Marketing on the TikTok platform
Posted: Nov 26, 2020
TikTok made the headlines in the last two years. Its wide spread popularity marked the establishment of a new and powerful social medium. Because of that it deserves the attention of the marketing professionals. It opens up new marketing channels for communication with consumers.
Although it’s already very recognizable platform and people are familiar with it, TikTok is still a growing organism and it still works on deciding what it can and what it should offer to businesses wanting to leverage the presence on the network.
In this article you will read an all-encompassing rundown of TikTok marketing, including an explanation how fast TikTok rose to this level, why it rose faster than other major social networks, what’s its revenue model, and how to use it for marketing purposes. At the end you will also see how it fares against Facebook in terms of ads cost effectiveness.
TikTok was created by Zhang Yiming. It’s one of a few projects developed by his company ByteDance. TikTok was launched in 2017, a year after the launch of the Chinese version of the app under the name Douyin. After a merger with Musical.ly in 2018 which was a Chinese lip-syncing 15-seconds to 1-minute music videos app, TikTok become available internationally.
The integration with Musical.ly had an advantageous effect on TikTok. Probably less than obvious, but Alex Zhu, the co-founder of Musical.ly deserves the spotlight too. He played a strategic role in the development of TikTok and you will see later why and how.
It took the market by storm. A phrase you have heard very often, but perhaps very applicable and true in TikTok’s case. At least when compared to its peers.
TikTok set a record. According to data from Financial Times it took around 3 years period to reach 1 billion users. No other social media app has achieved that.
Like many other people, you also might be curious why is TikTok so successful. Based on both diverging and interrelated experts opinions published by Forbes, TikTok’s massive success is attributed to a set of several factors:
It has an algorithm that rewards content above all and it gives generation Z more visibility in expression while allowing brands to be more authentic and entertaining.
On TikTok it’s easier than Instagram and Snapchat to edit and upload content. It fits with the short attention span of the young people, and uses artificial intelligence algorithm to provide customized user feed.
In the introduction stage TikTok was very thoughtful and creative how to spur user acquisition. The onboarding on the app is seamless process for the users. There is no sign up and tutorial stage. Instead it puts you abruptly and directly into the video feed and then the AI takes care for the rest.
The importance of Alex Zhu’s role was touched in the introduction above. One example illustrates his significance and ability to hack growth. He noticed that App Store was giving more weight and better ranking to apps with longer titles, and so Musical.ly (the company that was acquired by TikTok in the early stages) instead of using the usual and expected title for its app, used a much longer title which read: "make awesome music videos with all kinds of effects for Instagram, Facebook, Messanger". Aside from this technical hack for App Store, the title itself speaks that the app content can be shared further on other big social networks, which can give big boost in visibility and popularity. Something that Alex and his team purposely leveraged. Another also vital strategic tactic was the care that he gave to the initial users of the app. Alex uses an analogy with economic concepts and termsto explain his idea. He says that initially the community of users on the app/platform as a whole needs to have a high Gini index (the higher the index the more economic inequality within the community) before providing more economic equality. This means that small group of users have to be become rich first. Then this group of people will attract larger number of other users. And so, in line with this philosophy, TikTok hunted and onboarded high profile users, celebrities and influencers with large following base from other platforms and it also collaborated on campaigns with big FMCG brands.
Musical.ly merged with TikTok on 02 August 2018. Alex and his team shook up the company since then and TikTok went on a strong growth trajectory.
The music element. To a large extent TikTok is based on music which is something universal that everybody loves. The music coupled with entertaining features like challenges, dance and humor make it very engaging.
The success of Vine paved the path for video apps of this nature. Although TikTok was not a radical novelty on the market, it was clearly and substantially different than other existing apps and social networks. Being fun helped to draw in the young generation.
The ability to remix original content so easily, gives power to ordinary people to express themselves effortlessly.
Some claim that without Instagram TIkTok wouldn’t have been such success. Users are able to repost TikTok content on Instagram and in a way Instagram was used as a piggyback for TikTok. Instagram users were easily exposed to it and pulled away into the new platform. But, not only Instagram. Users can share TikTok videos on Youtube, Facebook, Twitter, Snapchat and others networks. All major apps/channels are covered and this amplifies the results big time.
Advertising concepts transferred to the masses. Video advertisements are typically short and expensive formats, each second counts and each second should make an impact. The ability to make a creative expression in short amount of time, just like a usual ad would aim to do, is transferred to the masses. Aware of that or not, the content providers became video advertisers.
According to InfoBeat, TikTok revenue model consists of: in-app purchases, and paid advertisements on the platform
In-app purchases consist of transactions with TikTok coins. The price of the coins is in the range between $0.99 for 100 coins and $99.99 for 10,000 coins.
