As of: 01/10/2023 4:10 p.m
The TikTok boss was a guest in Brussels today. The list of hot topics to talk about was long. How does the Chinese video platform make its money and who is behind it?
It is one of the most downloaded apps in the world and has revolutionized the social media landscape in just a few short years. Their video function, which allows users to create a wide variety of content such as their own karaoke videos, strikes a chord with an entire generation. According to the latest figures, TikTok has over 19 million users per month in Germany, mostly teenagers and young adults up to around 25 years of age. The video portal belonging to the Chinese ByteDance group is used by more than a billion people worldwide every month.
With its extensive range of videos, which also transport propaganda and content harmful to young people, the platform, which emerged in 2018 from the merger of the Chinese offers Douyin and musical.ly, called the state regulators into action early on. In the USA there was intensive discussion about a ban on the platform, and the creation of a US-based subsidiary with majority American owners is currently under discussion.
Numerous problem areas
Today, TikTok boss Shou Zi Chew will be received in Brussels for extensive talks with EU leaders. The list of topics discussed there gives an idea of the challenges that the TikTok phenomenon poses to regulators. The problem areas include, in particular, the lack of data and youth protection by Western standards, extensive political censorship, the spread of fake news, advertising for fake branded articles, fraudulent content and possible espionage by the Chinese state through the evaluation of user profiles.
TikTok is trying to address the global concerns with various measures, such as creating server and developer capacities outside of China or teams of moderators who delete prohibited content. But there is still a long way to go to an offer that satisfies the regulators. In the run-up to Shou’s visit, Internal Market Commissioner Thierry Breton emphasized the importance of data protection. “I will remind him to respect the integrity of our rules,” Breton said on Monday. This also includes transparency with regard to the algorithms used by the video platform.
Meanwhile, Shou met EU Competition Commissioner Margrethe Vestager, Values and Transparency Commissioner Vera Jourova, and Home Affairs Commissioner Ylva Johansson. Above all, the EU commissioners called for the implementation of their European digital guidelines, with which they are trying to regulate the global social media platforms. A statement then said Vestager had discussed TikTok’s “aggressive” data collection and monitoring with Shou, primarily in the United States.
Business model: video advertising
The enormous reach of the rapidly growing platform makes TikTok attractive for advertisers from all over the world. They can produce their own videos for the TikTok feed and then pay for the preferred placement between the user videos. Influencers with an audience of millions, who are paid for advertising content in their videos, also play a major role. Finally, users can also be asked in a kind of competition to create their own videos around a brand.
The big competitors Alphabet and Meta have responded to the popularity of short videos among young users with very similar offerings such as YouTube Shorts and Instagram Reels. But as the British “Financial Times” reports, TikTok is attracting ever larger advertising budgets to its platform with competitive prices. According to data from the New York media agency VaynerMedia, the cost of 1,000 views of TikTok videos is only about half that of Instagram Reels, a third less than Twitter and 62 percent less than Snapchat, according to the financial newspaper.
Significant growth potential
In view of the favorable conditions and high interaction rates, the advertisers surveyed by the “Financial Times” said they were increasingly shifting budgets from providers such as Twitter, Facebook or Instagram to TikTok.
The video app, which is already the most popular in Asia, seems to have far from exhausted its potential. According to data from the agency Insider Intelligence, TikTok had a turnover of more than ten billion dollars last year and had less than two percent share of the global digital advertising market, which is estimated at around 514 billion dollars. The Facebook and Instagram mother Meta, on the other hand, still comes to around 20 percent.
Previous platform founded in 2016
The original platform Douyin, which still exists in China alongside the international version TikTok, was only founded in 2016 by ByteDance founder Zhang Yiming. In 2021, the now 39-year-old multi-billionaire announced his departure from the board of directors of ByteDance, which is led by co-founder Liang Rubo. ByteDance has a private investor structure and is headquartered in Beijing but has its legal domicile in the Cayman Islands.
Singapore-born TikTok boss Shou Zi Chew is also CFO of ByteDance. The 40-year-old succeeded the American Kevin Mayer, who had only managed TikTok for three months. The great influence of Chinese government agencies, which enforce the censorship of content critical of the government or the system, cannot be overlooked.