TikTok diverts advertising revenue, hurting many American social platforms – yqqlm

On July 23, Snap reported in its second-quarter earnings reportLists competition from short-video platform TikTok as the main reason for the poor quarter. It’s not just Snapchat, the “flash after reading” communication app, that’s a headache. As TikTok’s business grows, it has become a competitor that big companies like Meta and YouTube can’t ignore.

When asked in October 2019 whether TikTok was a friend or rival of his business, Snap CEO Evan Spiegel chose the former.

“We absolutely see them as friends,” Spiegel told investors on Snap’s third-quarter 2019 earnings call. “They’re co-developers. As far as Snap Kit is concerned, they’re ours. Advertising partners. Most importantly, I think the value they provide to their community is completely different from the value we provide to our community.”

Spiegel’s view of the company’s business relationship with TikTok may not be so good now. Snap reported second-quarter earnings this week, and the dismal quarterly earnings were another sign of a slowdown in ad spending. TikTok continues to gain market shareanother sign of more leverage for competitors in the social media space.

In addition to competition from TikTok, SNAP and other big tech companies have also been affected by Apple’s privacy policy adjustment, increased global economic uncertainty, frequent supply chain problems and other factors.

But TikTok has gradually become a thorn in the side of competitors. Meta and Snap even directly acknowledged the threat the TikTok app poses to their businesses on recent earnings calls.

Market consultancy Insider Intelligence ranks TikTok as the third-largest social platform after Facebook and Instagram. It is predicted thatTikTok to triple digital ad revenue this year to nearly $12 billion, more than Twitter and Snapchat combined.

“TikTok is a rival that no social media giant can ignore,” said Laura Hoy, an equity analyst at investment services firm Hargreaves Lansdown. “TikTok is doing the same thing in the same space. That’s the problem with social media. Users are fickle and you never know how fast their attention spans can change.”

TikTok’s growth doesn’t affect every platform exactly the same. Its short-video platform competes more directly with YouTube’s business and social entertainment apps like Snap’s instant messaging. But when it comes to ad revenue, every company is competing for the same piece of the pie.

“Spiegel and his team are right to think that Snapchat usage is not influenced by TikTok,” said Rich Greenfield, co-founder of investment bank LightShed Partners. “But the problem is, there’s definitely competition for ad spend, and Probably more than they realize. Now they’re dealing with a money-sucking ad monster like TikTok that’s putting pressure on Meta, YouTube, and every business.”

While companies such as Snap are keeping up with market trends with various innovations, TikTok in turn has quickly copied other companies’ capabilities. Some analysts even worry that Snapchat will be replaced by TikTok.

Snap CFO Derek Anderson acknowledged the impact of TikTok during a Q&A session with analysts on the earnings call, saying: “Whether it’s competing with TikTok or any established company in the space,” he said. It’s getting worse.”

Snap’s Gen Z user base makes it particularly vulnerable to competition from TikTok, which is rapidly gaining popularity among the same audience. According to market research firm Forrester, TikTok is “more sticky.” The study found that 42 percent of U.S. online users aged 18 to 25 thought TikTok was addictive, while only 21 percent thought Snapchat was addicting.

Jasmine Enberg, principal analyst at Insider Intelligence, said that Snapchat was once the most important instant messaging app, but as Spotlight’s content creation capabilities continued to improve, it began to dabble in the TikTok business.

A Snap spokesman declined to comment on competition in the ad market.

In addition to Snapc,TikTok is also a confidant of Facebook owner Meta. Meta has tweaked several core products this year, most recently putting its own TikTok rival, Reels, at the top of its Facebook and Instagram platforms, with the aim of boosting user engagement in its short-video business.

Surveys show that users are ditching Facebook and Instagram for TikTok and Snap. According to data.ai, an app analytics platform, TikTok’s monthly time spent per user increased by 40% in the first quarter of this year compared to the first quarter of 2021 and 140% compared to the first quarter of 2020, surpassing Facebook and Instagram.

“While they can copy and paste TikTok’s features, they can’t copy and paste TikTok’s thriving community of users and creators. They need to keep investing and doubling down,” Mike Prox, vice president, research director, Forrester Proulx) said.

Meta cited the growth of Reels, stating that short video is the company’s fastest growing content format,Users spend more than 20% of their Reels time on Instagram.

Investment bank Bernstein wrote in a research note that Google YouTube’s performance over the past two quarters has been disappointing, and it faces “a strong direct threat from TikTok, as well as more ad-supported growth from companies such as Netflix and Disney. Video business competition”.

TikTok has surpassed YouTube in terms of usage time. According to research by data analytics firm App Annie, users spend an average of 23.6 hours a month on TikTok, compared with 23.2 hours on YouTube. YouTube has also launched its own short-video feature, Shorts, which it claims has surpassed 30 billion daily views, four times what it was a year ago.

But some ad buyers say that neither YouTube’s Shorts nor Meta’s Reels are getting enough interest to warrant a large ad spend to get the desired effect.