Last week’s announcement of a new creator paywall feature is just one of TikTok’s many recent attempts to cater to the creator community, re-ignite growth and combat a troubling slowdown in user engagement. With a ticking regulatory clock hanging over its head, can TikTok build the super app that other social platforms have thus far failed to create? Will 2023 be a year of spastic diversification experiments to solve what ails them? Or might this very publicly mark the beginning of the end—or as Cory Doctrow put it—the enshittification of TikTok?
Today, we round up and weigh in on TikTok’s latest efforts as the platform increasingly prioritizes its business customers and parent company ByteDance at the expense of its users.
TikTok Live: Significant cultural potential despite limited traction to date.
Existing live offerings (live UGC and music productions) haven’t taken off. TikTok’s role as a central driver of cultural trends has not yet translated into success with a live format. Its core offering, TikTok LIVE, mostly exists in the form of user-generated live streams considered a “wasteland of clickbait, scams, and other oddities.” In parallel, TikTok has turned to music for its own live activations, including a show with The Weeknd which was broadcast live to over 275,000 concurrent viewers—an impressive milestone achievement in 2020 that has since proven difficult to replicate. TikTok’s newsroom was noticeably void of touting viewership claims following recent live concerts with Camila Cabello and Calvin Harris.
February’s trivia launch wasn’t the “live” trojan horse TikTok needed it to be. A lackluster debut of its HQ Trivia clone didn’t do TikTok any favors in recouping users’ goodwill after some heavy-handed in-app promotion of the event. The stunt birthed a new sponsored ad format with Lionsgate participating in the pilot, but a poor user experience (including a cluttered UI, an inexperienced host, and weak scripting) saw TikTok squander a valuable chance to capture a zeitgeist moment and prime its audiences for more and more live, tune-in content.
Our outlook: Even with its missteps, TikTok possesses a distinct right to win in this space and can manufacture acute, culturally significant moments of live programming for Western audiences in ways BeReal, Twitter and its other peers cannot. With a host of in-app marketing levers and a secret "heating button" in its pocket, we expect TikTok to continue to innovate and refine efforts to steer millions of Americans to compelling live experiences like that of HQ Trivia. That said, the high profile and equally high cost live, star-studded performance productions may be yet another casualty of a challenging 2023 economic outlook and scarce, higher cost capital. We expect to see more and more of a pivot to brand sponsored and directed initiatives in live for this exact reason.
Shopping: Charging in (and out, and then in again) as others retreat.
Unlike competitors who are scaling back, TikTok can’t seem to make up its mind on ecommerce. Last July, reports surfaced of TikTok’s desire to abandon shopping due to underwhelming results—yet it began testing a new in-app ecommerce feature in November. Meta, meanwhile, is pulling back for a few reasons: but primarily, social commerce just hasn’t taken off in the U.S. as predicted, representing just 5% of overall U.S. e-commerce sales in 2022.
The flip flop could be a side effect of ByteDance’s grand ambitions in shopping.
ByteDance has found ecommerce success in Asia, generating $208B in spending in China via TikTok’s sister app, Duoyin, and another $4.4B in Southeast Asia through TikTok. Further, ByteDance has also launched several other lifestyle shopping apps to chase higher ARPUs and to compete with Xiaohongshu, considered China’s answer to Instagram.Give credit where it’s due: ByteDance is singular in replicating success from East to West. Perhaps lightning can strike twice from Duoyin to TikTok—first with social and next with ecommerce. TikTok already wields some influence over purchase behavior in the West, backed up by the 92% of TikTok users who say they’ve purchased something they saw promoted on TikTok or are willing to do so. (And the 7.4B views of videos related to the phrase “TikTok made me buy it”.)
Our outlook: While broader efforts across the ecosystem haven’t produced the social commerce windfall seen in China ($352B in 2021), Insider Intelligence forecasts a doubling in the U.S. from $50B in 2022 to $107B in 2025, with an estimated 114M Americans estimated to spend an average of $1,000 in social commerce by 2025. Capturing and converting attention is foundational to win here, and TikTok is well positioned and leaning in while the rest of its peers are seemingly retreating. However, while TikTok may possess some parent co level advantage, make no mistake that Facebook, Instagram, and even Pinterest are all still committed to owning their piece of the $107B pie by 2025 and furthering themselves from a reliance on advertising.
