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Special Report: The TikTok Gold Rush Has Begun

Why Brands Need to Engage With the Upstart Social Media Platform

By Gary Symons, TLL Editor in Chief

It’s been a while since a new social media platform has really punched through the ceiling to join the ranks of the well-established giants like Facebook, Twitter, or Instagram. 

In early 2019 not many people in the West even knew about TikTok; it was just another in a series of video-related social media upstarts (remember Vine, anyone?) that briefly soared across the digital firmament, and then faded away. 

But TikTok seems like it’s got real legs, not just because of the fast rate of adoption, but also because the company appears to have solved the monetization puzzle. Typically, social media networks acquire a lot of users, but struggle to turn those users into a revenue stream. TikTok, on the other hand, has signed deal after deal this year that one can see will pour a steady stream of cash into the company’s coffers. 

TikTok is now the top entertainment app on Android and iOS devices.

The big question licensing agencies are asking themselves this year is whether the joint China-US owned app company is a flash in the pan, or a steadily growing wildfire. For a variety of reasons, we believe it’s the latter, and that fire will continue to burn brighter through 2021. 

So, Exactly What and Who Is TikTok, and Why Do I Care?

In the most basic terms, TikTok is an app sold primarily on iOS and Android that allows users to easily shoot, edit and post short videos, backed up with music and various filters. Each video is very short, at a maximum of 15 seconds each. In that sense TikTok is very similar to Vine, but the app is improved enough that it gives its users very creative and simple ways to express themselves online. 

The app was initially launched in China as Douyin, and then launched outside of China in 2017 by ByteDance as TikTok. They both use the same software code, but they’re hosted on different networks due to Chinese censorship laws. Many people have pointed out that TikTok seems very similar to both Vine and musical.ly, and there’s a good reason for that: ByteDance Ltd. acquired musical.ly in 2017, and merged the two into the global version of the TikTok app. 

As for why the licensing industry should care, the answer is all in the numbers. 

For an app and social network that launched just three years ago, TikTok’s growth has been phenomenal. Based on publicly reported data, as of October 2020 TikTok ranked as the seventh largest social media network in the world, with 689 million monthly active users, while it’s sister app Douyin has 600 million users, for a combined total of almost 1.3 billion. 

When you compare that to the numbers for much older social networks, the results are startling. For example, Douyin and TikTok combined have more users than Instagram (1.16 billion), and close to half as many as Facebook (2.7 billion), the world’s largest social media network. 

Top Social Media Networks

Facebook 2.7 billion
YouTube 2 billion
WhatsApp 2 billion
Facebook Messenger 1.3 billion
TikTok & Douyin Combined 1.29 billion
WeChat (Weixin) 1.2 billion
Instagram 1.16 billion
TikTok 689 million
QQ 648 million
Douyin 600 million
Sina Weibo 523 million
QZone 517 million
Snapchat 433 million
Reddit 430 million
Kuaishou 430 million
Pinterest 416 million
Telegram 400 million
Twitter (potential ad reach) 353 million
Quora 300 million

Source: DataReportal

In short, TikTok is already larger in terms of monthly users than most of the world’s social media networks, and it is gaining new users at a faster rate. For example, it took Instagram six years to gain the same number that TikTok alone achieved in only three years. If you include Douyin in China, the combined social network has surpassed Instagram in only four years, while Instagram’s total took 10 years to achieve. 

That popularity also extends, to a lesser extent, to its website, where TikTok held a global rank of 39 for the most used websites globally, and number 58 in the United States. 

Another way to look at TikTok’s success is through its app download numbers, and again, those stats are impressive. TikTok is Number One for Entertainment on both iOS and Android, but just as importantly it also ranks 11th on Android for all app downloads, and third on iOS. The only apps that beat out TikTok on iOS were Zoom (driven by the pandemic) and Threads from Instagram. However, as of our data check on Nov. 27, TikTok was beating out YouTube, Instagram and Facebook on the iOS platform, showing the upstart has more momentum than its rivals.

For example, consider that as of February 2019 TikTok reached its first billion downloads, and by April 2020—just over a year later—the app surpassed two billion downloads. 

All of that said, TikTok still has a lot of room for growth, and it is growing fast. In 2019 it was India that led the downloads of TikTok with 191 million downloads, and the US had only reported 41 million downloads, but in 2020 it became the single most downloaded app in North America. 

How is TikTok Different from Other Social Media?

A big difference between TikTok and other social media is that Facebook, Twitter, and LinkedIn (among others) are primarily social media apps used for communication, while TikTok is an entertainment app with a social media aspect. 

The company’s mission statement is to “… capture and present the world’s creativity, knowledge and precious life moments, directly from the mobile phone. TikTok enables everyone to be a creator, and encourages users to share their passion and creative expression through their videos.” 

