TikTok is a popular social media app that allows users to create, watch, and share 15-second videos shot on cellphones. With its personalized feeds of quirky short videos set to music and sound effects, the app is notable for its addictive quality and high levels of engagement. Amateur and professional creators alike can add effects like filters, background music, and stickers to their videos, and can collaborate on content and create split-screen duet videos even if they're in different locations.
Launched in its present form in 2018, TikTok joined the ranks of social media giants in record time. It had about one billion active monthly users worldwide by the start of 2021 and had been downloaded in the U.S. at least 200 million times, according to Wallaroo Media.
Like all social media companies, TikTok has been the target of persistent if vague concerns about the potential use or misuse of the private information it gathers about its users. The difference is that a majority of TikTok is Chinese-owned.
That may change soon.
The TikTok Story
First, consider what TikTok isn't: It isn't Facebook. Facebook has been around since 2004, and still dwarfs every other social media site on the planet, both in audience size and advertising revenue. It had 2.6 billion active monthly users by the beginning of 2021, and that doesn't count the parent company's WhatsApp and Instagram sites. It brought in $17.4 billion in advertising revenue in the first quarter of 2020 alone. About 80 million small businesses globally have Facebook pages.
So, what is a rival in the social media business do to compete? For one thing, wow the younger crowd with a bottomless ocean of short and snappy entertainment that will draw in the advertisers who want to reach them. Only 7.1% of TikTok users are age 50 or older.
Facebook appeals more or less evenly across generations. That's nice, but marketers in search of youthful demographics aren't known for nice. TikTok, not Facebook, has the target audience that brands and the marketing companies that cater to them want now.
- TikTok allows users to watch, create, and share 15-second videos shot on cellphones.
- The app was launched in 2016 by the Chinese technology company ByteDance.
- Now available in more than 150 different markets, TikTok has offices in Beijing, Los Angeles, Moscow, Mumbai, Seoul, and Tokyo.
- The app had about 1.1 billion active global users by early 2021.
The name TikTok is meant to suggest the short format of the videos. Launched in 2016 by the Chinese startup company ByteDance, it's known there as Douyin. Its stratospheric growth in usage really began in late 2017, when it acquired a rival app, Musical.ly, and ported over its 200 million account list to TikTok.
ByteDance was reportedly worth up to $140 billion by mid-2020, based on the private sale of a small stake in the company. TikTok alone was said to be worth about $50 billion. That would make it the most valuable startup in the world.
Marketing on TikTok is still in its infancy, but a growing number of agencies are eager to help brands create the kind of quirky content that gets clicks on TikTok. Conventional advertising that stresses a product's superior qualities doesn't work. Light, fun campaigns set to music hit the spot. The ultimate goal is to goal viral on the site and spur imitations by TikTok users.
Some of the successful marketing campaigns on TikTok:
- The Chipotle restaurant chain ran a Halloween "Boorito" coupon giveaway campaign encouraging TikTok users to dress up for the holiday and post their images. The campaign scored four billion views.
- e.l.f. Cosmetics teamed up with a few social media influencers to create an online reality show and contest called #eyeslipsface. The ad campaign got more than 3.8 billion clicks.
- The NBA signed up for an account and scored more than 12 million followers to date. Its aim is to enhance global awareness of the NBA, particularly among young people.
ByteDance was reportedly valued at $75 billion as of 2018.
TikTok has offices in Beijing, Berlin, Jakarta, London, Los Angeles, Moscow, Mumbai, Sao Paulo, Seoul, Shanghai, Singapore, and Tokyo.
Other TikTok Revenue Sources
Like many other social media sites, TikTok also makes money from in-app purchases. Users can buy coins priced from 99 cents to $99.99 and use them to tip their favorite creators on the platform.
The company grossed $80 million from in-app purchases globally, according to an April 2019 report from Sensor Tower. In Q1 2019, user spending reaching an estimated $18.9 million globally—222% more than the app grossed during the same period last year.
TikTok only started running display advertising in 2019. Instead, brands open user accounts on TikTok and, just like any of its users, create and post mini-videos. They can pay to promote their videos to other users. The ultimate goal is to go viral and spur takeoffs, drawing in a huge audience for your brand's message.
