If you’re reading this, then you probably know that what happens to TikTok is heavily dependent on international regulations. And everything is kind of on hold because of this. However, this story is not about politics. Here’s my prognosis about TikTok’s existence in the tech universe.
Disclaimer: I have never actually used TikTok. I’ve seen a couple of viral videos, but I haven’t used the platform and don’t intend to (just personal preference).
TikTok is considered to be an “Entertainment” company on Apple’s app store. The content reminds me of a lot of what you would find on apps like Reddit, Vine, and Yik Yak. As long as this “meme culture” continues to prevail, it seems like these entertainment apps will continue to resurface. So what makes TikTok any different? Will it disappear like Vine?
I want to preface this again that I’m no expert in TikTok, but based on news articles and my general observation of TikTok’s influence on social media, these are some of the things that I think TikTok brings to the table.
Young, mainly female user base
According to several sources like Statista and Hootsuite, TikTok’s user base is about 60% female and over 60% are in the < 30 age group. In terms of content, a lot of TikTokers upload dance challenges, funny reactions, and many other “meme culture” oriented videos. In my opinion, the viral content gravitates more toward a younger audience. I think TikTok’s user base is unique in that they attract a very young audience (pre-teens). By appealing to young users, not only do companies get insight into a new market but also more time to build a relationship with their users.
Content recommendation algorithm
If you haven’t listened to WSJ’s Tech News Briefing, I highly recommend it. September 3rd’s episode focused on TikTok’s recommendation algorithm and how they obtain so much user data to be able to tailor different algorithms to specific cultures and countries. In 2019, India accounted for 44% of TikTok downloads, China at 7%, and the US at 6%. Hootsuite has also noted that the average time spent on TikTok per day is about 46 minutes. I suspect that with these custom algorithms, people can find relevant, entertaining content and thus spend more time on the app.
UPDATE: Today’s Bloomberg article states that ByteDance has concluded TikTok will not be selling their algorithm.
Advertising platform
TikTok is another medium for businesses to target specific users. Businesses can hire TikTok content creators or post their content and launch campaigns to engage potential customers. TikTok is another way to spice up a business’s digital marketing strategy. Checkout Guess’ campaign here.
International social networks
As mentioned above, TikTok has a global presence. Even though it has been banned from India recently, their market is well-diversified. I think the graphic below sums it up nicely. There’s room for expansion in the US market. However, I think the concern here is whether or not TikTok can withstand “big tech”. Historically, these “viral” apps gain attraction and then disappear because they cannot keep up with their competitors who add similar features to their platforms. Vine is a good example of this. This is already happening with the launch of Instagram Reels last month. Facebook’s global presence (with 2.6 billion MAU) is surely a force to be reckoned with.
Microsoft + Walmart Takeover?
Microsoft and Walmart have teamed up in this political, bidding war. It’s well known that under Satya Nadella, Microsoft has been acquiring new user bases (e.g. LinkedIn and Github) to expand their services. Not only will Microsoft gain a young, mostly female user base through this acquisition, but they will also become more prominent in the consumer-facing realm.
We cannot forget about the revenue stream that TikTok brings in.
If TikTok is successfully integrated, Microsoft would become established as the fourth major player in the online ad revenue business. — Forbes
BREAKING NEWS: Microsoft’s bid has been rejected by ByteDance today, September 13, 2020.
Oracle Takeover?
Wow, this took me by surprise. I wasn’t considering Oracle in this bidding war because they offer B2B services. Here’s a business summary on Oracle.
The Company’s businesses include cloud and on-premise software, hardware and services. Its cloud and on-premise software business consists of three segments, including cloud software and on-premise software, which includes Software as a Service (SaaS) and Platform as a Service (PaaS) offerings, cloud infrastructure as a service (IaaS) and software license updates and product support. Its hardware business consists of two segments, including hardware products and hardware support. — CNBC
How does TikTok even fit into Oracle’s business strategy? Perhaps they want to use TikTok’s advertising platform or provide cloud services to TikTok and attain a new revenue stream. I am not a strategy and operations guru; if you thought I was, I’m sorry that I led you on for this long. However, I honestly do not see TikTok withstanding big tech competition after accepting this deal with Oracle.
Big tech: Microsoft Azure, AWS, Google Cloud, all lead in cloud services (ahead of Oracle).
So why would ByteDance accept a deal with Oracle but not Microsoft if they wanted to take advantage of cloud services? What does ByteDance gain by accepting this deal? It’s not clear to me what Oracle’s competitive edge is compared to Microsoft’s that could be advantageous to TikTok. Maybe ByteDance will choose Oracle because it will serve more as a business partner, therefore allowing ByteDance to maintain control of TikTok’s US operations.
In conclusion …
I think ByteDance will strike a deal with Oracle to continue US operations and also maintain the same level of control over TikTok. I said I didn’t want to talk about politics in this story, but it looks like the result is a political appeasement contest. As I said earlier, I think this deal with Oracle could be the beginning of the end for TikTok. The soaring competition, escalating US-China tensions, unabating privacy concerns, and changing consumer preferences, will make it difficult for ByteDance to adopt and retain TikTok users.
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