Category: Social Media
Reuters recently quoted me saying about Tik Tok:
LinkedIn “was bought on domination of a sector, good revenue, and good margins,” said Mike Vorhaus, head of Vorhaus Advisors. “TikTok is going to be valued based on its incredible user growth and mobile advertising revenue opportunities.”
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In these days of pandemic, protests, economic recession and angst among the world’s population a recently issued report shows that consumers continue to shift away from traditional media sources for their news and are moving more towards social media and messaging services to find the news.
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Long gone are the days of people getting most of their news from a local TV station, their local newspaper or the national newscast from one of the networks. Over 15 years ago, we already saw the substantial decay of Americans using traditional news sources and instead the Internet becoming a major source of news, particularly for the 18 to 34 year old demographic. This data comes from a study done for Carnegie Corporation in 2005. A research group I led at the time was responsible for the study. Carnegie Corporation is a major U.S. charitable foundation with a significant interest in journalism and news.
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As newspapers have fallen dramatically in usage, and the national newscasts have dropped in ratings, the swing to new sources of information has accelerated considerably. Reuters Institute for the Study of Journalism at Oxford University has recently issued a report on the state of digital news around the world.
One of the very notable facts coming out from the study is the heavy use of Instagram for news which could soon possibly overtake Twitter. Instagram news consumers were 11% of the social media population. Twitter was statistically tied at 12%. Just as we found in 2005 for Carnegie Corporation, the shift away from traditional news media sources is being led by the younger generation, in this case people under 25 years old. Two-thirds of that age cohort said they use Instagram for gathering news information. The same age group reported that they were two times more likely to look at news on social media apps.
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Facebook leads with 36% of social media consumers using the social media giant for consuming news. YouTube had 21% of social media users looking at news on the popular video site. WhatsApp had 16% of consumers in that group and 12% used Twitter. Facebook owns both Instagram and WhatsApp.
In this time of political and social upheavals, it is interesting to note that the Reuters study (conducted by YouGov, a research agency) only found 14% of people in the US trusted news on social media compared to 22% in regard to news gathered from search engines. Also, as further evidence of the power of social media in driving news to consumers, social media as a news source, saw ongoing growth with news consumers, unlike platforms such as all online sources combined, TV, and print.
Actor and humorist Will Rogers
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When thinking about what we know about the news and where we get our news, I reflect back on Will Rogers’ famous quote: “All I know is just what I read in the papers, and that’s an alibi for my ignorance.”
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Snap, like Facebook FB in its earlier years, is frequently being viewed, in terms of success or failure, from the point of view of monetization. It is relatively easier to acquire a large audience to use a free service like Snapchat, than it is to monetize those consumers and achieve large-scale advertising revenue growth.
In a further step toward enhanced monetization, Snap announced last year a new automated advertising product, Dynamic Product Ads (DPAs) in the U.S. and selected other countries. Snap has just recently extended that product to more countries in Europe, the Middle East, and Australia.
DPAs are appealing to e-commerce advertisers because it allows retailers and brands to more easily sell their services and products to consumers using Snapchat. Google GOOGL and Facebook already offer similar ad products, where an e-commerce catalog is uploaded into a template on a digital platform and then updated in real-time. The benefit to consumers is that they will get up-to-date listings of products and prices. The benefit to advertisers is that they will save time over previous methods of updating e-commerce digital listings.
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Rob Seidu, the senior director of media activation in Europe for Adidas said they have seen an increased return on advertising spend during their test of Snap’s DPAs. “The launch of DPAs allows us a route to reach our target Gen Z and Millennial audiences with relevant product creative throughout the consumer journey,” Seidu said.
Long-time digital media observer and experienced revenue executive in the digital world, Michael Hudes, observed, “Snap’s move to launch dynamic ads is a no brainer move for all of the obvious reasons and on the surface, far from innovative. The real question is how does Snap deliver a user experience that performs for a wide swath of brands and not just direct response – D to C – advertisers?”
