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Coast to coast: TikTok’s long-term plans for global domination

Written by KrASIA Connection Published on   5 mins read

As TikTok diversifies its revenue streams, how does the company stack up against competitors?

Over the five years since its inception, TikTok has evolved rapidly under the leadership of six vastly different figures, each shaping the company to overcome hardships, both in business competition and the ever-changing geopolitical landscape.

The most consequential development is that TikTok operates on a hub and spoke model that encourages diversification on the regional level. Now, CEO Shou Zi Chew chiefly spends his time on matters related to cybersecurity, legal compliance, and government and public relations, while localization policy is in the hands of the regional lead in each market.

The company’s overall strategic planning involves three key figures. As one TikTok executive told LatePost, “The decision-making process between Shou Zi Chew, Zhu Wenjia [global R&D head], and Vanessa Pappas [COO] is not clear-cut. For instance, Zhu and Pappas have a greater say over products and operation . . . [but] product launches and the budget for user growth may need approval from Chew, even though they can be decided solely by Zhu.” All three host meetings with regional heads twice a month.

While today, TikTok stands on its own legs as a multinational company, its rapid evolution depended on abundant resources that were drawn from ByteDance and Douyin. Professional expertise in business operations and technical application gave TikTok a head start. Even now, TikTok’s e-commerce and monetization strategy is overseen by ByteDance’s commercialization team, which is led by ByteDance China chairman Zhang Lidong.

That’s all to say that TikTok was not a platform built by a ragtag startup team. It was a derivative product based on Douyin, one of the most successful consumer apps in China.

While TikTok and Douyin shared plenty of DNA, the organization of TikTok is vastly different from its sibling in China. While TikTok’s core management formulates overall strategy and direction, such as moves to launch livestreaming or e-commerce capabilities, it is up to regional heads to shape localized rollout plans.

For example, the US version of TikTok doesn’t have a function that lets users detect each other when they are in physical proximity, as this would involve gathering excessive personal data. Meanwhile, the US version of TikTok prominently features short educational videos, unlike its counterparts in many other markets.

Beyond developments within the walls of TikTok, Douyin, and ByteDance, an important piece of the puzzle is the user base, particularly popular creators who have massive followings.

The USD 200 million TikTok Creator Fund was launched in spring 2021 to support creators in the United States who sought to earn a livelihood by being power users on TikTok. The fund’s existence continues to be a big draw for the app, cementing “influencer” as a dream job for many teenagers across the country.

Elsewhere, in Japan, TikTok flashes cash to lure popular creators to its app. Japanese users’ TikTok videos are frequently cross-posted to other platforms—with TikTok’s logo prominently featured. TikTok is everywhere, and it has fundamentally changed short-form entertainment and digital advertising.

TikTok’s streams of revenue

Currently, 1.2 billion people use TikTok each month. That’s still a far cry from Facebook’s 2.9 billion and Instagram’s 2 billion (both as of Q4 2021), but the growth trajectory is telling. In September 2021, TikTok overtook YouTube in terms of average watch time in the US. This means ad revenue for TikTok has been rising, eating into the profits of staple social media and video streaming platforms.

However, there’s a long way to go before TikTok becomes a self-sustainable business. Its ad revenue in 2021 was just under USD 4 billion, roughly 7% of ByteDance’s overall revenue. In the same year, Facebook earned USD 114 billion in ad revenue.

There are still barriers for TikTok when it comes to acquiring clients. One source in TikTok who spoke to LatePost said, “Most companies spend 60% of their ad budget on Google Ads, 30% on Facebook, and the remaining 10% is adjustable based on the performance of various channels.”

Over the past year, TikTok has been refining its livestream e-commerce capabilities and offering hefty subsidies to create an alternate stream of revenue. In 2021, GMV from this line of business was USD 951 million.

Internally, ByteDance still considers live shopping to be the most significant revenue source for TikTok over the next decade. ByteDance’s head of e-commerce, Bob Kang, pointed to Southeast Asian countries such as Thailand, Vietnam, and Malaysia as high-priority markets.

ByteDance’s broader e-commerce strategy has yielded mixed results. In late 2021, it launched Fanno, an e-commerce app meant to rival Amazon in Europe. For some time, it also operated Dmonstudio, a retail website for women’s fashion and accessories that in many ways resembled Shein, but the site was shut down in February 2022.

Cultural complexities

While TikTok expands its footprint around the globe, the company has implemented business plans to fit each market, but staff in different countries have aired their displeasure about unequal treatment.

Staff members in China once complained that their salaries are merely half or even one-third that of their counterparts in the US, even though their responsibilities and workloads are roughly the same. Meanwhile, TikTok employees in the US objected to the required daily meetings with teams based in China due to time zone differences.

One TikTok team member told LatePost that all product managers that he knew in the company resigned within one year, and that upper management was concerned about the high turnover rates in North America.

Other forms of conflict have cropped up due to overlapping customer acquisition targets. One of TikTok’s ad teams provides services for Chinese companies that set up operations and conduct business overseas, but this leads to competition with regional TikTok operations, which target the same customers. This has led to the formation of a company policy that says client-facing teams may need to share credit whenever they identify the same target.

Problems like this are rooted in TikTok’s “hub and spoke” organizational structure, where regional teams have a high degree of autonomy. This also reflects the maturation of short-video platforms as a serious advertising channel for consumer brands.

The long-term sustainability of TikTok will likely involve many more changes to the company’s operational methods. Few individuals in the ranks of TikTok and ByteDance have experience executing long-term roadmaps for businesses, according to LatePost.

Now, TikTok serves an extremely diverse user base. Every day, 700 million people open the TikTok app and swipe through videos made by creators from all over the world. To broaden its global appeal, the company plans to release TikTok Lite, a lighter version of the app that has fewer editing video features and filters, specifically for markets in sub-Saharan Africa. The company’s regional teams have made TikTok one of the most diverse firms to originate in China and reach nearly every corner of the world.

The complexities of drawing revenue from advertisements and e-commerce still need to be resolved. TikTok will test whether ByteDance co-founder Zhang Yiming’s vision to create a new type of global tech company can come to fruition.

This article was adapted based on reporting by LatePost. KrASIA is authorized to translate, adapt, and publish its contents.


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