TikTok's User Base
TikTok is one of the world's most popular social media apps and is available in more than 150 markets and 75 languages. The app hit close to two billion downloads in March 2020, with 104.7 million downloads alone as of January 2020, according to market analyst Sensor Tower.
Here's a breakdown of some of the app's most notable demographics:
- 69% of users are between the ages of 13 and 24.
- 60% are female.
- Its users spend an average of 46 minutes per day on it
- A quarter of the app's downloads come from India, with more than 200 million active users.
- Usage in Thailand is increasing, with one in seven people downloading the app.
- About 96 million downloads are from the U.S.
Like most social media sites, TikTok is not immune to controversy.
TikTok and many other Chinese-made apps were banned in India in mid-2020 as a danger to the nation's sovereignty. The move came amid growing tensions between the two nations.
TikTok is banned in Bangladesh. It was also briefly banned in Indonesia for "pornography, inappropriate content, and blasphemy." The ban was overturned a week later after the company promised to take all objectionable content off the platform and set up a local office to monitor and sanitize content.
In February 2019, the company paid $5.7 million in the U.S. to settle allegations that it illegally collected personal information from children. It is the largest civil penalty ever obtained by the Federal Trade Commission (FTC) in a children’s privacy case.
TikTok vs. President Donald J. Trump
Starting in July 2020, then-President Donald J. Trump launched a public attack on TikTok, threatening to ban it from the U.S. on the grounds that the Chinese Communist Party could use data gathered on its users to spy on U.S. citizens. He demanded that TikTok be sold to U.S. interests to eliminate the threat.
Concerns about social media companies' use and misuse of private information is a bipartisan issue in Washington, so the concern gained some traction. However, by September, Trump had declared that he had solved the problem. TikTok's U.S. operations would be severed from its Chinese owner, ByteDance, and incorporated as a U.S. company.
That's not quite what happened. The deal created a new spinoff company, TikTok Global. Oracle will own a 12.5% stake in the company and become its cloud provider in the U.S. This may have been intended to alleviate concerns that China was using TikTok to gather data on Americans, but apparently, the real change is minimal. TikTok data on U.S. users always was held in the U.S., so it's just moving from one cloud to another.
Meanwhile, Walmart tentatively agreed to buy a 7.5% stake in TikTok Global. It plans live-streamed shopping events hosted on TikTok.
The remaining 80% remains owned by ByteDance.
Crucially from the investors' viewpoint, various parties involved, including Walmart, immediately floated the possibility of an initial public offering (IPO) of TikTok Global on a U.S. exchange as early as late 2021.
Here are the answers to some commonly asked questions about TikTok.
What Company Owns TikTok?
The majority owner of TikTok is ByteDance, a Chinese technology company. In late 2020, ByteDance agreed to create a new company, TikTok Global. ByteDance would continue to own 80% of TikTok Global, with Oracle and Walmart as its minority owners and U.S. partners.
What Is the Purpose of TikTok?
TikTok is a social media app dedicated to short-form videos created for and consumed by users. The average length is 15 seconds. A minute is an epic.
The format lends itself to entertainment and comedy. However, it is increasingly used for infotainment. So-called influencers who gain a steady audience on TikTok offer snippets of advice and tips along with self-promotion. Beauty, fashion, personal finance, and cooking are all popular topics for informational videos.
Celebrities with a youthful audience perform for it.
Increasingly, the format is used to sell products.
How Do I Invest in TikTok Stock?
Stay tuned for the initial public offering in TikTok Global. This entity was only created on paper in late 2020, so it could take a while. TikTok Global is 80% owned by a Chinese company, ByteDance, with 12.5% owned by Oracle and 7.5% owned by Walmart.
Is TikTok a Publicly-Traded Company?
TikTok is not publicly owned as of mid-February 2021. Stay tuned for the announcement of an IPO for TikTok Global.
Is TikTok Banned?
At this writing, TikTok is banned in India and Pakistan. It was briefly banned but restored in other countries including Indonesia and Bangladesh.
It was threatened with a ban in the U.S. by then-President Donald Trump, but he backed off after an agreement with owner ByteDance to spin off TikTok as a separate entity, TikTok Global, with minority ownership held by U.S. companies Oracle and Walmart.