Ian Whittaker is twice winner of the City A.M. Analyst of the Year as well as a judge on this year’s awards, and founder of advisory firm Liberty Sky Advisors
Given investors’ embrace of capitalism, it is ironic that their view of Tech – especially when it comes to the leading players – can be more driven by a Marxist-style view that its success is inevitable.
In recent months, no company has been viewed in such a way more than TikTok, the social media app owned by Chinese firm Bytedance. Yet, just as it is often said that it is darkest before the dawn, this might be a case of lightest before the dusk – a phrase I admittedly don’t expect to catch on.
It is not hard to see why TikTok suddenly looks the ultimate winner in the social media world. Worldwide, it was the most downloaded app in Q1. In the United States, the last app to beat it by downloads was Zoom in Q4 2020. It’s the app that youngsters use while their parents and grandparents are on Facebook. The move to increase the maximum length of videos shown to ten minutes makes it more of a direct competitor to YouTube.
By the consensual logic of today, all of this should drive advertising traffic to TikTok. In addition, the success of social commerce in China has raised hopes it can do the same in western markets. TikTok, with experience in this field that its major rivals are lacking, should be in a dominant position to win big in this space.
Yet, yet, yet. There are signs that the inevitable march of TikTok towards success and domination may not only have its bumps but may also not be inevitable.
Of course, TikTok has already fought a few battles. India banned the app in 2020 over a border clash with China, and then-President Trump tried to demand it be sold or closed. Yet the issues today feel more serious when it comes to TikTok’s future growth.
The first strike came from a call by a Trump-appointed Federal Communications Commissioner to Apple and Google to take the TikTok App down from their app stores given its Chinese links and concerns over how data relating to US citizens was accessed and stored.
Short-term, it is unlikely anything will happen but where things could get more interesting is if the Republicans re-take the US Congress in November. That could easily lead to more calls to “do something”, which may have an influence on how advertisers decide to invest on the platform.
But probably more of a fundamental blow to TikTok is the news that it is abandoning its e-commerce plans in Europe and the US, soon after a report detailing the various problems plaguing the launch such as dissatisfied influencers, disgruntled staff and questions over support from partners. Social commerce has been a huge hit in China (where people buy goods recommended via social media channels) and it has been seen as a key path to revenue growth by all the major players. As mentioned above, TikTok should have been well placed to benefit from an explosion of social commerce in Western Europe and / or North America.
There is an obvious question as whether this is due to market or company-specific factors. TikTok says the market just isn’t there yet. If that is true, that has implications for other players such as #Meta and #Google that have their own plans. It would also highlight again that what works – or could work – in China doesn’t necessarily work in Europe and the US. When it comes to the Tech platforms, China is increasingly of its own kind when it comes to structure, what consumers will (not) accept etc.
If social commerce does not take off, then TikTok will need to rely – as its rivals have done – on advertising revenues. However, advertisers may be increasingly wary, despite TikTok’s audience reach, of advertising on a platform that is increasingly attracting controversy. Events such as the news that parents are suing TikTok in both the United States and Europe over their children dying from the “blackout challenge” – a TikTok craze – may make some advertisers think twice about spending money on the platform, especially given the increasing pressure on advertisers to take social responsibilities more seriously.
In the world of tech – and indeed the markets – it is usually a wise policy to take the view that nothing is inevitable.
The post Long read: TikTok’s march to the top by no means inevitable appeared first on CityAM.
For all the latest Technology News Click Here
For the latest news and updates, follow us on Google News.
