TikTok is having a monster 2020


Today felt like an unusual lull in the intersection of our many unfolding national and global crises, and so I thought I’d take the opportunity to write about something different — a subject that, despite all my best efforts, I keep getting crushingly wrong. That subject is TikTok, the ByteDance-owned app whose fading into irrelevance I have been predicting for more than a year now, and which — to say that absolute least — has yet to arrive.

How well is TikTok doing these days? Let’s check in with Sarah Perez, writing last week at TechCrunch:

A new study on kids’ app usage and habits indicates a major threat to YouTube’s dominance, as kids now split their time between Google’s online video platform and other apps, like TikTok, Netflix and mobile games like Roblox. Kids ages four to 15 now spend an average of 85 minutes per day watching YouTube videos, compared with 80 minutes per day spent on TikTok. The latter app also drove growth in kids’ social app use by 100% in 2019 and 200% in 2020, the report found.

So basically, before TikTok, kids used social apps a certain amount. And then by 2019 they started using TikTok and that amount doubled, and then by this year it had tripled. If you are working on a social app, this is a good sign that you are doing something right.

And so it pains me — like, in an excruciating way — to say that if you have been reading The Interface for the past couple years, all this may have come as a surprise. Since ByteDance bought Musical.ly in 2018 and fused it with another app to create the sensation known as TikTok, I have been impatiently awaiting its demise.

Last August I wrote about how competition, regulation, and user retention problems could thwart TikTok’s ambitions. In November I wrote about how Congress and the Council for Foreign Investment in the United States were putting the squeeze on ByteDance — and about how the company’s past run-ins with the Chinese government had created a credibility gap with US regulators. In December I was warning about looming competition again, and by January I said ByteDance might be getting ready to sell TikTok off.

Looking back, I don’t believe that any of those predictions were irrational, exactly. All were based on things that were actually happening. Competitors were launching; regulators were starting to ask questions; and users were churning. But it’s clear that I’ve underestimated TikTok in two important ways: one, the appeal of the core product, which is way more powerful than I ever gave it credit for; and two, ByteDance’s nimbleness in responding to these challenges. And I overestimated the competition, which has so far been weak; and the regulators, who have mostly stuck to angrily shaking their fists at the sky in the American tradition.

So what’s working?

One, ByteDance is printing money, and money is power. TikTok itself generates significant revenue through advertising and in-app purchases, and ByteDance’s growing portfolio of apps has created a war chest it can use to reinvest in TikTok’s success. Here are Katie Roof and Zheping Huang in Bloomberg:

The company owes much of its success to TikTok, now the online repository of choice for lip-synching and dance videos by American teens. The ambitious company is also pushing aggressively into a plethora of new arenas from gaming and search to music. ByteDance could fetch a valuation of between $150 billion and $180 billion in an initial public offering, a premium relative to sales of as much as 20% to social media giant Tencent thanks to a larger global footprint and burgeoning games business, estimated Ke Yan, Singapore-based analyst with DZT Research.

“None of the Chinese tech companies has achieved this level of success in the global market before ByteDance,” he said, adding neither social media company harbors much debt. “The fact that ByteDance is making profit, if true, and sitting on a $6 billion cash pile means that it is not in a rush at all to come to market to raise capital

Two, TikTok keeps finding new users. My old view was that once ByteDance stopped buying new installs on Facebook, TikTok’s growth would level off. Instead, the pandemic hit, American teens were locked indoors for weeks on end, and TikTok became the most downloaded app in the world — installed 315 million times in the first quarter, according to third-party data, and reaching more than 2 billion cumulative downloads in the current quarter.

Three, ByteDance has rapidly leveled up its lobbying game. It hired its first American lobbyists a year ago, and in November hired a former congressman in anticipation of more regulatory pressure. Last month it hired the prominent executive Kevin Mayer away from Disney to be TikTok’s CEO, giving ByteDance a face of the American business establishment to go before Congress and ask questions about how the Communist Party of China might plan to use TikTok as part of an influence campaign. And to that last point, PingWest reported this week that ByteDance will begin restricting the access Chinese engineers have to TikTok’s code base.

There are good reasons to be skeptical about the data issue, as Ben Thompson laid out this week at Stratechery. “There are two problems here,” he wrote. “First, who is going to verify this, and second, the more concerning possibility to my mind is not so much user-data but rather the sort of algorithmic control that could very much sway hearts and minds. That, technically, is not ‘sensitive data’, it just happens to be very powerful data.”

I don’t know what ByteDance could do to convince us that it will never, ever share American user data with the Chinese government or allow state agents to manipulate its algorithms. At the same time, in recent weeks I have felt like TikTok is working to build trust where it can. After a recent issue in which view counts were improperly displayed for videos related to Black Lives Matter protests — part of a pattern in which content from minority communities has seemed to get lower distribution — TikTok established a creator diversity council and donated $3 million to nonprofits supporting the black community.

What impressed me so much weren’t the moves themselves so much as the speed with which TikTok made them: you can’t move that quickly unless you’re attuned to your user base, and that bodes well for the company as future crises inevitably arise.

The question is how long TikTok will be able to serve that user base before some conflict with China’s larger interests materializes. For ByteDance, this is not a theoretical question, as Alex Heath, Yunan Zhang and Jessica E. Lessin wrote in The Information:

The government sees the media as an essential instrument of domestic control and increasingly as a tool for projecting its views on the international stage. For example, in early 2018, after the government shut down Toutiao for 24 hours for posting what it called “pornographic and vulgar content,” ByteDance hired 2,000 content moderators, giving preference to Communist Party members in its recruitment.

But at this point, the mere existence of a threat to ByteDance no longer persuades me that the company won’t find some way to crush it. Skepticism is a reporter’s most valuable tool, but it ceases to be useful the moment it blinds you to the facts. TikTok isn’t just a fluke smash hit — it’s a durable one. Whatever problems lie down the road, and I’m sure there will be plenty, the least I can do is to stop underestimating it.