Gaming: Avoiding typical pitfalls may reveal compelling engagement and revenue opportunities.
TikTok already leverages gaming content consumption to court advertisers. TikTok averages north of 30B monthly video views across its top gaming-related hashtags, and a limited offering of gaming-specific features hasn’t stopped the company from flexing its stance with advertisers and game developers as a place to discover new games.
Seeking a larger role in gaming, TikTok is expanding into mini-game development. Even with deep social integrations, casual mobile games can be difficult to monetize. Instant games nested inside of a larger app often fail due to an overreliance on ads (bad UX), limited in-app purchase behavior (poor monetization), and other technical limitations (vs. standalone/installed gaming apps).
Our outlook: Can TikTok strike gaming gold where Facebook and Snap could not? TikTok’s existing in-app purchase habits are a positive sign for potential gaming-related transactions in the future. According to Apptopia, TikTok’s in-app revenue (mostly driven by purchases of digital coins to tip creators) has grown for seven consecutive quarters, and through the first two months of 2023, TikTok generated $205M more in IAP revenue than Facebook, Instagram, Snapchat and Twitter combined. Coupling its forthcoming rollout of a dedicated gaming feed with a library of compelling casual games could spur incremental IAP revenues, a stronger hold on Gen Z’s time spent with the app, and engagement with the older audiences TikTok seeks.
Music: May have missed its moment to disrupt Spotify & YouTube.
TikTok has become a heavyweight for music discovery, but lacks an all-in-one music offering. It’s been credited as the new kingmaker for artists and musical trends, but to listen to and further engage with songs, TikTok users today have no choice but to leave the platform for Spotify, Apple Music and YouTube. Per TikTok, 67% of its users are more likely to seek out a song they heard on TikTok on a music streaming platform.
ByteDance already has a music streaming app in Resso, but there’s work to do before its anticipated rebrand and launch in the U.S. as TikTok Music. Introduced in 2020, Resso is heavily ad-supported and currently only available in India, Indonesia and Brazil. Its music recommendation engine is reportedly inconsistent and fails to match up with the quality of Spotify and YouTube’s algorithms. To make matters worse, Sony pulled its catalog of music from Resso in September, with some insiders pointing to ByteDance’s reluctance to spend on artists as the issue.
Meanwhile, music streaming incumbents are closing in. Per Edison’s latest research, Gen Z consumes a staggering 3 hours 43 minutes of music every day. So, absorbing a fraction of that consumption and extracting more from the end-to-end value chain is alluring to TikTok and its competitors. YouTube and Spotify have already TikTok-ified aspects of their platform by integrating vertical short-form video to further enhance music discovery. With the introduction of Shorts, YouTube now claims more monthly short-form video viewers than TikTok (1.5B vs 1B respectively, as reported in December 2022), offers a deeper music library, touts a $100M Shorts fund for creators, and more.
Our outlook: TikTok still owns an incredible right to win in music at the top of the discovery and consideration funnel with labels and musicians who are all but required to invest and engage on the platform as table stakes. But as competitors expand and deepen integration of music content and experiences, artist / creator fatigue on TikTok sets in, and an increasingly contentious frenemy relationship with the music industry at large comes to a head, we believe their well-earned window of leverage to exploit their advantages in music is closing.
Reaching this inflection point is a testament to TikTok’s extraordinary growth in recent years, driven by its ability to show users what they (never knew they) wanted to see. TikTok’s huge cultural influence and high viewership still make it a must-use platform, but its unrelenting chase for growth and diversification might ironically erode these strengths and enable its own undoing.
Should it manage to dodge a legislative ban in the U.S., TikTok must still confront the same fate of other tech darlings who lost sight of their initial value prop to users and creators. We’ve seen it time and time again…the gradual descent begins once a platform inevitably decides to force feed its users less of what they want and more of what it wants. Tick-tock, TikTok.
