TikTok

TikTok: the time is now

January 18, 2023 10:10 Comments Off

For nearly a decade, the Google-Meta duopoly raked in more than half the money invested into digital advertising in the US. And while they still dominate, 2022 was the first year since 2014 that that wasn’t the case. Their joint market share was 48.4% last year, and is expected to drop to around 44.9% in 2023. They’re still growing, just more slowly than the rest of the digital ad market. This slowed growth is likely down to the increasing number of formats available, the fact that people are spending less time online than they did during the pandemic and, of course, Apple’s infamous privacy update which requires apps to ask users if they want to be tracked.

So who’s receiving the other half of US advertisers’ digital ad dollars? There’s Amazon, of course, whose ad business is powered by its ability to target users based on their purchase and browsing history. It commanded 11.7% of digital ad spend in the US in 2022, and that’s expected to rise to 12.4% in 2023. The streaming services are also getting a bigger share, with advertisers shifting spend from linear to connected and streaming TV. Roku, Hulu, Pluto, Paramount+, Tubi and Peacock combined made up 3.6% of the digital ad market in the US in 2022 – that percentage will rise significantly now that Netflix and Disney+ have launched ad-supported tiers.

And then, of course, there’s TikTok. While the Chinese-owned short video app is still a relatively small player, with just 2% of the digital ad market in 2022, it’s the one that everyone is watching and packs a far bigger punch than its market share suggests.

TikTok has a highly engaged, younger audience

TikTok is taking up more space in marketers’ minds and media budgets thanks to its audience and how effectively it engages them. Insider Intelligence estimates that 61.3% of Gen Z in the US uses TikTok at least once a month, and adults in the country spend an average of 46 minutes on the platform – significantly more than the 28 minutes they spend on Instagram. These audiences are highly engaged – one study showed that the standard engagement rate of ads on TikTok is 6% – 10 times higher than Instagram’s 0.6%. Much of TikTok’s success in engaging its audience comes down to how it has shifted how social media is used, from finding things you like to discovering new things. It also allows its audience the opportunity for self-expression and to be authentically themselves. And the clincher? TikTok users are 1.7 times more likely to buy products they discover on TikTok compared to other platforms; TikTok’s commerce-focused hashtag, #TikTokmademebuyit, has been viewed more than 30 billion times.

Lowering CPMs to attract investment

TikTok is riding a wave just as advertisers are looking for ways to rein in their spending. It has responded to the economic downturn by reducing the cost of its ads in a concerted effort to appeal to marketers. The result is extremely attractively priced advertising, with CPMs half that of Instagram Reels, a third cheaper than Twitter’s and 62% less than Snap’s.

How are advertisers responding to TikTok?

In a word: enthusiastically. While a year ago, many would have viewed TikTok as an experimental platform, its popularity amongst young audiences and very high levels of engagement mean that it is now considered to be at least close to mature – but perhaps without the scrutiny that more established channels are put under. Some brands are prioritizing TikTok as much as Meta’s platforms on their media plans: the top 1000 advertisers in the US increased their spend by 66% to $467m from September to October of last year. Although TikTok has not been immune to the downturn in online spending – it slashed its revenue targets for 2022 by 20% – it is estimated to have made more than $10bn in ad revenue in 2022. Not bad for an app that launched worldwide less than six years ago…

Fortune favors the cautious

It’s very easy to get excited about TikTok, with its impressive reach and engagement – but there are reasons to be careful when advertising on the platform. As it grows it attracts, along with the other tech giants, increased scrutiny from national and international bodies. Washington DC is sufficiently alarmed about national security to ban government employees from using the Chinese-owned app on government-owned devices. India has banned the use of TikTok permanently, while several other countries, including Indonesia, have placed temporary bans on its use. Towards the end of 2022, an internal risk assessment conducted by TikTok’s parent company, ByteDance, found systemic issues with fraud and inappropriate data management. One employee familiar with such issues apparently said that it is impossible to keep sensitive data from being stored improperly on Chinese servers.

