CONTROVERSIAL: Toutiao, a personalized information aggregator, can be used to read the news (WEI YAO)

As more people turn to their mobile devices for news consumption, a goldmine has emerged in offering up personalized solutions for readers using the medium. Zhang Yiming, the founder and CEO of Beijing-based ByteDance.com, was one of the first Chinese entrepreneurs to spot an opportunity. The company's Toutiao app is one of the most used mobile news apps in China.

Toutiao, meaning "headline" in Chinese, is a personalized information aggregator which tries to supply content that is automatically created for each of its users through analyzing data obtained from their social networking accounts and personal reading habits.

Zhang is no stranger to entrepreneurial undertakings. After graduating from China's prestigious Nankai University in Tianjin with a degree in software engineering back in 2005, he worked for ticket booking service Kuxun.cn, microblogging website Fanfou.com, and established property rental site 99fang.com. As early as 2008, Zhang considered creating aggregation software that focused on jokes and real estate news, but gave up when he found the market wasn't ready.

According to Southern Weekly, a newspaper based in Guangzhou in south China's Guangdong Province, three changes Zhang spotted during the second half of 2012 led him to create Toutiao: Developments in machine learning, social networks and mobile Internet.

Launched in August 2012 as a content distributor, Toutiao does not generate content itself, but rather aggregates it from other sources. It has registered more than 120 million unique users and over 40 million active monthly users, according to company data. Zhang revealed that Toutiao's in-app advertising revenue in the first five months of 2014 surpassed 10 million yuan ($1.6 million). However, Toutiao has still not achieved profitability.

In early June, Toutiao secured $100 million worth of Series C financing led by Sequoia Capital, a U.S. venture capital firm. It is currently valued at $500 million.

However, the initial success of the fledging IT start-up has received backlash from traditional media outlets. Several news portals, media giants and influential bloggers asked the company to stop using unauthorized linking, reproduction and forwarding of their contents.

A court in Beijing heard a case against Toutiao on June 4. Dayoo.com, which is authorized to publicize the content of newspaper Guangzhou Daily over the Internet, filed the suit and accused Toutiao of copyright infringement.

The lawyer representing Dayoo demanded the removal of links to its original reports from the app, display of an official apology on the app's home page for a month and compensation. However, the lawsuit ended with a cooperation agreement signed by the two sides on June 18.

On June 23, the National Copyright Administration (NCA) confirmed that the administration had launched an investigation into Toutiao after receiving complaints from various media outlets that claimed that the website had illegally reproduced or reposted their stories.

The move has been seen as part of a nationwide crackdown on online infringements of intellectual property rights that the NCA launched on June 12, when the administration also pledged to improve a copyright certificate mechanism for print media to cooperate with news portals.

"Strictly speaking, the services that we are providing are just a collation of news links, and we don't plagiarize any content," Zhang said.

No easy answer

Zhang told the media on different occasions that during his company's initial development stage, Toutiao engineers used programs to categorize and archive media and social network content and reformatted some web pages into a mobile-ready version, mainly without the authorization of the original websites. In the process, advertisements on the original web pages were sometimes omitted. Moreover, as the reformatted pages are mostly stored in the servers of Toutiao, the original websites saw no increase in page hits for their content on the Toutiao app.