

Coupang’s IPO and current value

As Renaissance Capital notes, Coupang boosted its share allocation to 130 million shares from 120 million. This made the value of both primary and secondary shares in its public offering worth a total of $4.55 billion. That’s a lot of damn money.

At its IPO price of $35, the same source pegged the company’s fully diluted IPO valuation at $62.9 billion. By our accounting, the company’s simple valuation at its IPO price came to $60.4 billion. Those numbers are close enough that we’ll just stick with the diluted number out of kindness to the company’s fans.

Doing some quick math, Coupang is worth around $92 billion at the moment. That’s a huge number that nearly zero companies will ever reach. Some do, of course, but as a percentage of startups that start it’s an outlier figure.

Today, the auction of an NFT digital art collage from a relatively unrecognized digital artist ended with a purchase price above $69 million. The work, called Everydays – The First 5000 Days, chronicled several years-worth of daily sketches from the artist Mike Winkelmann — known online as Beeple. Unlike every other work the auction house Christie’s has listed in its 250+ year history, this was a purely digital work.

It’s a crazy dollar amount sure, but it’s also a tacit endorsement from the stratospherically wealthy patrons of the fine art world that blockchain-minted digital art is an acceptable medium. Beeple may have attracted a higher premium than other artists of his class thanks to crypto-enthusiasts aiming to use this wave of enthusiasm to prop up a new market for crypto assets and a new medium for blockchain, but it’s still a historic moment for the art world.

Christie’s auction notes that the sale makes Beeple one of the world’s three most valuable living artists. Christie’s detailed that the bids exploded in the artwork’s final two hours at auction, moving from nearly $14 million to over $69 million as the bids poured in.

Beeple had embraced NFT artwork for months, making several million dollars off the artwork late last year before a slightly more mainstream embrace of the tech by the art world drove his works’ valuations to the moon. NFTs — or non-fungible tokens — are essentially minted assets with mathematically defined contracts that can indicate true ownership of a digital good. For digital artists who had struggled to define a sense of scarcity for digital files that could be downloaded, uploaded and shared freely, NFTs seem to be a coup of the medium that feel custom-built for the art world.

Internet-embracing meme art has been fusing with street art and eating the fine art world over the past decade, much to the chagrin of many of the existing tastemakers and stakeholders in that world who have struggled to find a shared definition of what these works mean in terms of artistic value. Christie’s embrace of the NFT for this singular sale is perhaps the most impactful evolution here. The FOMO for other auction houses may push them to quickly embrace a technology they otherwise would have been more reticent to.

The impact of the blockchain may have long-term effects on art auction houses beyond pure NFTs sales, namely it’s highly possible that these entities embrace NFTs as a trusted solution for indicating and transferring proof of ownership. The future of NFTs in the art world is certainly far from certain, but this is an explosive start.