How DeepSeek Levels the Field: New Investment Opportunities

Why Data Is the New King in the DeepSeek time

Introduction

Imagine building an internet platform with 300 million monthly active users in the U.S. or Europe. You’d be popping champagne and buying a private island.

In China? Those same numbers would raise eyebrows. Here, user bases of that size smell like day-old fish at a market—investors (myself included) would question whether you’re even big enough to survive. Internet titans like Tencent and ByteDance operate on a galactic scale: their ecosystems (WeChat, Douyin, etc.) collectively serve over a billion users.

As I’ve written before, this scale advantage isn’t just impressive — it’s a strategic Death Star (though I’ve also pointed out some of its limitations).

But lately, something unexpected has happened: smaller platforms aren’t just surviving — they’re thriving. Let’s unpack how.

Before we do that, let’s review the argument against smaller platforms in the first place.

When Giants Ruled the Earth

For years, the argument against smaller platforms was straightforward: the tyranny of the virtuous cycle. ByteDance and Tencent didn’t just dominate their core markets (short videos and messaging, respectively)—they built sprawling empires. Toutiao (news), Tencent Video (streaming), and dozens of other services turned them into one-stop shops for advertisers. Why bother with 10 niche platforms requiring separate teams and budgets when two giants could reach everyone?

The result? A self-reinforcing loop: more advertisers → more revenue → better targeting → even more advertisers. As a result, ByteDance and Tencent’s ad revenue dwarfed the combined ad revenue of all the smaller players by a wide margin.

Until 2021, smaller platforms coasted on VC funding, prioritizing user growth over profits. But when the funding tap shut off, extinction loomed. Stocks cratered by 90%, and desperate monetization efforts alienated users. Game over? Not quite.

In the rest of this article, I will discuss how these smaller companies faced this existential threat, how they managed to survive, and even more importantly, why DeepSeek is now having a significant impact on these platforms — further leveling the playing field and eroding some of the advantages that giants like ByteDance and Tencent once had. This creates some great investment opportunities.

This article is exclusively for my paying subscribers. However, if you’d like a free idea, you can read a recent free article I wrote here.