The entertainment value of TikTok creators, in turn, means that people spend a lot of time on the app, an average of 52 minutes per day, which is very similar to Snapchat, Instagram and Facebook, and nine out of 10 people who download the app use it on a daily basis (Source: Business of Apps), driving millions of video views per day. 

Perhaps the most important difference is that the very nature of these short videos make them almost perfect for marketing campaigns. Short, punchy, and right to the point, TikTok videos are very like a tightly scripted TV ad, with the exception that people actually want to watch them!

Soaring Revenue at a Young Age

Another important difference with TikTok is that the parent company’s revenue has skyrocketed in just four years. Bloomberg reported this year that Bytedance had already pegged an astonishing $7.4 billion in revenue for 2018, and then more than doubled that with $17 billion in 2019. By that time the company was valued at $110 billion, but many analysts believed it would fetch an even higher valuation in an IPO. 

Sarah Cooper’s lip sync impersonations of US President Donald Trump generated both views and controversy, driving adoption of TikTok by older users.

Even scarier, the app’s real popularity hit in 2020 as TikTok creator Sarah Cooper generated both millions of views and widely reported controversy through her lip sync impersonations of US President Donald Trump. Cooper later showed up on newscasts and several late night television shows, and millions of older Americans began downloading an app that was previously used mainly by a younger 16-24 demographic. 

Cooper herself is a Jamaican-American woman who formerly worked with Google and Yahoo, but left a successful career to work in standup comedy, working with the likes of Stephen Colbert, but it was her brilliant impressions on TikTok that made her a star, even landing the comedian her own comedy special on Netflix. Incredibly, however, Cooper doesn’t even crack the Top 50 of most watched TikTok accounts, which as of this writing is headed by the breezy young dancer @charlidamelio, who boasts more than 100 million followers. 

What Cooper did do, however, was bring TikTok to an audience that knew little or nothing about it … and then Trump himself took notice. The US President inadvertently raised TikTok’s profile in America by claiming the platform was a security risk, and threatening to ban the app in the US unless it was purchased by an American company by Nov. 12, later extended to Nov. 27. 

That did happen … sort of. US tech firm Oracle did buy into TikTok, but only owns a 12.5 per cent stake. The Trump administration still insists TikTok must be owned by an American company, but ByteDance is asking the courts to declare the order unlawful and that it be overturned in court. In the meantime, TikTok has been handed another extension, until Dec. 4, and with a new administration coming in it appears increasingly unlikely ByteDance will be forced to sell, especially as US regulators were somewhat assuaged by the fact Oracle will own and run the cloud servers and security for the app outside of China. 

Nevertheless, the controversy increased North American views, the agreement with Oracle may well clear the app to operate in the US with no restrictions, and TikTok has since taken advantage of both developments to ink several key deals. 

TikTok Lays The Foundation for Increased Revenue

One of these key agreements likely came about because of the manner in which TikTok videos were boosting sales of the back catalog of various music companies, most notably Sony Music Entertainment, which also owns Columbia Records.  

As reported in The Licensing Letter on Nov. 4, the agreement with Sony Music Entertainment allows TikTok’s millions of users to use songs from SME’s vast roster of global music superstars, as well as its many emerging artists. 

“We are thrilled to enter in to this agreement with Sony Music so that we can continue to work together to connect the incredible roster of Sony artists in the US and across the globe to new audiences and harness the power of TikTok,” said Ole Obermann, Global Head of Music for TikTok. “Especially during this time when the artist community is challenged to find new ways to reach fans with their music, we are committed to working together to do just that.”

A lot of TikTok content consists of users combining short form videos with music, so music licensing agreements have become critical to the social media platform’s global success. 

Nathan Apodeca, aka Doggface208, posted one of TikTok’s most popular videos, and at the same time drove a licensing deal between TikTok and Sony Music.

Likely the most famous example to date came from a short TikTok video in which Idaho man Nathan Apodaca (better known as ‘Doggface’) filmed himself on a skateboard, drinking cranberry juice out of a jug, and then suddenly bursting into a joyous lip sync version of Fleetwood Mac’s 1977 hit Dreams. 

The video exploded across the Internet, garnering millions of views, and turning Doggface into a much sought after commodity in the social influencer space. It also boosted the sales of the Fleetwood Mac album and of Ocean Spray Cranberry Juice, not to mention inspiring a legion of imitators. Dreams saw a 374% jump in sales and an 89% jump in streams, and even made it back onto the Billboard top charts at #21 after a 43 year absence. Dreams hit the Top 10 on Spotify and #1 on Apple Music.

Fleetwood Mac co-founder Mick Fleetwood himself joined TikTok to post his own version of the Dreams video, and later thanked Doggface and TikTok for the video.

