How addictive is TikTok? Think of the immersive short-form video app as a dopamine hit, the “feel-good” hormone that gives us a sense of pleasure. When you watch TikTok, its algorithm dishes out more short videos, pushing us further down the rabbit hole.
TikTok, which lures users to an endless scroll of mostly 15 seconds to three-minute long random short-form videos, reaches 1.5 billion monthly active users, according to data. ai., a San Francisco-based firm that tracks social media usage.
Unlike other global social media sites whose use is shrinking or are seeing their growth taper off, TikTok is still growing at a 35% to 40% annual rate, according to most estimates. Unlike other global social media sites whose use is shrinking or are seeing their growth taper off, TikTok is still growing at a 35% to 40% annual rate, according to most estimates.
Users of TikTok spent an average of 45.8 minutes on the platform every day last year, more than they spend on other social media like YouTube or Instagram, and are spending more time on the platform at the expense of the time they spend doing other things. Its ad revenues are forecast to top US$12 billion ($17 billion) this year, up nearly 200% over last year.
A couple of weeks ago, I spoke to Mark Shmulik, Internet analyst for Sanford C. Bernstein & Co in New York. Shmulik recently compared TikTok to America’s 1980s crack cocaine epidemic and called the short-form viral video app “digital crack.” In the 1980s, crack emerged as a cheaper alternative to cocaine in America.
While the more expensive cocaine’s effects take some time, crack gives smokers a short, almost instantaneous and intense high but wears off fairly quickly, forcing users to seek another ‘hit’ until they become addicted. More recently, between 2014 and 2020, America faced an opioid crisis due to increased prescription and widespread misuse of highly addictive opioid medications that use Fentanyl. Opioid addiction killed 70,000 people in the US in 2020, up from around 50,000 in 2019. Now, a new addiction, ‘digital crack’ called TikTok, is hogging the headlines.
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Regular readers of this column might recall that over the past four years, I have covered TikTok, its parent Beijing-based parent Bytedance — which also operates the Chinese version Douyin — and the larger controversy over the short-form video content. I also covered former US President Donald Trump’s attempt to ban and forcibly restructure and stifle the burgeoning Chinese-owned firm. Courts overturned the ban, but regulators and politicians from both sides of the aisles in Washington still have TikTok in their sights. Last week, TikTok’s COO Vanessa Pappas spent hours being grilled at a US Senate hearing about when her company will seal off American user data from being reviewed by Chinese regulators.
TikTok’s influencers create their videos and upload them for other users to see. They are paid between 2 to 4 US cents per thousand views, while TikTok makes money from selling advertising on its platforms. For example, its top-ranked influencer — 18-yearold Connecticut girl Charli D’Amelio — has been on the platform for three years, has 10 million subscribers, gets over 350,000 views every day for her videos and is worth nearly US$20 million.
Little wonder, then, that everyone wants to create videos and have their 15 seconds of fame. And it is not just creators or influencers, but TikTok has been so successful that just about every tech platform wants to be a short-form video distributor and join the gold rush. TikTok’s clones include Meta Platform’s Reels, YouTube’s Shorts, Snap’s Spotlight, Pinterest’s Idea Pins, Netflix’s Fast Laughs and Amazon’s Inspire. Last week, YouTube announced that it would share 45% of revenues from ads that run between videos in the Shorts feed with creators and payout at the end of every month to woo influencers away from TikTok.
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In a way, TikTok and its competitors in short format videos are wooing viewers away from other players in the attention economy — video streaming firms like Netflix, Walt Disney, Amazon Prime and Apple, video games makers Electronics Arts, Activision Blizzard, and Take-Two Interactive and music streaming services like Spotify. Short-form video is shared on other social media as well newspapers, radio, terrestrial TV and podcasts. “If short-form video is going to grow, it will take share from everything that has our attention,” Shmulik says.
So, how much more time will we spend watching short videos like those on TikTok? Shmulik believes there is plenty of room to grow. While the average TikTok user spends just 45 minutes every day watching its videos, the average Douyin or Kuaishou user spends up to 120 minutes on short-form videos daily.
If TikTok can match Chinese short-form video peers, it would take 80 minutes from TV, newspapers and other social media. He notes that the time Americans spend on short-form videos has been growing by 20% to 30% a year, with 65% of the time taken away from other formats and 35% “newly created” Internet time.
The arrival of short videos like TikTok has been music to the ears of music rights owners like Japan’s Sony Corp, which owns about 50% of global music rights. The music industry is now focused on extracting more licensing fees from TikTok and other shortform video distributors like Meta’s Reels and YouTube Shorts because they are seen as the fastest growing platforms for consuming music from top-grossing singers like Taylor Swift and Ed Sheeran.
E-commerce, the next frontier
In China, e-commerce is the next frontier for short-form video players like Douyin and Kuaishou, as well as the nifty app WeChat and its parent Tencent, both players in the short- form video space in their own right. In a recent report on short-form videos in China, Goldman Sachs noted that Douyin, Kuaishou and Tencent “are becoming funnel ecosystems as they know their users more daily, increasing their advantage in providing relevant recommendations, ahead of other forms of entertainment and shopping apps.”
The report noted that short-form video players initially focused on live streaming shopping and are gradually expanding into all-purpose shelf-based shopping, local services, recruitment and real estate. Goldman estimates that live streaming contributed to 15% of total online retail share in China last year. It estimates that figure will likely grow from 25% to 30% by 2025.
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But don’t expect TikTok to soon become a competitor to Amazon in e-commerce or short-form video players to morph into serious e-commerce players. Shmulik doesn’t see social commerce or group buying taking off in a big way in the US or elsewhere in the West. “It may have taken off in China, but that’s just not how we in America, or people in Europe, buy things,” he says. “We like going to a mall or shopping online on Amazon for ourselves.”
Americans don’t want to call friends and neighbours or compare shopping lists and buy as part of a larger pool to cut overall shopping costs. Even in China, group buying has been more popular in second and third cities and rural areas than in larger urban centres like Shanghai.
Still, short-form video players are busy trying to make inroads in e-commerce. Facebook is expected to shut down its live shopping feature next month to focus on Reels. Amazon is reportedly working on a TikTok-like vertical video feed for its shopping app. Last month, YouTube announced a partnership with e-commerce enabler Shopify. Creators can link their products from their Shopify stores directly to their live streams on YouTube. Meanwhile, giant retailer Walmart is delving further into live-streaming and social commerce with an extended partnership with Talkshoplive.
The rise and rise of TikTok have pressured earnings of tech platforms linked to Meta, Snap, Pinterest and even Twitter. So, who might be the biggest loser from TikTok’s ascendancy? While much media attention has been on how much Meta has suffered, Shmulik believes YouTube is probably the most vulnerable because it is the closest thing to TikTok. Both are in video entertainment business. “The reality is that there is a finite amount of time that we can spend online,” Shmulik says.
We must work, sleep, eat, and play; our kids must attend school and learn. We can’t be online watching videos all the time. All short-form video platforms are trying to attract viewers away from other forms of entertainment like longer-form videos, movies, music, sports, surfing the web, instant messaging, social media or whatever else we do in our free time every day.
Is an IPO on the cards for TikTok? Trump had tried to force TikTok to sell itself to American companies. Walmart, Microsoft and software firm Oracle — which was keen on hosting tens of millions of short-form videos on its cloud servers — were all at one point in the race to take a substantial stake in TikTok. The platform could be worth up to US$50 billion as a standalone entity if its parent Bytedance were to sell it.
Last week, Bytedance offered to buy back as much as US$3 billion of its shares from investors at a US$300 billion valuation. At its height 18 months ago, Bytedance was reportedly worth over US$400 billion and readying an IPO for late this year. Bytedance investors include prominent venture capital firm Sequoia Capital, investment group Susquehanna International and Japan’s SoftBank Group. China is unlikely to allow a TikTok spinoff because selling the short-form video firm will involve transferring algorithms and other intellectual property from Bytedance to a US entity.
Even if Beijing was willing to allow Bytedance to sell TikTok, Shmulik doesn’t believe any significant tech players would buy the short-form video firm. “TikTok is now just too big to be acquired by one of the big players,” he argues. If they could, Alphabet and Meta Platforms would be prevented from buying it because of anti-trust issues. And Bernstein’s Internet analyst doesn’t see why Apple, Amazon.com, or even Microsoft, will be interested. “I don’t see them doing an IPO over the next year or so or being sold to private equity or a consortium led by Oracle,” he says. “I don’t know what will happen in five or 10 years, but nothing in the foreseeable future.”
Ultimately, TikTok’s future will be in the hands of regulators and politicians. When it comes to addictive stuff, whether it is opioids or cocaine or, for that matter, digital crack regulators are forced step in to save society at large. Politicians in the US — Democrats and Republicans — have talked about moving against TikTok and other platforms that they believe are harmful to society. Whether they will do so against popular media like TikTok remains to be seen.
Assif Shameen is a technology and business writer based in North America