In the period leading up to Facebook’s IPO many analysts doubted Facebook’s ability to monetize particularly in the mobile environment. But once Facebook demonstrated rising advertising revenue with good margins, the stock took off and has been a darling of Wall Street.
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While Snap’s stock price has moved up considerably in the last year, as they increased revenue and demonstrated the value of their many US and European users, they are still trading below their high. Snap has other efforts underway to increase their advertising revenue, including an advertising network across many sites and apps, not limited to Snap properties.
Snap has continued to hire advertising sales people from some of the leading digital companies, like Facebook, Amazon AMZN, and Google. Snap continues to take more and more steps toward demonstrating they can grow their primary revenue stream – digital advertising.
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It has been widely reported that ByteDance, the Beijing-based digital entertainment and information company, had impressive 2019 revenue and earnings. ByteDance had revenue of $17 billion in 2019, up from $7.4 billion in 2018. In the first half of 2019 ByteDance is reported to have had revenue equal to or exceeding the whole year of 2018. According to the same reports, ByteDance’s profit was $3 billion for 2019. It is also reported that they have over $6 billion in cash available for investment and growth initiatives. As a privately held company, ByteDance does not officially release their financial data and I was not able to get a comment from ByteDance regarding their financials.
ByteDance has been reported to have a valuation over $100 billion and as high as $180 billion. ByteDance has announced that they have over 60,000 employees in 126 cities.
ByteDance owns TikTok, which is their non-Chinese mobile app which allows consumers to make short videos and share with the millions of users on TikTok. TikTok is headquartered in Los Angeles. Kevin Mayer, the former Chairman of Direct-to-Consumer and International at Disney DIS, announced last week that he was going to ByteDance as COO of the whole company, and CEO of TikTok.
TikTok is reported to have over 800 million daily active users which compares to 1.73 billion daily active users for Facebook, who reported that number this year.
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ByteDance has a number of core products that use artificial intelligence to choose content that will be shared with readers whether it is in their news and information content product, Toutiao, or their entertainment apps, particularly Douyin and TikTok. Douyin is a mobile app launched in China by ByteDance in 2016 focused on consumer-generated short videos.
Much of the revenue for ByteDance comes from advertising and in-app purchases, both areas with a lot of room for growth, plus ByteDance’s user numbers continue to grow rapidly. ByteDance was founded in 2012. ByteDance has raised money from funds like Softbank, KKR KKR, Sequoia, General Atlantic, Hillhouse Capital Group, Coatue, SIG Asia Investment, and Source Code Capital. Knowledgeable sources have indicated to me that there are also some influential Internet-related investors from around the world, invested in ByteDance, some at a very early valuation. This will be a company that will be closely watched for an IPO or other liquidity event.
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Every few years a new “bright shiny object” appears on the digital scene. Sometimes these companies go on to be huge (Amazon AMZN, Google, Facebook, etc.) and other times they fail massively – Excite.com, Go.com/Infoseek, Vine, Friendster, etc. Other companies may not be the “bright shiny object” of their early years, but they are still gaining momentum and traction, such as Snap. Even MySpace, a company that most people probably assumed was shut down and written off entirely, is still alive with about 4% of American social media users reporting they are currently using Myspace in a quantitative study I conducted with 2,400 Americans in June of last year.
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Which flavor of “bright shiny object” is TikTok? Short-term or long-term?
TikTok has received a lot of attention in the U.S. and around the world recently, including the announcement of the new CEO of TikTok (and COO of parent company Byte Dance), Kevin Mayer, the head of Disney DIS’s Direct to Consumer services and International (including Disney+). Mayer was previously the planning and M&A guru at Disney. Forbes writers Dawn Chmielewski and Abram Brown reported in detail the search by Byte Dance for a CEO of TikTok and the hiring of Mayer.
So the question is now: is TikTok more like Vine (short 6 second video serviced owned by Twitter TWTR and shut down) or more like YouTube, owned by Google GOOGL, which reportedly has revenue over $15B a year – mostly advertising – and over 125M monthly unique users in the U.S. alone.
