READ MORE: TikTok Boom (Scott Galloway)
Elon Musk’s Twitter spree has distracted us from what is the ascendant tech firm of 2022. TikTok now commands more attention per user than Facebook and Instagram combined. What is the secret of its success?
“TikTok eliminates the burden of consumer choice with a continuous stream of videos curated for you,” says Scott Galloway, professor of marketing at NYU Stern, blogging at Medium.
Downloaded more often than any other app for each of the past five quarters, it was the world’s most visited site in 2021, according to figures reported by the Wall Street Journal. TikTok has 1.6 billion monthly active users — more than Twitter, Snapchat, and LinkedIn combined.
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“The biggest mistake we make in marketing is believing choice is a benefit. No, it’s a tax,” Galloway argues. “Consumers don’t want more choices, they want more confidence in the choices presented. TikTok content is a continuous stream of videos where the decisions are made for you. Your only choice: what not to watch.”
This creates a spiraling effect that drives young people especially to flock to the platform for hours.
“Compare the TikTok doomscroll to the Netflix experience, where you skim infinite thumbnails trying to figure out what to watch. Then you have to focus for 40 minutes. A big commitment these days.”
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TikTok may bill itself as a social media company, but it is really all about video streaming and to that extent it is not just Meta but all SVODs who are threatened by it.
Investors know this. Six months ago, Netflix was worth more than $300 billion — today it’s at $80 billion. And at its last valuation event, according to Forbes, ByteDance (TikTok’s parent company), was valued at $360 billion.
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TikTok’s ascent to the top of the streaming wars was financed not with monthly subscriptions or cable packages, but attention. Specifically, the attention of Gen Z, says Galloway.
On TikTok, the average session lasts 11 minutes and the video length is around 25 seconds. Galloway points out that this generates huge amounts of data, and way more than cable broadcasts or even Netflix can pull in. The platform’s “video-based social media,” with the ability for users to interact with the content (generating more and more data), is the killer app.
Aside from data, Galloway highlights the platform’s unique and personalized content serving content you didn’t know you liked.
“Watching Netflix is like going to Universal Studios Florida because you loved Disney. Watching TikTok is going on Safari.”
TikTok’s content production model upends everything we thought we knew about how making content that audiences want gets made. The film and TV industry still employs relatively few people in relatively few locations (London, Atlanta, Mumbai, LA) compared to TikTok, where over half of users create and post their own videos.
“The world’s largest reserve of talent also has a near-zero cost of extraction,” says Galloway. “The top eight US media firms will spend $115 billion on original content this year. TikTok produces its content for almost nothing.”
The company’s payout to top creators “is a rounding error,” Engadget notes, at $200 million per year.
“The primary incentive for content creation is social expression. The company’s A&R team is the app itself. On YouTube and Netflix, there are creators and consumers. On TikTok, they are the same person.”
And when your total addressable market is 1.6 billion users, your 15 seconds of fame on TikTok can be lucrative. Galloway calculates that 9.6 trillion minutes were watched on Netflix in 2021. Impressive, until compared to the 22.5 trillion minutes viewed on TikTok.
“For creators who are in it for more than just expressing themselves, the real TikTok money comes from brand endorsements. The top creators make as much money as a Fortune 500 CEO or an iconic Hollywood actor.”
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Can TikTok be Dethroned?
Is there anything that could stop the juggernaut?
A few things, perhaps.
The competition from Netflix to Snapchat is making copycat moves, or “rip-off products,” says Galloway. Of these, he thinks, Facebook and Instagram are best positioned to compete, “thanks to Meta’s massive coffers of data and captive audience.”
But TikTok has something that Mark Zuckerberg can’t seem to buy: Kids think TikTok is cool.
Another risk is China, specifically the threat that the Chinese state could “weaponize the platform” — by turning it into a propaganda machine. It’s the Manchurian Candidate as an app, with all the hysteria that entails.
And then there’s regulation. Galloways notes that the app appears to be linked with eating disorders and depression, and it may even cause motor and verbal tics among teens. He points to a series of Wall Street Journal articles with headlines like “TikTok Floods Teens With Eating-Disorder Videos” as evidence.
It’s unlikely “a threat to the well-being of our youth” will lead to any major curtailing of TikTok’s power – but Chinese ownership just might.
“[It] may be the siren America’s regulatory bodies need to register a real threat,” says Galloway. “So far, Uncle Sam hasn’t done his job.”
Instead, TikTok will continue on its charge to become one of the most valuable companies in the world and “another tech firm whose profits and addictive qualities outpace our ability to govern it.”