“It’s been such a wonderful surprise to see that TikTok has been able to bring some joy in challenging times as well as encourage creativity among so many young people,” Fleetwood said. “To see our fans or even people just learning about the band embrace Fleetwood Mac has been so inspirational and meaningful to us.”

But Dreams and Fleetwood Mac come under the Sony label, and without licensing deals like the one announced this week, TikTok’s ability to distribute videos like Doggface’s Dream ride could potentially be crippled, if that music was then used in anything that could be seen as an advertisement. 

On the other side of the equation, Sony is equally aware how important exposure on TikTok is for their stable of artists. 

“Short form video clips have developed into an exciting new part of the music ecosystem that contribute to the overall growth of music and the way fans experience it,” said Dennis Kooker, President, Global Digital Business and U.S. Sales, at Sony Music Entertainment. 

“TikTok is a leader in this space and we are pleased to be partnering with them to drive music discovery, expand opportunities for creativity, and support artist careers.”

The deal gives the TikTok community blanket access to sound clips from Sony Music’s immense catalog, laying the foundation for creators to work with various commercial brands.

It didn’t take long at all for licensing agency Joester Loria to see the writing on the wall. In 2019 Joester Loria signed up TikTok stars ‘WeWearCute’, consisting of sisters Ashley and Emma, who have racked up billions of views on the rising social media platform. Represented by Joester Loria Group and TTPM Influencer Talent Management, they are knocking down deal after deal after deal.

In April WeWearCute signed up with Taste Beauty for their own beauty line, followed up in June for a partnership with Spin Master for stationery, crafts, and activities lines, and then got a deal with Mad Engine for Apparel and Accessories in July. Last month JLG brokered yet another deal with Build-A-Bear, with the agency saying they have tapped into “the “pop culture zeitgeist,” in what they see as an early preview for the potential of TikTok as a channel for brand ambassadors.”

Direct Monetization Through Ecommerce Stores

But what might in the future be seen as TikTok’s boldest move yet was announced last month (For more, see the original story in The Licensing Letter at https://www.thelicensingletter.com/tiktok-makes-monetization-move-with-partner-shopify/) when the social media giant announced a key agreement with Canadian ecommerce giant Shopify. 

TikTok and Shopify have launched a new “compatibility project” which allows small business owners to create, manage, and measure their TikTok ad campaigns natively within the Shopify platform. 

The new TikTok feature within Shopify will provide access to the core functionality of the TikTok roughly one million merchants around the world. The feature is now available in the US, and will be extended to North America, Europe and Southeast Asia by the end of Q2 2021. 

The move followed development of new technology developed by TikTok to encourage businesses to use TikTok as a direct marketing tool, called ‘TikTok for Business’, with the slogan, “Don’t Make Ads. Make TikToks.”

While the TikTok videos are definitely ads, it’s not obvious that they are ads, and that’s the difference. The company advocates a viral video approach to marketing, telling stories and building audience for brands rather than simply putting out ads designed to sell a product right now. 

“Over the past year, brands have found success resonating with the TikTok community not because they had the glossiest ad or the biggest names in their campaign, but because of their ability to creatively engage and connect with users through feelings, actions, and sounds,” said Katie Puris, the company’s managing director of global business marketing. 

TikTok quickly followed up in September with the launch of its Marketing Partner Program, which links advertisers with several technology providers to help them create and measure their TikTok campaigns. 

Those include creative development partners like QuickFrame, VidMob, and Vidsy, or branded effects companies like Byte, Happy Finish, and Ignite XR, among others. All partners on the site (https://ads.tiktok.com/marketing-partners) are experts vetted by TikTok who can create campaigns relevant to the TikTok audience. 

But all of that can now be seen as building the foundation for TikTok’s ad business, while the deal with Shopify opens the doors to the millions of actual advertisers who drive revenue. Under this new system, businesses and TikTok artists can create a campaign under a hashtag that directs the viewer right back to the Shopify ecommerce portal for that business. 

To launch the new system, TikTok partnered with Shopify on a campaign called #ShopBlack, which allows viewers to shop a sponsored hashtag without leaving the app. 

The campaign saw Black-owned businesses and entrepreneurs sharing their stories with the TikTok community from Nov. 10 to 15, with viewers being able to shop products from more than 40 Shopify merchants using the hashtag.

TikTok notes that posts using #BlackOwnedBusinesses and #SupportBlackOwnedBusinesses generated over 210 million views in the first few days. 

And that, of course, is just the beginning. While no one outside of TikTok’s management team can predict what will come next, the company has very quickly put in place key monetization tools that will not only promote businesses on its platform, but will also link purchases directly back to TikTok videos. 

And that, in four years flat, has turned TikTok into one of the largest marketing, advertising and branding companies in the world. 

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