TikTok is no longer running wild

Before this, the only apps in the world with more than 1 billion daily active users were Facebook, WhatsApp, Instagram and Youtube.

TikTok's ambition is evident. Looking back at TikTok in 2022, it has frequently "gone viral" in overseas markets thanks to its platform traffic and a series of new gameplays.

Among them, TikTok tried offline food delivery and used the popularity of short videos to drive offline book sales, which made users rethink the "real" value of TikTok; and new features such as TikTok's AI green screen background continued to attract users' curiosity with novel and interesting online "virtual" experiences.

In addition to innovations based on short video content, TikTok has also tried to expand its business in multiple fields such as music, games, live broadcasting, and cross-border e-commerce, among which cross-border e-commerce is the top priority.

This year, TikTok's e-commerce expansion has accelerated significantly, from its previous trial in Indonesia and the UK to a global expansion of seven countries, five of which are located in Southeast Asia, one of the fastest growing regions for e-commerce in the world. Following the UK site, TikTok Shop's US site was launched at the end of the year, marking a crucial step for it to enter the European and American markets.

However, for TikTok, which started out as a short video content company, “large traffic advantage” cannot be simply equated with “e-commerce conversion rate”.

In the UK market, the development of TikTok Shop has hit a wall because its product strategy and corporate culture are incompatible with the local environment; in Southeast Asian markets such as Indonesia and Vietnam, although TikTok e-commerce is growing rapidly, the "potential market" is accompanied by the imperfection of various e-commerce supporting services, and consumers may not be ready to "fully embrace social e-commerce."

The development of e-commerce has not been as expected, and affected by multiple factors such as the global economic downturn, TikTok's advertising revenue has also reached a growth bottleneck.

According to sources cited by the Financial Times, TikTok CEO Chow Sau-chi announced at a meeting in September this year that the company would cut its full-year sales revenue by 20%, from $12 billion to $14.5 billion, to $10 billion. During the meeting, TikTok employees were reportedly accused of failing to drive growth in advertising and e-commerce, two of its main revenue sources.

Since the trillion-dollar e-commerce track is difficult to "chew", TikTok has also begun to work hard in the tens-billion-dollar live show industry.

According to Xiaguang News, TikTok has prioritized its live streaming business since last year, and has significantly increased its related funding and manpower investment this year. It has seen a strong momentum since the second half of the year. Taking the Middle East market as an example, in just one year, TikTok's live streaming shows have already become the industry leader.

This article will focus on TikTok’s key progress in e-commerce and live streaming this year, and analyze TikTok’s business direction and future development trends in multiple markets.

1. Although the thunder of e-commerce is loud, the rain has not yet fallen

As the fastest growing social media in the world to date, the value of TikTok's huge traffic pool is still being explored, and cross-border e-commerce has become the only way forward.

In 2020, Zhang Yiming listed cross-border e-commerce as one of ByteDance's three key new business directions. In the more than a year since then, TikTok has begun to test the waters of e-commerce, trying to cooperate with Walmart to sell goods through live streaming, and in 2021, TikTok Shop was launched in Indonesia and the United Kingdom.

Before TikTok Shop went online, a large number of businesses had already tried to place ads on TikTok. When users are interested in the products in the short videos, they can click the link at the bottom of the video to jump to the off-site transaction. After the emergence of TikTok Shop, users can place orders directly in TikTok to complete the purchase, forming an e-commerce closed loop.

Since the beginning of this year, the expansion of TikTok e-commerce in multiple markets around the world has accelerated significantly. In the first half of the year, TikTok Shop was launched in multiple markets in Southeast Asia, including Thailand, Vietnam, Malaysia, the Philippines, and Singapore. In November, TikTok Shop took a more significant step, landing in the largest and most mature overseas e-commerce market - the United States.

Overall, although TikTok has accelerated its expansion in the e-commerce field this year, the growth rate of related businesses is not as rapid as expected.

