Business

TikTok is devouring its rivals. Can it keep users hooked?


If the sun goes down on Facebook,

so TikTok is dancing in the moonlight. How long can his short video hold the capricious attention of consumers?

Just a few years ago, China-based ByteDance’s TikTok was an app for kids, featuring videos of anthropomorphic pets or spookily talented kids dancing. Now it seems everyone is using it, regardless of age. Its growth has come at the expense of its competitors, so almost every social media company now invests money in copycat products.

TikTok’s founding genius is that it capitalized on consumers’ short and fickle attention spans with a seemingly endless collection of music videos under 60 seconds algorithmically tailored to users’ interests. Those who are still bored in less than a minute can simply slide away until something else catches their eye.

In its latest installment of what it considers the longest-running survey of digital media consumer behavior in America, Edison Research found that 82% of American adults surveyed now use social media, unchanged from Last year. This means that unlike most other areas of tech like food delivery, ridesharing, or dating, social media apps compete for the same users, not new ones.

It’s a game that TikTok is winning. In 2019, 70% of 10-year-old girls with smartphones in the United States used TikTok. Today, Edison Research survey shows TikTok is the third most used social media app by users of all ages, overtaking Twitter,

Snapchat,

Pinterest and LinkedIn. Around 36% of the US population over 12 surveyed have used TikTok since this year, behind only Metait is

Facebook and Instagram, and up from 11% two years ago. During this period, the percentage of people using Snapchat, LinkedIn and Pinterest has decreased, according to the survey.

But among younger users, the gains appear to have come at the particular expense of Facebook. According to the survey, more people aged 12 to 34 now use TikTok than Facebook, a marked change from just two years ago, when Facebook led TikTok in this demographic by 39 percentage points. It’s not just young people who are moving away from incumbent social media operators: just 5% of people aged 35-54 used TikTok two years ago; now more than a third of them are. During this period, the percentage of this age group using Snapchat and LinkedIn did not increase at all, while it decreased by 5 percentage points on Pinterest.

Overall, TikTok’s earnings illustrate its early ability to bridge the age gap, a unique point of differentiation among its social media competitors. Snap Inc. says Snapchat reaches 75% of 13-34 year olds in 20 countries, but didn’t disclose its usage statistics among older demographics, suggesting the stats are much less impressive. Pinterest has struggled to attract and retain wide usage outside of its core demographic of moms. And parent company Meta said its Facebook app lost daily users sequentially in the fourth quarter for at least the first time since its public offering.

Accessibility is key. Evercore ISI analyst Mark Mahaney said part of TikTok’s appeal is its intuitiveness, calling it “fantastically easy to use”. On TikTok, you open the app and start scrolling. Most other apps require you to sign up for an account before you can use them, and Snapchat, for example, opens to a camera, which can be intimidating to some. It’s also easy to contribute to TikTok; anyone can be a content contributor.

Facebook and Instagram now have the shorthand Reels video platform. Last year, Pinterest added Watch, where users can scroll through short videos and series of images. Snapchat launched the Spotlight short video product in late 2020. Last year, YouTube launched Shorts globally, providing a platform for videos under 60 seconds. And even Twitter in December said it was testing an updated “Explore” tab that follows a TikTok-like scrolling format that appears to favor short video tweets. TikTok’s shortened video concept is even bleeding into TV with Netflixit is

Fast Laughs, a feature first launched on its mobile app last year that features short snippets of Netflix shows.

TikTok, like its social media predecessors, is free to download and operates an ad-based model. As a private company, its exact revenues are not publicly known. But eMarketer estimates that TikTok generated nearly $4 billion in advertising revenue last year and will triple that amount this year to become bigger than the advertising business of Twitter and Snapchat combined. By 2024, company estimates show that TikTok’s revenue will essentially reach parity with YouTube at over $23 billion.

Analysts are mixed on the impact of TikTok on social media holders from an advertising perspective. Stifelit is

Mark Kelley called TikTok a “manageable threat” to incumbent social media operators, noting that the platform has historically lacked the targeting and measurement tools available on competing platforms that advertisers covet. Evercore ISI’s Mr Mahaney said that while advertisers are clearly looking to experiment with TikTok, he has yet to see big brand advertisers fully commit.

Analysts at AB Bernstein say global investors remain “under-worried” about the competitive impact TikTok may have in the coming years, given the success of ByteDance and its version of TikTok in China, Douyin. The company notes that Douyin captured around 40% of total incremental internet time spent in China between 2018 and 2021 and that Bytedance as a whole took more than 50% of incremental ad dollars in the past two quarters.

TikTok seems to be working hard to fill in some of its gaps from an advertiser and user perspective. Earlier this year, the platform improved its ability to target and measure its value proposition to advertisers by enabling first-party and third-party cookies in addition to its existing tools. It also recently launched a 50% revenue share with creators on ads alongside its most popular videos. Revenue sharing is a concept that has long been used to help incentivize creators on YouTube, and one that a Meta explored on Reels.

TikTok is also growing from its abbreviated foundations. Less than a year after increasing the maximum length of a video to three minutes, TikTok said earlier this year that it was extending that length to 10 minutes. Traditional YouTube videos can be up to 15 minutes long, and verified user videos can be hours long.

It could be that advertisers come wherever the users are. Data from Similarweb shows that traffic to TikTok’s ads site increased by almost 200% in the first quarter. Users of TikTok’s Android app spent an average of more than an hour and 22 minutes a day on the service in March, more than Facebook, Instagram, Twitter, Snapchat or YouTube show data. Similarweb.

As the advertising company at the top of user-generated content, TikTok faces much of the same controversy that has plagued Meta’s apps, especially what it does with its users’ data. The app is banned in India due to security risks. It has also come under scrutiny from US lawmakers over its algorithms, which can push users down potentially unhealthy rabbit holes. TikTok said late last year it would adjust its recommendation algorithm to avoid showing users too much of the same content.

Internally, TikTok’s rapid rise has required grueling work. A Wall Street Journal investigation last week revealed a US office culture described as demanding and secretive, with several former employees describing 85 hours of meetings a week in addition to their regular work. He also found many instances of cultural conflict between the US operation and its Beijing-based parent company. TikTok had about 1,500 employees in the United States last year and plans to add another 10,000, according to the Journal report.

But will his investment continue to bear fruit?

“I can’t sit here and say that in 10 years they will still be the dominant platform,” says Evercore ISI’s Mahaney; However, he also noted that a billion plus users would likely buy you at least “a few years” in the sun.

A Wall Street Journal survey found that TikTok only needs one important piece of information to figure out what you want: how long you dwell on a piece of content. Every second you hesitate or review, the app follows you. Photo illustration: Laura Kammermann/The Wall Street Journal

Write to Laura Forman at [email protected]

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