These privacy and security concerns have the US government worrying about whether they should take the Indian route and restrict access to the app altogether. The Democrats are very reluctant to do so as it could alienate young people – an important part of their voting demographic – but are also aware that the platform could be used to spread disinformation in the presidential election next year.

As things stand, there is no inherent risk of reputational damage for advertisers investing in TikTok ads. However, it would be wise to monitor the situation. While it is currently difficult to imagine tearing young people away from their favorite app, consumers are becoming increasingly aware of privacy and security. Things can turn quickly (just look at Twitter) and – teamed with the imminent and final demise of the cookie – brands should certainly be seeking to build robust audiences and communities and first-party data practices away from third-party platforms, for future-proof online marketing.

value@ecimm.com

Image: Shutterstock/Kaspars Grinvalds

Instagram faces a backlash against ‘TikTokification’

September 1, 2022 11:32 Comments Off

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For many years Instagram was the undisputed leader of the social media platforms. Just 12 months after launch, it had acquired 10 million users, and it had 1 billion users by June 2018. By 2021, Instagram had generated around $25bn in ad revenue for parent company Meta. It has helped build influencer careers and activist communities, as well as helping people stay connected with their friends and family and the brands and influencers they like.

Despite that success, Instagram has recently been making changes in order to address the threat posed by TikTok. However, those changes are proving deeply unpopular with users, provoking a backlash against Instagram. Is it losing touch with what made it so popular?

The TikTok-shaped elephant in the room

It won’t come as a surprise that TikTok has enjoyed spectacular growth over the last four years. Just four years after its launch, it had 1 billion active users – not far off Instagram’s 1.3 billion. Many experts believe that it will soon overtake Instagram in this respect. In terms of engagement, TikTok is far ahead of its rival: users spent an average of 25.7 hours a month on TikTok in 2021, compared to just 7.9 hours on Instagram. TikTok is also the favored social platform of teens: 33% said it was their preferred platform in 2021, compared to 31% for Snapchat at 22% for Instagram.

And while Instagram still dominates in terms of ad revenue – $47.6bn in 2021 compared to TikTok’s $4bn – TikTok’s is projected to raise to nearly $12 billion this year, making it bigger than Snap and Twitter combined. It’s on track to become a serious threat to Google/Meta duopoly of digital advertising.

Reeling them in with Reels

Meta is clearly flustered by TikTok’s continued growth. Its response has been to significantly increase its focus on video on both Facebook and Instagram. Indeed, Mark Zuckerberg said on a call to investors that Reels is a major part of Meta’s TikTok defence strategy. Instagram launched Reels – short, snackable videos – back in 2020, and have given them increasing prominence ever since. In 2021, Instagram CEO Adam Mosseri announced that the platform would be pivoting to video because ‘we’re no longer a photo-sharing app. People are looking to Instagram to be entertained. We have to embrace that’. Instagram started adding slots for recommended videos from accounts users didn’t follow into their regular feeds. In summer 2022, it announced that all videos posted onto Instagram would become Reels.

A backlash against Instagram

This approach, whilst understandable given the wider move towards video, has thrown up a number of problems for Instagram. Chief among them is the effect that it has had on user experience. A large proportion of users’ feeds is now content from people they don’t know, usually in the form of Reels. Posts from their friends and people they follow are drowned out by a cacophony of video clips and sponsored content. Testing of a full-screen feed, similar to TikTok’s, has exacerbated the issue.

Instagram has suffered a significant backlash, with highly influential users such as Kylie Jenner and Kim Kardashian, who each have more than 300 million followers, criticizing its new strategy. Other users have commented that Instagram no longer feels like somewhere to share photos and videos, but more like a ‘chaotic hub for Meta to build relationships with brands’. The danger is, of course, that by neglecting the user experience, Instagram is deterring the very audiences that those brands are paying to access.

