Merge these 3 reasons with the deep pockets at parent company ByteDance, and it’s obvious TikTok is here to stay and play. Let the games begin.
1- Product is well designed for consumption, which acts as a successful funnel for creation 📱
When comparing video platforms, I assess them on two scales: auto vs manual play and mobile vs desktop creation. The auto-play/mobile creation quadrant is a bit of the holy grail for user generated content since it removes the barriers to both consumption and user-to-creator conversion. TikTok fits squarely in this quadrant. Users never need to decide what to watch — they’re immediately served content upon app launch — and it’s as simple as a swipe to flick to the next video. If they decide to join the fun, they can easily create a similar video in the same app in a matter of seconds with countless visual effects that enhance the footage. Most importantly, users can create exactly what they’ve been watching. What they watch is attainable.
Neither Snap, nor Instagram, nor Facebook Watch comes close to this user-to-creator funnel for video, which is so important to scale. Snap is out of the race since it made peace with being a messaging platform first and foremost, and IG only enables this conversion for Stories when it comes to video, but the main feed and appeal of the app is still photos. As for Facebook Watch, it was so concerned with competing with YouTube that it essentially built a copycat, thinking its social connections and built in sharing in its newsfeed would help it succeed in driving traffic better than YouTube. Instead, it found itself funnelling large amounts of cash to original content in a bid to attract viewers, thereby competing more with Hulu and Netflix.
That brings us to YouTube, which operates an incredibly personalised algorithm — Emmy winning in fact — that still requires you to make a decision and click on a video for consumption. As for converting that user to a creator, it’s much harder since YouTube is still not optimised for mobile, on-the-spot creation.
Here, YouTube is a victim of its own success and maturity. Unlike Facebook that quickly rebuilt itself for mobile when the revolution was just taking place, YouTube just translated its viewer experience to mobile with an app, leaving their creators mostly on desktop, breaking the user-to-creator funnel. This means that the majority of videos users see on YouTube are still shot with DSLR cameras and external microphones that are then extensively edited on software before being uploaded. A viewer’s general response to watching a YouTube video is that it’s hard to do. Combine that with the notorious discovery issues on the platform, and you see how many viewers would happily stick to only viewing. YouTube will need to be optimised for mobile creation AND promote those videos for viewership to show its massive two billion user base that they too can create.
2- Advertising was well used during the lockdown to boost user acquisition while costs were cheaper 📈
From TV to digital, ad costs have come down significantly with major brands pulling their planned 2020 marketing spend. Taking advantage of this low cost environment, TikTok released TV campaigns leveraging names like Tom Daley, Gordon Ramsay and Little Mix among some prominent TikTokers while continuing to advertise on digital. This will no doubt increase app installs among an audience that’s housebound and bored, which will then feed the user-to-creator funnel I mentioned above. Money well spent.
3- Hiring has been spot on 👩💻
Starting with Vanessa Pappas in the US in 2018 followed by Richard Waterworth in the UK in 2019, TikTok has attracted industry executives who have lived and breathed user generated content and its business model. With the latest addition of Kevin Mayer, Disney’s ex Head of Streaming, as CEO, TikTok is sending a message to the industry that it likely won’t stop at user-generated content and will cozy up to broadcast partners, similar to how YouTube convinced late night shows and broadcast properties like the X-factor to leverage their platform.
TikTok’s benefit here is that YouTube already did all the hard work convincing these partners, who used to see video platforms as competitors, to see digital video as a complement to their broadcast efforts instead. All TikTok needs to do now is focus their narrative on the rising audience and creator numbers they’re attracting to create a fomo effect. We’re already seeing this work with many major shows like Jimmy Fallon and celebrities like Will Smith and Bella Hadid embracing TikTok. Even some famous YouTubers are choosing to post more on TikTok instead of YouTube these days.
But it won’t be that easy
So far I’ve mentioned the main advantages that TikTok has, but it also has some major challenges that it will likely face.
First up is monetisation. YouTube is still the only major platform that pays its creators a portion of its revenues, which was $15 billion in 2019. With Google’s extensive ad expertise and brand and agency connections, you can bet that they will double down on ads, and getting a cut out of this growing pie is a major attraction to any creator. Where TikTok succeeds right now is ease-of-creation and discovery, but it will need to follow up with a solid monetisation scheme quickly to be able to keep its most famous TikTokers on platform. Douyin, the Chinese version of TikTok, already has extensive non-ad revenue streams like integrated shopping and premium stickers, so it would make sense for TikTok to inherit some, if not all, of these revenue streams.
Second, TikTok will continue to face regulatory pressure in western democracies due to its Chinese roots, which is not being helped by the growing enmity towards China in the US. I would not be surprised if TikTok was spun out of ByteDance and headquartered out of London, NYC or LA in a bid to distance itself from China and reposition itself as a western brand.
And finally, while its mobile-first approach makes TikTok the ultimate user-to-creator funnel today, it could also be its downfall. The ultimate entertainment platform should run on any device. How will we engage with TikTok when self-driving cars are ubiquitous with built in screens? How does the consumption and creation attitudes change when more people continue to work from home, driving up use of smart TVs. We already know that smart TVs were increasing their share of use prior to the pandemic. This is where YouTube has the upper hand since being everywhere is in its DNA; it’s already available from Samsung TVs to the Playstation, from airline screens and AppleTV to offline supported versions for emerging markets like India. TikTok will need to invest heavily to shed its bounds to mobile so it can be form-factor agnostic for future proofing.
Let the games begin. ⏩