- Due to the success of its Shoppertainment strategy, TikTok has become a major player in the social media and e-commerce industry.
- TikTok aims to grow its MAUs count by another 50% in FY2022 to exceed 1.5B, which would then be very close to Instagram's existing 2B users.
- Despite the headwinds from TikTok and Apple, Meta is expected to report excellent revenue growth at a CAGR of 13.69% in the next four years.
- We are certain that Meta will be able to weather the current situation, due to the successful approach of its multiple competitors over the years.
TikTok (BDNCE) combines its addictive entertainment with highly successful advertising to create a Shoppertainment approach that is a massive threat to Meta's (NASDAQ:FB) eCommerce and Social Media strategy. In Meta's recent earnings call, the company acknowledged the growing demand for TikTok's short format video, which was adapted into Instagram's Reels format in August 2020. However, despite the launch, Meta has yet to successfully master the market in FY2021, while TikTok's parent company, ByteDance, reported massive YoY revenue growth of 70% in the same year. Nonetheless, considering how Meta has navigated multiple competitions through technology adaptation or acquisition over the years, we are confident in its ability to turn this situation around.
For this article, we will focus on how Instagram will fare against the intense competition from TikTok.
The Superiority Of TikTok's Shoppertainment
By combining its addictive entertainment and successful advertising as a Shoppertainment strategy, TikTok has shown itself as a force to be reckoned with in the Social Media and eCommerce industry. The innovative approach led more advertisers to switch from traditional social media platforms like Facebook and Instagram, to its highly creative and engaging platform, TikTok, especially during the widespread COVID-19 lockdowns.
In addition, TikTok had trended their For You Page and hashtag #TikTokMadeMeBuyIt, due to its highly effective and accurate algorithms. With more than 3B views of the hashtag, the influencers-led phenomenon drove massive global eCommerce growth in the last two years. As a result, TikTok reported nearly $4B of advertising revenues in FY2021.
TikTok's Shoppertainment Strategy
TikTok achieved the feat due to its highly connected platform, which encourages two-way public interaction, by enabling entertaining advertisements and community participation. It allowed TikTok users to reach out to a more extensive community based on similar interests than Instagram, which encourages interactions based on the existing circle of followers. These proved highly effective during the COVID-19 lockdowns as many turned to TikTok communities for social interactions, especially for the Gen Zs and Millenials who form the majority of TikTok users at 63%. In addition, TikTok's short video format allows for more entertaining advertisements content, which users commented as less disruptive and more entertaining than other social media platforms.
TikTok's Advertising Success
As a result, more users have indicated that they are more inclined to discover and purchase new products from the new advertising format. The more engaging platform and seamless discovery had led to TikTok's 37% consumer product engagement, which is 1.5 fold higher than any other platform. It is evident that TikTok had redefined the popular social media experience into distinctly communitive engagements, while also reinventing the global eCommerce experience.
TikTok's Massive Growth Likely Tempered By New Regulations And Algorithm Changes
Global Social Networks' Number of Users as of Oct 2021
As of September 2021, TikTok reported 1B of global Monthly Active Users (MAUs), representing an astronomical CAGR of 93.84% in the past four years. In addition, TikTok intended to grow its MAUs by another 50% in FY2022 to over 1.5B, which would then be nearer to Instagram's existing MAUs of 2B. For reference, TikTok took only five years to grow its MAUs to their current levels, while Instagram took 11 years. It is also important to note that as of October 2021, Snapchat (SNAP) only had a total of 538M MAUs since its inception in 2011. Furthermore, 1.5B of MAUs would bring TikTok closer to Meta's Whatsapp at 2B, Alphabet's (GOOG) Youtube at 2.29B, and Meta's Facebook at 2.89B.