This is particularly evident in the UK market. Data shows that TikTok's e-commerce GMV exceeded US$1 billion in the first half of this year, while the average monthly GMV in the UK market was only US$24 million.

"The number of users and traffic on the TikTok platform may seem impressive, but I think it actually accounts for less than 15% of the entire overseas traffic pool," a cross-border e-commerce practitioner in Europe and the United States told Xiaguangshe. He believes that European and American consumers have not yet developed the habit of shopping through content e-commerce, and the actual conversion rate of TikTok e-commerce is not high.

For some brand merchants that have already settled in the UK TikTok Shop and are planning to settle in the US site, it is unrealistic to expect to use this to drive a significant increase in brand sales.

After the launch of TikTok Shop in the UK, cross-border brand merchant Huang Cong joined the platform almost immediately. However, based on more than a year of operation, he believes that the effect of opening TikTok Shop on the brand's overall sales is "very limited."

"We mainly use TikTok as an advertising channel rather than an e-commerce platform. For example, we will launch brand activities on TikTok or broadcast short videos of internet celebrities to drive traffic to our website. TikTok's traffic can help us build a certain brand influence among young consumers overseas," said Huang Cong.

Data shows that more than 50% of users in Europe and the United States still choose brand official websites or online platforms such as Walmart and Carrefour when shopping.

In addition, European and American consumers are not so sensitive to the price of goods, but pay more attention to the quality of goods. This also led to the fact that TikTok Shop, which sells low-priced and low-quality goods, did not develop smoothly in the UK.

According to foreign media reports, when TikTok Shop UK was first launched, the platform was flooded with low-priced knockoffs, and the goods often did not match the ones on the shelves, resulting in a poor consumer experience. From the seller's side, after being involved in a price war, even product profits could not be guaranteed, let alone service experience.

"Pushing products with super low prices but poor quality will not only fail to help open up the market, but will damage the brand's reputation and fall into a vicious cycle." Li Ming, a cross-border e-commerce practitioner, told Xiaguangshe.

In response to this phenomenon, TikTok Shop UK carried out a wave of store closures in the middle of this year to regulate the platform order and improve the quality of sellers. However, some sellers found that low prices and fakes have attracted a group of users with poor quality. Once the price is raised, the order volume will drop sharply.

"I no longer operate the TikTok Shop in the UK. My focus is now on platforms such as Amazon, which I have been operating on for many years," said Li Ming.

It is reported that TikTok originally planned to launch the live streaming sales function in European markets such as Germany, France, Italy and Spain, as well as the United States. However, due to internal problems and the assessment that live streaming sales have limited appeal to consumers, TikTok was revealed in July this year that it would abandon the live streaming sales project in Europe and the United States.

TikTok's e-commerce has been cold in Europe, but the Southeast Asian market is gradually accepting emerging online shopping methods such as live streaming, which is reflected in the data.

Data shows that in the first half of this year, when TikTok's e-commerce average monthly GMV in the UK was only US$24 million, its average monthly GMV in the Indonesian market had reached US$200 million.

Unlike the British market, the "low-price route" of e-commerce platforms has been proven to be feasible in the Indonesian market.

The Southeast Asian E-commerce Market Data Monthly Report (June 2022) released by TMO Group shows that in June this year, the average price of goods from Indonesia on the Shopee platform was only US$0.9, far lower than the average transaction price of US$8 in Singapore, another Southeast Asian country. However, due to Indonesia's large population and larger market size, total sales still ranked first among Southeast Asian countries.

Indonesia is a potential e-commerce market and one of the regions with the highest concentration of TikTok users. Although TikTok e-commerce is a latecomer and still has a long way to go to catch up with traditional e-commerce platforms such as Shopee, its growth rate cannot be underestimated as it has been launched in five Southeast Asian countries this year.

"Not only in Indonesia, TikTok e-commerce is also developing rapidly in Vietnam, although it is still a little behind Indonesia at present," said Han Dong, a cross-border e-commerce practitioner in Southeast Asia.