Why do users love TikTok but hate Instagram’s move into video?

It’s not the move into video per se that is behind the Instagram backlash. There is a clear movement into video by creators. Users are lapping it up on many platforms, including – and particularly – TikTok. So why has TikTok got it right and Instagram wrong?

A key factor in TikTok’s success is its superior algorithm, with its remarkable ability to suggest content that users love. An effective algorithm relies on high-quality data, and TikTok is pretty aggressive in how it harvests data from its users – much more insistently than Facebook or Instagram. This means that good content on TikTok reaches millions of users, even if the creator has no followers. This makes it a very attractive platform for creators, and therefore brands.

Another factor in the discrepancy between TikTok and Instagram is the simple fact that Instagram appears to be trying to be TikTok – but users want it to be Instagram. Its huge popularity grew from sharing photos and stories. This allowed users to connect with their friends as well as the brands and public figures they liked. Right now, Instagram seems to be actively pushing against that original mission by suppressing content from people you follow in favor of suggested Reels from people you don’t. And in following this path, it is losing sight of what made it so popular in the first place.

It’s not just TikTok that Instagram copies

Meta has form for copying or acquiring innovative products. Some critics suggest that this is because innovation at the company is lacking. Just last week, Meta announced that Instagram is testing another feature which appears to be copied directly from a competitor. Candid Challenges mimics the BeReal concept, which prompts users to post an unfiltered photo of themselves once a day. It has tapped into a desire for authenticity, which allowed it to push Facebook out of the Top 10 apps on the App store. However, Instagram faces a challenge thanks to its user interface. Candid Challenges risks getting lost in the myriad Instagram features. Meanwhile, BeReal is designed around this single purpose – much like TikTok with snackable videos.

However, Meta had much more success with Stories, which took Snapchat’s disappearing photos as inspiration. Their success came from a desire for realness and authenticity – people were beginning to feel that their everyday lives weren’t ‘Insta-worthy’, so they stopped posting every day. Stories – which delete after 24 hours – meant that they required less thought. In two years, Stories attracted 400 million daily users and changed the way that people share and consume online.

After the backlash, what does Instagram’s future hold?

To see off the backlash, Instagram needs to sort out its user experience. Mosseri has recognized that the full-screen feed is ‘not yet good’, and said that ‘I want to be clear: we’re going to continue to support photos, it’s part of our heritage’. But he still maintains that videos are the future. ‘More and more of Instagram is going to become video over time. We see this even if we change nothing’. Clearly users will engage more with video if video is what they are fed, but Mosseri is right that video is undoubtedly the future. It makes sense for Meta to continue its drive towards video, so that it maintains a key role in the creator ecosystem.

Another factor that Instagram has in its favour is that it is by far the largest platform for influencer market. Furthermore, its wide variety of content formats are almost all shoppable, which is a big draw for advertisers.

It’s not over for Instagram. It is so much bigger than TikTok that it shouldn’t need to mimic what the Chinese social platform is doing. In doing this, it risks losing sight of what made it popular in the first place, and alienating its users. It needs to find a way to hero what users want from it – namely, sharing and seeing photos – and integrate Reels seamlessly, in a way that works for users, creators and advertisers.

What does it all mean for advertisers?

First things first: despite the backlash, Instagram isn’t going anywhere, so don’t pull your social spend from the platform.

Advertisers should remember to follow buying power and respond to demographic characteristics. The belief that users stay with the platform they have grown up with appears unfounded: teenagers, for example, seem to migrate to Instagram as they enter early adulthood. They are moving to Instagram as they accrue buying power, making Instagram a wise choice for media investments. What’s more, younger people – on TikTok – learn faster and require less frequency to remember an ad or brand, which means less investment is required on TikTok. Even Instagram seems not to have realised this.

