Saturday, 10 June 2023

Data Analytics and Technology

The Rise of TikTok and the Lessons for Business Owners

From the night of the launch of TikTok at Starbucks, Sandton City, in Johannesburg, I have not stopped learning a lot as a business, from the rise of Tik Tok.

The rise of TikTok has been nothing short of astounding. 

The video-sharing app, which was originally launched in 2016 as Douyin by Chinese technology company ByteDance, has managed to reach 1 billion users faster than any other social media app.

In the United States, it has become the most popular place to watch videos, surpassing all other social media platforms. This has led to major players, from Facebook to YouTube, attempting to emulate TikTok's model and practices, with limited success.

But what is it about TikTok that has made it such a success?

The concept behind it is pretty simple: it's a video sharing application that allows users to create and share short videos extremely easily. However, the major novelty that made all the difference is its algorithm.

Unlike other social media platforms, TikTok doesn't rely on its network of friends or acquaintances, but has an extremely fast learning algorithm that displays videos - from its entire database - depending on user preferences. Therefore, anyone can go viral without thousands or millions of connections or followers.

The stats speak for themselves: TikTok users spend an average of over an hour and a half on the platform, with 60% of Gen Z using the app. In addition to the appeal of short, fun videos, the rise of TikTok is changing the name of the game in a number of industries.

One of the most significant impacts of TikTok has been on digital advertising. According to Omdia, TikTok's ad revenue will grow from $13 billion in 2022 to $44 billion in 2027, while TikTok Douyin (an app in China) will skyrocket from $28 billion to $76 billion.

By 2027, online video advertising will generate more than $331 billion globally, of which TikTok accounts for 37% of that revenue, or $120 billion. By comparison, YouTube and Facebook combined account for 24% of the market or $77 billion.

This presents a huge opportunity for businesses to reach and engage with younger audiences. The platform's targeting and advertising options allow businesses to effectively reach specific demographics, and the platform's influencer marketing opportunities are also becoming increasingly popular.

Another industry that has been impacted by TikTok is e-commerce. The platform has launched live stores in various geographies (e.g. UK, Southeast Asia, USA) on user profiles so users can purchase goods without leaving the app. If TikTok succeeds, live shopping streams could be the next big step in e-commerce, helping to increase revenue and brand loyalty.

In China, TikTok now derives most of its revenue from in-app direct sales and is rapidly taking market share from established e-commerce giants like JD and Alibaba. Douyin is betting heavily (in China) on so-called "interested e-commerce" (driven by people's interests and passions), in the hope of attracting more and more smart consumers via a multi-channel approach (short videos, live streams, research, etc.).

The music industry has also been impacted by TikTok. The platform's algorithm is able to effectively match music with videos, leading to many viral hits and even mainstream chart success. TikTok has also introduced the concept of "TikTok challenges," where users can create videos using a specific song or trend, leading to increased exposure for the artist or song.

However, TikTok's success has not been without controversy. The platform's Chinese ownership and potential data privacy concerns have led to scrutiny and calls for regulation from government officials in several countries, including the US. Additionally, TikTok has faced criticism for its lack of moderation and censorship, with some claiming that the platform has allowed the spread of misinformation and inappropriate content.

Despite these controversies, there are several key lessons that businesses can learn from TikTok's rise to success.

Keep it simple: TikTok's success can be attributed to its simplicity. The app allows users to easily create and share short videos, which is what makes it so appealing. Businesses can take a cue from this and focus on keeping their products and services simple and easy to use.

Personalization is key: TikTok's algorithm is able to display videos based on user preferences, which is what sets it apart from other social media platforms. Businesses can use this as an example and focus on personalizing their products and services to meet the needs of their customers.

Use influencers: TikTok's influencer marketing opportunities are becoming increasingly popular. Businesses can use this as an example and focus on using influencers to promote their products and services.

Embrace e-commerce: TikTok has launched live stores in various geographies, which allows users to purchase goods without leaving the app. Businesses can take a cue from this and focus on incorporating e-commerce into their overall strategy.

Be aware of privacy concerns: TikTok's Chinese ownership and potential data privacy concerns have led to scrutiny and calls for regulation. Businesses must be aware of privacy concerns and be transparent with their customers about how their data is being used.

TikTok's success serves as a valuable case study for businesses looking to stay ahead of the curve in the ever-changing digital landscape. By focusing on simplicity, personalization, influencer marketing, e-commerce and privacy concerns, businesses can learn from TikTok's rise to success and adapt their strategies accordingly.

Source: Tik Tok, Behaviour Report