The "E-commerce Platform Business Panorama Report in the First Half of 2022" released by Metric Data Research Company shows that Vietnam is becoming the second largest e-commerce market in Southeast Asia after Indonesia.

Statistics show that more than 70% of Vietnamese internet celebrities are active on the TikTok platform. However, in contrast to the huge traffic, the platform's consumer content is still very scarce.

Han Dong said that it was not until TikTok Shop entered Vietnam at the beginning of this year that many local people began to realize the use of live streaming to sell goods. Therefore, Han Dong and many cross-border e-commerce practitioners believe that there will be another wave of dividends in the Vietnamese market in the future.

In a report, China Merchants Securities pointed out that the retail e-commerce penetration rate in Southeast Asian countries in 2021 was basically less than 5%. At the same time, Southeast Asia is also one of the fastest growing e-commerce regions in the world, showing the characteristics of "low penetration and high growth" of e-commerce, and has sufficient room for imagination.

Southeast Asia's cross-border e-commerce, which is full of opportunities, has attracted a group of entrepreneurs including Han Dong. However, when they stepped into this emerging market, they had to face some realities.

Compared with China, live streaming and related logistics and other supporting services in Indonesia or Vietnam are still at an early stage of development. On the one hand, this means huge potential to be developed, but on the other hand, practitioners have to accept the fact that their monetization capabilities are "far behind" those of domestic e-commerce.

A Vietnamese MCN agency entered the TikTok platform this year. Its head, Michael, told Xiaguangshe that the company's core monetization method is e-commerce live streaming. The MCN is not large in size, with only a few managers and a dozen local Vietnamese anchors, but due to its early start, its current transaction volume has soared to the top level of TikTok e-commerce.

Even so, Michael's company has just achieved a break-even point. "There is still a lack of content on TikTok in Vietnam. It is easy to accumulate fans, but it is difficult to monetize." Michael said that live streaming is still a new thing in Vietnam, and even the top anchors have limited monetization capabilities. His company's monthly sales are only a few million RMB.

He gave an example, a Vietnamese anchor with more than 10 million fans on TikTok can earn about $10,000 a month by selling goods. Although this is an absolute high income in Vietnam, where the average monthly salary is only about 2,000 yuan, compared with anchors in China with the same fan base, the monetization ability of Vietnamese anchors is obviously still far behind.

"I think Vietnamese consumers have only just developed the habit of watching live broadcasts, so the market still needs to wait a little longer," said Michael.

Overall, although TikTok Shop has made great strides, the UK site has not developed smoothly, and the consumption habits of sites in several Southeast Asian countries need to be further cultivated. Analysts pointed out that the Internet industry attaches great importance to genes. TikTok is good at content and traffic, but in the field of e-commerce, traffic does not play a decisive role.

Although the development is not as expected, it is foreseeable that e-commerce will remain one of the key layout directions that TikTok cannot give up in the future.

At the end of this year, news first came out that TikTok Shop's US site was launched after many twists and turns, and then there were reports that TikTok e-commerce was preparing to enter the Spanish market and had started recruiting for multiple positions such as category managers and logistics operations.

It can be seen that TikTok e-commerce has not chosen to retreat completely due to the setbacks in its business in the UK. On the contrary, with the experience of TikTok Shop in the UK, perhaps TikTok e-commerce can avoid taking detours in other European and American markets in the future.

2. Recruit top anchors to grab the meat in the show live broadcast

In addition to e-commerce, TikTok is also working hard to explore more ways to monetize this year. Many pan-entertainment players in various overseas markets feel that TikTok's show live broadcast has developed extremely strongly this year, launching an offensive against traditional players in multiple markets, and the industry landscape may change further.

Compared with the trillion-dollar global e-commerce market, the show market is only worth tens of billions. Many industry insiders believe that this is also the reason why TikTok initially lacked interest in show live broadcasts.