However, TikTok should still play a key part in any advertiser’s marketing strategy, especially those seeking to target a younger audience. And the very fact of TikTok’s success and Instagram’s pivot to video should point the way to a video-first future. Social content can no longer just be about photos – it needs to feature short, engaging video too. Brands need focus on their video game and optimize their content for the platform on which they are publishing.

value@ecimm.com

Meta versus TikTok: the battle for our attention

April 25, 2022 12:34 Comments Off

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For years, Facebook and Instagram have dominated our social media lives and, indeed, how we behave and interact across the internet. Facebook Meta has come to shape our online lives, and its influence is so vast that bodies such as the European Union and the US congress spend huge amounts of time and money working out how to exert control over it. But for all Meta’s dominance of our time and attention – and the ad dollars of millions of advertisers worldwide, its confidence appears to have been wobbled by an ‘upstart’ – TikTok. The Chinese-owned video-sharing platform soared in popularity during the pandemic and has morphed from a lip-synching and dancing app to one that creates trends and forges deep connections between creators and users, keeping the latter engaged video after video. And now, the cracks are starting to show at Facebook, which has just reported its first-ever decline in daily active users (DAUs). The battle between Meta and TikTok is on.

Meta – the reigning monarch

Facebook’s dominance of the social media industry is still undisputed. In Q4 of 2021 it boasted 2.9bn monthly active users – not far off half the Earth’s population. Meta, Google and Amazon together accounted for more than 74% of global digital ad spend in 2021 – which is more than 47% of all money spent on advertising in that period. Meta’s share of the digital ad market is 23.8%.

But there are signs of trouble ahead for the social media giant – and signs that it is nervous too. It is facing a challenge in terms of both user numbers and advertising, reporting their first-ever quarterly decline in DAUs in the fourth quarter of 2021. Facebook lost around 500,000 daily users in the last three months of 2021. The number of monthly active users on Facebook stayed relatively flat, while growth across Meta’s other platforms – WhatsApp, Messenger and Instagram – was modest. Furthermore, Buzzfeed found that audiences are spending less time on Facebook. This decline in time spent on Meta’s platforms puts direct pressure on ad spend. That pressure is exacerbated by the economic pressure that many small businesses are facing as the world emerges from the Covid-19 pandemic; these small businesses make up a large part of Meta’s advertiser base and, if they are having to cut down on their ad spend, Meta’s ad revenue will inevitably suffer. Insider Intelligence has lowered its forecast or Meta, predicting that the company’s revenue will decrease by $2.5 billion in 2022 and 2023. The company’s share of digital ad spend will fall under 22% by 2023 – down from 25% in 2020.

TikTok – the pretender to the throne

The fact is, those daily users and ad dollars are going somewhere. In a rare direct nod to competition (quite possibly because of the various antitrust lawsuits that Meta is facing), Mark Zuckerberg emphasized the threat Meta faces from platforms such as TikTok and YouTube, as people are increasingly drawn toward short-form video content.

YouTube has been big for a long time, but TikTok’s ascendancy over the last few years has been meteoric. It got its billionth user in 2021, just four years after its global launch; that’s half the amount of time it took Facebook, YouTube or Instagram, and three years faster than WhatsApp. TikTok was the world’s most downloaded app in 2020, and in 2021 it became the first app not owned by Meta to cross the 3 billion app download mark. Also in 2021, the typical TikTok user spent an average of 19.6 hours on the app every month – more or less equalling Facebook.

And it’s not just user figures that suggest that TikTok is the one to watch. It is also the most lucrative app globally for in-app purchases. Users spent $850 million on TikTok’s virtual ‘Coins’ currency in the first quarter of 2022. What’s more, the company’s unique approach to social commerce, which involves pairing marketers with content creators, drives huge demand for products: the #TikTokMadeMeBuyIt hashtag has had over 11.5 billion views.

All this is propelling TikTok’s ad revenue: in 2022, it is expected to bring in $11.64 billion – that’s triple its 2021 figure and more than Twitter ($5.58 billion) and Snapchat ($4.86 billion) combined. It’s still small in terms of share of the digital ad market – but Meta evidently still feels threatened.