With the coins users can buy TikTok Gifts, then they can send Gifts to other TikTok users which are content providers/creators. The Gifts on the content providers’ accounts are converted into Diamonds. The content providers can convert the Diamonds into real money, denominated in USD currency.
The money are transferred to a PayPal account or other payment channels that TIkTok approves.
There is no indication what is the commission that TikTok applies when it converts the Gifts into Diamonds, but before its takeover Musical.ly was getting 20% on such transactions.
Based on Bloomberg findings, TikTok users spent $78 million on in-app purchases in April 2020. A back-of-the-envelope calculation shows that the annualized earnings from in-app purchases would be around $930 million. The growth trajectory in the following period will determine the variance around this number. Anyway, no matter what are the actual earnings, this amount is a gross amount and TikTok earns a portion/share in the conversion process.
The total 2019 revenue of TikTok’s parent ByteDance was $17 billion and $7.4 billion in 2018. Because of that, industry insiders assume that the paid ads on the platform probably play bigger role as a revenue stream, compared to in-app purchases. These figures however do not provide a clear picture because ByteDance has few companies in its portfolio and normally the company does not report publicly its performance and financial indicators.
TikTok allows five types of ads formats: In-Feed Native Video, Brand Takeover, Hashtag Challenge, Branded Lenses, Top View.
The In-Feed Native Video Ads: appear between videos on For You users feed; take between 9 and 15 seconds; support calls to action with link clicks and allow engagement with likes, comments and shares.
The Brand Takeover Ads: appear as a first thing when the user opens the app; supports calls to action with link clicks or redirects to a hashtag challenge; and there is only one brand takeover ad in a day for each product category, therefore this type of ad is pricier.
Top View: appears after 5 seconds when the user opens the apps; supports calls to action with link clicks; represents the longest ad format, with ads duration up to 60 seconds.
Hashtag challenge: appears in the Discover page of the app; brands can sponsor hashtags which are redirecting the users to sponsors’ pages that describe the challenge; it’s available by paying a fee for a branded hashtag or by using a lower cost approach which assumes engaging with influencers who can do the job.
Filters/Branded lenses: brands can create, customize and take ownership of filters and other visual effects; according to Awario, they are live 10 days, and the lenses are promoted in the "hot" or "trending" tab.
In addition to paid ads and in-app purchases, InfoBeat indicates that TikTiok also plans to add subscriptions to the platform as additional revenue generating segment, but there is no clear evidence if this is going to happen.
Maybe you have been wondering whether you can sell your products on TikTok. Sales of merchandise and things like that is something that’s in a test phase with 7000 content providers, and if it turns successful you’ll most likely see it available for all content providers. TikTok is testing integration of Teespring on its platform.
This will allow content providers to sell their own branded items on TikTok. TikTok was testing also other possibilities for sales of merchandise on the platform. Probably it won’t stop here with its social commerce efforts and it will make integrations with more partners.
Obviously TikTok has developed and is still developing different monetization methods and naturally a question arises whether the company is profitable. Such information is scarce. There are though some financial indications related to its parent. Bloomberg found out that ByteDance made a net profit of $3 billion in 2019. It’s very likely that this profit is tied to the success of TikTok.
TikTok is still one of the most downloaded apps.
It raises the question who is the driving force behind its popularity, what age group uses TikTok mostly and what are the demographics of the users.
According to Hootsuite the age profile of TikTok users looks like this:
- Age 13-17: 27%
- Age 18-24: 42%
- Age 25-34: 16%
- Age 35-44: 8%
- Age 45-54: 3%
- Age 55+: 4%
There is obvious inclination towards younger age groups. Hootsuite also states that the gender profile is more disposed to female population with 60% female users against 40% male.
Probably the gender profile for each age group and each market/country strays to some extent from this general proportion, but such data are not readily available in the public. However, one example related to the distribution of US TikTok users by age and gender as of July 2020 shows the existence of such differences.
The differences in the example above substantial, at least for the first two youngest age brackets. For both of them the female population clearly prevails the male population as users. This makes it attractive marketplace for brands providing products to this segment.
Based on BBC findings, TikTok’s top 10 markets are China, USA, Indonesia, Brazil, Vietnam, Russia, Turkey, Mexico, Thailand. In this ranking the Douyin app is also included which is the version used in China.
India was the top market for TikTok by number of downloads, but recently it was banned from providing the service in this country. TikTok was banned in Pakistan also, but that represents a smaller hit on TikTok than India. With the ban in India TikTok lost about 200 millionactive users, while in Pakistan 20 million active monthly users. TikTok is under threat of ban in USA too. If the ban is realized TikTok will be challenged to reorient to other regions, like Latin America, Africa and Europe.
There is no transparent and comprehensive data on the number of users by country and regions, but there are estimates that at the moment TikTok has 100 million users in Europe.
According to Mediakix, TikTok users spend on average 45 minutes per day, closest to Snapchat’s average time of 49.5 minutes, but farther than Instagram and Facebook.
