Can Tik-Tok Break The Facebook-Google Duopoly on Digital Ad Dollars?

It started as an off-beat place for users looking to share self-created videos of content ranging from funny to risky stunts. Now, it’s the biggest competitor to Facebook and Google. This is the story of Tik-Tok, the Chinese video-sharing app which has taken the world by storm. Ever since its launch in 2017 in the international market, TikTok has become the world’s biggest social network already. And this rise means that ad dollars that Facebook and Google so heavily depend on are no longer earmarked for the US-giants.

Currently, TikTok is the seventh most downloaded app in app stores across the world. It boasts of availability in 75 languages and it’s present in 150 markets. While Facebook and Google have managed to get a big share of the emerging markets pie already, TikTok seems to be eating up that share too as 43% of its new users are from India – the second most populous country in the world.

The above chart clearly shows the popularity of TikTok in an emerging market like India which happens to be Facebook and Google’s biggest playground. However, now, TikTok is closing in on that gap with 200 million active users in India compared to Facebook’s 300 million. The possibility of TikTok starting to eat up the share of digital ad dollars is also very real.

Within just seven months of its launch of paid advertising in India, TikTok managed to clock a profit of Rs 3.4 crore in the country. Its revenue was even more impressive at Rs 43.7 crore in India in its first year of operations. Now, TikTok’s parent company ByteDance plans to inject more than $1 billion in India business to further boost the breakout social media app.

Globally too, TikTok is chasing advertisers through guerilla advertising of its own. One one hand TikTok has spent about $1 million per day advertising in the US to capture new users. The result is that TikTok has now 42 million users in the US. The company is also expected to boost this budget to $3 million in advertising spends per day to garner even more users.

On the other hand, it is wooing advertisers away from Facebook and Google. Advertisers can now access a self-serve platform on the app which offers advertising at about $10 for 1000 views. This is slightly expensive than even Instagram which pegs the same amount of visibility at $8. However, the expensive rates don’t mean that the ad dollars are not flowing in.

TikTok influencers like Alejandro Baigorri are making $250 per 30-60 second video that they produce to market big companies like Sony and Universal. Moreover, companies like Chipotle and Home Depot have already tasted TikTok success with each receiving hundreds of millions of views on their respective hashtags.

This could be especially worrying for Facebook and Google which have so far rested on their laurels as the world’s biggest tech companies in command of the digital advertising market. Take Facebook, for instance, which is seeing its revenue from ads increase every year. Its revenue from ads was almost $17 billion in the last quarter.

While this revenue has risen consistently, the company would be worried about the plateauing of its daily active users which are now rising in low single digits year-on-year. At the same time, the increasingly young demography of countries like India is seemingly choosing TikTok and Snapchat over Facebook or Instagram.

For instance, Indian users spend more than 34 minutes per day on TikTok on average as compared to just about 24 minutes on Instagram. This is perhaps why platforms like Flipkart have roped in even stars like Amitabh Bachchan, MS Dhoni and Alia Bhatt to run TikTok campaigns to promote their Big Billion Sale. The campaign clocked more than 4 billion views till the last count and now, brands are using TikTok’s pre-made packages to buy up to 600 million views in a span of just three days.

Even Mark Zuckerberg has taken note of TikTok’s rising popularity and launched a similar app Lasso quietly to challenge its position. However, it’s not yet clear exactly how will Facebook or Google dethrone an incumbent like TikTok which boasts of a much larger number of content creators.

Even though Google still doesn’t have a social media platform that it can boast of, it’s the largest digital ad dollar generating company in the world. With TikTok’s arrival, it remains to be seen how the search-engine giant responds to the threat of native advertising and influencer marketing and most importantly – organic virality.

TikTok’s rise can be explained partly due to the explosion of high-speed data and the proliferation of smartphones around the world and especially in India where incomes have risen over the last decade. Using the power of internet, one can not only entertain themselves but also make their money work for them.

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