Meta and TikTok: A play for the crown

TikTok’s huge growth in the last few years, its clever social commerce strategy and the fact that it is winning the battle for the hearts, minds and attention of under 25-year-olds (and indeed under-18s) – which happens to be where Facebook is suffering its most significant declines – means that Meta is paying attention and reacting accordingly. The tech giant needs to maintain its ad revenue until the metaverse – into which it has invested heavily – takes off (if it takes off). It does not want an ‘upstart’ like TikTok snapping at its heels.

Meta’s reaction to the TikTok threat seems to be “if you can’t beat ‘em, join ‘em”. Its Reels product is a direct rival to TikTok’s short-form video format. Mark Zuckerberg admitted in an earnings call that Reels is a major part of Meta’s TikTok defence strategy. They are also exploring the introduction of virtual coins on Facebook and Instagram, nicknamed ‘Zuck Bucks’. It is, however, interesting that Meta’s investment in these projects has been limited – especially given that Zuckerberg has form for investing in projects that he does believe in, such as the metaverse.

However, Meta is not just using product innovation or imitation in order to keep the TikTok threat at bay. It was revealed recently that it hired a Republican consulting firm in the US to seed public distrust around TikTok. Op-ed and letters to the editor in various local publications have expressed concern that TikTok poses a danger to American children – particularly in relation to the fact that it is Chinese-owned and holds an extraordinary amount of data on teenagers across the world. Meta has defended the campaign and its actions, saying that it believes that all platforms should face scrutiny consistent with their size and success. The eagle-eyed have noted, however, that the thought-pieces in question have criticized trends that have gone viral on TikTok – but originated on Facebook and Instagram.

The political angle

Given Meta is a huge American tech company, and TikTok a huge Chinese one, it’s impossible to discuss this matter without touching on global politics. There is a tendency in the West to see the West as a bastion of democracy, free speech and freedom – and to see the ‘rest of the world’ but particularly China and Russia as restrictive, non-democratic and, in the case of Russia, outright aggressive. The fact that TikTok is Chinese owned may well have an impact on its future in the West. The app is already banned in India, and many other countries have considered banning it; the Trump administration in the US toyed with the idea of forcing the sale of the American business to an American company, but this idea was dropped after Trump lost the 2020 election. TikTok collects an enormous amount of data – it is, for example, using facial and voice recognition, even in the US. The fear is that the governing Chinese Communist Party (CPC) will use this very private data to its advantage – and given that they are closely involved in all major Chinese companies, it’s naïve to believe they are not doing this.

That said, the West also has access to a staggering amount of data. The US can access all data that passes through servers in the US, and the data offered by data brokers from cookie and app data gives anyone who wants it far more intelligence on our behavior than we could reasonably expect them to have – and both the West and the East can use and abuse that data.

These data flows are likely unsustainable in the long-term – individuals and regulatory bodies will demand more privacy in the future, even if market changes are slow to catch up. We are already seeing increased scrutiny on Meta in the US, the EU and beyond – TikTok will undoubtedly not be immune to it.

So – is the future TikTok’s?

While Meta is still by far the biggest social media company, and has a huge percentage share of the digital ad spend market, dwarfing TikTok’s, it is obviously flustered by TikTok’s success, especially when compared to its own stagnating and even declining figures. Facebook has more users, but TikTok has the attention of the demographic that advertisers most want to target and form a relationship with. Both companies will continue to be scrutinized for how they handle data and privacy – we all know the level of scrutiny that Meta faces, and TikTok – being Chinese-owned – will need to get used to a similar level of enquiry.

For the last couple of decades, Facebook has had huge influence on how people across the world behave on the internet and even off it. It has changed how we interact, how we discover news, brands and products, even how we speak. But with young people devouring short-form video, interacting with creators and buying socially, it looks like the next two decades could well belong to TikTok. And marketers – particularly, but not exclusively, those who want to target a younger audience – should make plenty of space in their marketing plans for the Chinese-owned platform.