However, most probably different age groups spend different amount of time on the platform. During the March-April Covid quarantine in US, users in the age group 4 to 15 years old spent 85 minutes daily.
Beside the usage differences by age, probably there are differences by countries too, even though there are not enough data to verify this assumption.
Nevertheless, in the US, users open the app 8 times per day and the individual sessions last 4.9 minutes, while for Instagram, Facebook and Snapchat the individual sessions last 3.1 minutes, 4.7 minutes and 1.6 minutes respectively. The engagement rate of the app defined as a percent of monthly users who open the app every day is estimated to be higher than 70%.
With 800+ million monthly active users (MOU), TikTok ranks higher than Linkedin, Twitter, Pinterest, and Reddit for this indicator, according to Mediakix.
Your company has four ways to use TikTok as a marketing tool:
- Produce your own video content
- Curate content produced by other users
- Pay for ads
- Pay influencers to collaborate with your brand
Unlike Facebook, Instagram and other platforms TikTok doesn't have in-depth user profiles. That’s normal having in consideration that it came into existence in the last few years, much later than Facebook and others.
Other than that TikTok advertising options are very similar to what you would get from Facebook and other platforms.
TikTok allows you to set the advertising objectives along the customer journey:
- Awareness: Reach
- Consideration: Traffic to a targeted page, App installs, Video views
- Conversion: Add items to a cart, Download your app, Register for your site, or Make a purchase.
It also allows you to target your audience based on different criteria:
- Demographic: gender, age, location, language and interest
- Users’ device: connection type, operating system, operating system version, device price, network carrier
- Audience: lookalike or customer audience
TikTok lets you target your audience based on behavior such as "watched content to the end", "liked content", "user participation in comments" and "shared content with other users". Beside that it also provides targeting by user interest in different categories. The behavior based targeting is based on real user behavior, while the interest based targeting on machine learning algorithm.If you want to buy ads, TikTok allows you the following bidding methods:· Cost per Click (CPC)· Optimized Cost per Click (oCPC)· Cost per Mille/Thousand Impressions (CPM)· Cost per Thousand Views (CPV) According Digiday each of the ad formats has the following fee:1. The Brand Takeover ads require a minimum of $53.000 for 8.9 impressions. The ad is in three seconds image format or 3 to 5 seconds video format. To remind you the ad is available exclusively only once in a day to one company within a single product/service category; 2. Top View ads require $65.000 per day for 7.4 million impressions. The length of ad can take up to 60 seconds; 3. In-Feed video ads require minimum $26.000 per day for 3.6 million impressions. The length of the ad is five to fifteen seconds; 4. The Hashtag Challenge requires $130.000; 5. The Branded Lenses require $45.000 for 30 days period;
If the ad options above does not fit with your plan, TikTok’s Creator Marketplace allows advertisers to engage influencers for a predetermined fee:1. Engaging five influencers with less than a million followers requires payment of $12.000;2. Engaging five influencers with between one to five million followers requires payment of $35.000;3. There is also a possibility to choose a combination of influencers that belong to one of the two groups above and they cost between $20.000 and $30.000;
According to InfluencerMarketingHub usually best user engagement rate is achieved in the following time slots based on Eastern Standard Time:
- Monday: 6 am, 10 am, 10 pm
- Tuesday: 2 am, 4 am, 9 am
- Wednesday: 7 am, 8 am, 11 pm
- Thursday: 9 am, 12 am, 7 pm
- Friday: 5 am, 1 pm, 3 pm
- Saturday: 11 am, 7 pm, 8 pm
- Sunday: 7 am, 8 am, 4 pm
These time slots are a generalization. To maximize your result you should find out when the audience in your target market is most active. TikTok provides such overview on its platform.
After all this you may still be asking yourself whether you should use TikTok as your advertising platform. It’s costly and normally you would be careful when making such decision.
Fortunately, Jungletopp did an interesting $50.000 split test experiment by placing identical ad into both TikTok and Facebook to measure the results and to get a better performance overview. The experiment results show that TikTok provides advantage on all performance metrics, with exception of the click-through rate.
Obviously TIkTok provides clear cost advantages compared to Facebook and deserves a place in your marketing toolbox.
Creative and carefully executed business strategy brought TikTok to where it is today. The company is still in a growth mode and we are about to see what else it will offer to the business and consumer community in the near future.
It had a wild ride and its ride is far from over. As for now while we witness the evolution process of TikTok it makes a lot of sense to explore it and use it as additional marketing instrument for your company. After all, it’s big, creative, entertaining and fun platform, but also promises good ROI on marketing efforts.
You could be a consumer product company selling merchandise, a media company, an NGO, a travel company, entertainment company, a gym, a zoo or any other type of business. As long as your target audience is present on TikTok it makes sense for you to try it.