While some analysts look at TikTok as competition for the social networks – Facebook, Instagram, and Snap, there are many reasons to think of TikTok as more of a competitor to YouTube. TikTok is not about sharing what you did today or where you went (though there is some great travel content on TikTok), but more about creating and sharing content, such as songs, dances, ideas, challenges – all presented in short video form. Unlike Vine, which limited users to six seconds, a TikTok can be as long as 60 seconds, with a function that combines four videos of 15 seconds each. Furthermore, you can upload to TikTok longer videos shot outside of the Tik Tok app.
TikTok, whose mobile app is free, is owned by Byte Dance of China. Byte Dance is a private company with many reports that it is worth $100B and beyond. Byte Dance runs a similar service to TikTok in China, Douyin, which was launched in 2017.
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TikTok was launched outside of China in 2018 and merged with Musical.ly, another company owned by Byte Dance, that year. Douyin and TikTok when translated from Mandarin mean: “shaking sound” and “vibrating sound” respectively.
TikTok was the most downloaded, mobile, non-game app worldwide in January and February of this year. There are over 800M worldwide users. In China there are 400M users which doubled in one year. About half of all smartphone owners in China are using TikTok. Byte Dance is also growing TikTok in India where they have over 120M users. Southeast Asia is another growing area for TikTok.
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In the U.S. TikTok is reported to have 60M monthly users, who spend on average 45 minutes a day on the app. A majority of U.S. users of TikTok are female (57%). Over 40% percent of TikTok users are between 16 and 24 years old. Roughly 50% of TikTok’s global audience is under the age of 34. While only 9% of US internet users say they have used TikTok, 49% of teenagers say they have used the app. Another demographic strength for TikTok are the large number of families, siblings, and co-workers that collaborate on TikTok dances, challenges, lip syncs, etc. When you watch TikTok you see many multi-generational users.
Though privately-owned, it was reported that TikTok grossed over $175M in revenue in 2019. TikTok revenue comes from in-app purchases (virtual goods and subscriptions), sponsorships and advertising. All of these areas are likely to grow for TikTok as the platform grows in numbers of users and as TikTok gears up their revenue sales teams.
Tiktok has hired many top Facebook executives and others from Snapchat, YouTube and other companies, before the hiring of Mayer. It is expected that TikTok will continue to pursue some of the top talent at the successful social media and digital video companies. TikTok has a large office in Los Angeles (the largest presence outside of China) and their European efforts are headquartered in London.
Vine failed for many reasons, including that six seconds was too short a time for some people to express their creativity. Furthermore, Vine was bought by Twitter where it withered. It was not a good brand fit with Twitter or demographic fit. TikTok is the main business of Byte Dance outside of China and will not have the problems Vine had at Twitter. Also, the TikTok app has a lot of strong functionality that did not exist for Vine, such as powerful viral tools, easy video recording and editing, mobile first, a great recommendation algorithm and strong social features.
TikTok is also more than just dances and Vine-like antics. They also have people giving short video advice on health, exercise, the stock market, travel, DIY (do-it-yourself), and even politics. Naturally these categories will reach young people, as well as a more mature audience.
I spoke to a number of 20-30 year olds in the media world and most of them said they used TikTok. Numerous people I spoke to said that TikTok is more like a short/mobile first version of YouTube. I think TikTok is going to challenge YouTube more than than TikTok will challenge Instagram or Facebook.
I think TikTok will be grow substantially, and quite possibly, will have the longevity of YouTube, which is 15 years old this year. Vine, in comparison, lasted 5 years. My projection of strong, future growth for TikTok in the U.S. is supported by the high evaluation score that TikTok receives from its users – a 4.7 score out of a 5-point scale.
If you doubt the appeal of TikTok, take a few minutes and explore the videos on the app. And don’t miss this one – “The Five Stages of TikTok” on TikTok which you can search for on TikTok or you can watch it on YouTube:
