From coast to coast: TikTok’s long-term plans for world domination

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

The most consequential development is that TikTok operates on a hub and spoke model that encourages regional diversification. Now, CEO Shou Zi Chew mainly devotes his time to issues related to cybersecurity, legal compliance, and government and public relations, while localization policy is in the hands of each market’s regional manager.

The overall strategic planning of the company involves three key figures. As one TikTok executive put it Late shipment“The decision-making process between Shou Zi Chew, Zhu Wenjia [global R&D head]and Vanessa Pappas [COO] is not settled. For example, Zhu and Pappas have more say in products and operation. . . [but] product launches and budget for user growth may require Chew’s approval, although they may be decided solely by Zhu. The three hold meetings with regional chiefs twice a month.

While today, TikTok stands on its own as a multinational corporation, its rapid evolution depended on abundant resources drawn from ByteDance and Douyin. Professional expertise in business operations and technical applications has given TikTok a leg up. Even now, TikTok’s e-commerce and monetization strategy is overseen by ByteDance’s go-to-market team, which is led by ByteDance China President Zhang Lidong.

That’s all to say that TikTok was not a platform built by a motley startup team. It was a spin-off based on Douyin, one of the most popular consumer apps in China.

While TikTok and Douyin shared a lot of DNA, TikTok’s organization is very different from its sibling in China. While senior TikTok management formulates overall strategy and direction, such as steps to launch live-streaming or e-commerce capabilities, it is up to regional leaders to shape localized rollout plans.

For example, the US version of TikTok does not have a feature that allows users to detect each other when they are in physical proximity, as this would involve collecting excessive personal data. Meanwhile, the US version of TikTok offers 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, especially popular creators who have massive followers.

The $200 million TikTok Creator Fund was launched in the spring of 2021 to support creators in the United States who were looking to earn a living by being power users of TikTok. The existence of the fund continues to be a big draw for the app, cementing “influencer” as a dream job for many teens across the country.

Elsewhere in Japan, TikTok is sending money to attract popular creators to its app. Japanese users’ TikTok videos are frequently posted on other platforms, with the TikTok logo prominently displayed. TikTok is everywhere and has fundamentally changed short-form entertainment and digital advertising.

TikTok revenue streams

Currently, 1.2 billion people use TikTok every month. That’s still a long way off Facebook’s 2.9 billion and Instagram’s 2 billion (both in Q4 2021), but the growth trajectory is telling. In September 2021, TikTok overtook YouTube in terms of average watch time in the United States. This means that TikTok’s advertising revenue has increased, eating away at the profits of major social media and video streaming platforms.

However, there is still a long way to go before TikTok becomes a standalone company. Its advertising revenue in 2021 was just under $4 billion, or about 7% of ByteDance’s overall revenue. In the same year, Facebook earned $114 billion in ad revenue.

There are still obstacles for TikTok when it comes to acquiring customers. A source on TikTok who spoke to Late shipment “Most companies spend 60% of their advertising budget on Google Ads, 30% on Facebook, and the remaining 10% is adjustable based on the performance of different channels.”

Over the past year, TikTok has honed its live e-commerce capabilities and offered significant grants to create an alternative revenue stream. In 2021, the GMV of this line of business was $951 million.

Internally, ByteDance still sees live shopping as the single most important revenue stream for TikTok over the next decade. ByteDance’s head of e-commerce Bob Kang named Southeast Asian countries such as Thailand, Vietnam and Malaysia as high priority markets.

ByteDance’s broader e-commerce strategy has had mixed results. At the end of 2021, it launched Fanno, an e-commerce application intended to compete with Amazon in Europe. For a time, he also operated Dmonstudio, a women’s fashion and accessories retail website that was in many ways similar to Shein, but the site was shut down in February 2022.

Cultural complexities

As TikTok expands its footprint around the world, the company has put in place business plans tailored to each market, but staff in different countries have expressed dissatisfaction with the unequal treatment.

Staff members in China once complained that their salaries were only half or even a third of those of their American counterparts, even though their responsibilities and workloads were about the same. Meanwhile, TikTok employees in the US have objected to required daily meetings with China-based teams due to time zone differences.

A member of the TikTok team said Late shipment that every product manager he knew in the company quit within the year, and that senior management was concerned about high turnover rates in North America.

Other forms of conflict have arisen due to overlapping customer acquisition goals. One of TikTok’s advertising teams provides services to Chinese companies that set up and operate overseas, but this leads to competition with TikTok’s regional operations, which target the same customers. This has led to the formation of a corporate policy that customer-facing teams may need to share credit whenever they identify the same target.

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

The long-term sustainability of TikTok will likely involve many other changes in the company’s operational methods. Few in the ranks of TikTok and ByteDance have experience executing long-term business roadmaps, according to Late shipment.

Now, TikTok serves an extremely diverse user base. Every day, 700 million people open the TikTok app and browse videos made by creators around the world. To broaden its global appeal, the company plans to launch TikTok Lite, a stripped down version of the app that has fewer video editing features and filters, specifically for sub-Saharan African markets. The company’s regional teams have made TikTok one of the most diverse companies originating in China and reaching almost every corner of the world.

The complexity of earning revenue from ads and e-commerce has yet to be resolved. TikTok will test whether ByteDance co-founder Zhang Yiming’s vision of creating a new kind of global tech company can come to fruition.

This article has been adapted based on reported by LatePost. KrASIA is authorized to translate, adapt and publish its content.

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