Header image: Kaspars Grinvalds/Shutterstock

TikTok: would a US ban spell the end for the video-sharing platform?

July 27, 2020 13:06 Comments Off

You’d think that an app best known for dance crazes and lip-sync comedy would be about as apolitical as they come – but you’d be wrong.

TikTok caught up in US-China tensions

TikTok, the short-form video sharing social network, has been caught up in the increasingly tense relationship between the US and China, with President Trump considering a nationwide ban of the app. TikTok is owned by ByteDance, a Chinese organisation which is thought to be the most valuable private company in the world. Many lawmakers across the world are concerned about the security of user data and risks around potential foreign interference. India banned TikTok (and 58 other Chinese apps) at the beginning of this month, saying they posed a ‘threat to sovereignty and integrity’, while Australian Prime Minister Scott Morrison has said that his government is ‘having a good look’ at the platform. It should be noted that all three countries with ongoing concerns about TikTok have difficult relationships with China.

TikTok is hugely popular with the critical younger audience

TikTok was formed in late 2018 as a result of a merger between two other big Chinese apps – Musical.ly, an app for lip-sync music videos, and Douyin, a short-form video platform. It has since grown enormously, reaching the 2 billion download milestone in April this year, making it the most downloaded non-gaming app ever – surpassing even Facebook and WhatsApp. It was downloaded 315 million times in the quarter that ended on March 31^st, the highest number of downloads for any app in a quarter. This is a reflection of its huge popularity as the world went into lockdown during the coronavirus pandemic, and consumers sought light-hearted entertainment and engagement. TikTok’s userbase skews very young: 65.3% of its users in the US are under 29, and 31% of 13-18-year-olds in the UK used the app during lockdown. This youthful, highly engaged audience is a huge lure for advertisers: TikTok is on track to earn $500m in ad revenue in the US alone this year.

Security concerns

However, it’s not all been smooth sailing for the social platform. The current and threatened bans aren’t the first problems it has encountered. TikTok was fined $5.7m in 2019 by the US Federal Trade Commission for illegally collecting personal information from children under the age of 13; as part of the agreement it was also required to delete all videos and data relating to under-13s, something which it is now alleged it failed to do. Just last month, TikTok was one of 53 apps that Apple security researchers flagged were regularly seeking access to a handset’s clipboard. These security breaches have made many uneasy: some government entities in the US have banned staff from using the TikTok app on government-issued phones, while Amazon told employees to delete the app – although it rescinded the instruction later that day.

TikTok will remain popular with advertisers

Some advertising industry figures are wondering aloud whether the threat of a ban will affect advertisers’ attitudes towards the platform, ultimately making that $500m ad revenue target harder to achieve. The general consensus seems to be that it will not. TikTok’s core appeal is its huge, youthful audience: the ability to reach them on a meaningful level is critical for many advertisers. What’s more, it may well benefit from the Facebook boycott. Many brands who normally spend most of their social dollars on Facebook and have chosen to pause their spend with the tech giant in the support of the #StopHateForProfit campaign will be looking to spend their social budgets elsewhere. TikTok’s young audience and recent launches – its self-serve ad platform and TikTok for Business – will make it an attractive alternative. The self-serve ad platform, which allows advertisers to buy and manage ad campaigns directly and access creative tools, flexible budgets and performance targeting could lure small and medium businesses in particular – Facebook’s core revenue driver. TikTok has also pledged $100m in ad credits for small businesses suffering as a result of lockdown.

There will always be an appetite for platforms with a youthful audience

The future is uncertain for TikTok, and its success undoubtedly hinges on the US government’s decision. However, no matter which way the decision goes, TikTok’s very existence and its enormous success show that there is a huge appetite for platforms that appeal to a young audience. If they fall, then the space that they leave will no doubt be filled rapidly.

Image: Marmolejos / Shutterstock

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