As TikTok's e-commerce development has encountered obstacles, the revenue from the show market has begun to become considerable.

Yang Tai, a practitioner in the live broadcast industry in the Middle East, told Xiaguang News Agency that TikTok has begun to significantly increase the priority of its live broadcast business since 2021. This trend is even more significant this year. With the significant increase in various investments, TikTok live broadcasts have seen a "visible increase" in the second half of the year.

"TikTok's live show has currently become the leader in the Middle East market, and it is said that its monthly revenue can reach 100 million US dollars," said Yang Tai.

Yang Tai works for a live streaming platform in the Middle East. Influenced by the social and cultural customs of the Middle East, live streaming products are more popular in this land than other pan-entertainment products. Taking Saudi Arabia as an example, data shows that pan-entertainment accounts for nearly 80% of its non-game revenue, and live streaming apps still account for nearly 1/4 of the top 50 non-game revenues even after several years of rapid development.

From TikTok's development in the Middle East market this year, we can get a glimpse of its determination to enter the live streaming industry.

TikTok has a high penetration rate in the Middle East and can be called a national-level application. After launching live streaming, TikTok has opened up a large number of local guilds and recruited local employees; on the other hand, it has also begun to introduce Douyin agencies from the domestic market. After a series of actions, the entire market quickly felt the impact from TikTok.

"The data of a leading local live streaming platform has dropped by 30%-40% this year, and it is expected to drop further in the future." Yang Tai told Xiaguangshe that faced with the pressure from TikTok and local emerging small platforms, the former leading local live streaming platform has to face the reality of "double loss" of users and anchors.

"Some time ago, some top families and anchors flowed into the TikTok platform. After the signs appeared, many people followed suit and went to TikTok." Xie Tao, an employee of another live broadcast platform in the Middle East, told Xiaguangshe.

Most of the anchors on the TikTok platform started out as short video KOLs, and then "went with the flow" and turned to the live broadcast field. Many of the large number of fans they have accumulated before will still spend money to support the KOL after the KOL starts broadcasting.

"After all, TikTok has a large amount of traffic, so it is very easy to do live streaming. For a KOL with 1 million followers, even if only 0.1% or less become paying users, it is still a considerable amount," said Xie Tao.

Faced with the huge impact of TikTok on the live streaming industry in the Middle East, he believes that the most important thing at present is to clearly position his own products and differentiate himself from TikTok.

Compared with the glamorous KOLs on TikTok, Xie Tao admitted that the anchors on his platform are indeed inferior in terms of appearance and talent. "Since we can't compare with them, we will find ways in other aspects. For example, TikTok does not have a dedicated large-scale operation team, but we do, and we can provide core users with better and more thoughtful services."

As TikTok's live streaming business has been given more priority, competition similar to that in the Middle East market has also emerged in other regions.

An employee of a Japanese live streaming platform told Xiaguangshe that the highest-earning anchor on the platform recently moved to TikTok, taking away many big spenders who gave her tips. After joining TikTok, the anchor was also at the "top level."

Sun Ting, who works in the live streaming industry in Vietnam, also said that TikTok has also been poaching talent from leading companies in the country. But she also said that live streaming is just one of TikTok's modules, and in the Vietnamese market, TikTok's focus is still on e-commerce. "As far as I know, there are more than 100 MCNs cooperating with TikTok, and about half of them are based on live streaming and show live streaming, and most of them are from China," said Sun Ting.

Xie Tao said that although TikTok's entry has a great impact on other platforms, it also has a good side for the entire industry. "As an app with super traffic, TikTok's live show broadcasting helps us quickly educate the market and users. Looking at the Middle East, the overall live broadcast market is now expanding."

Although TikTok's live show broadcasts have become a leader in the Middle East market, and TikTok has also opened up to domestic live broadcast guilds in many places in Japan, Brazil, the United States, the United Kingdom and Southeast Asia, overall, the live broadcast ecosystem of the TikTok platform still appears to be relatively "primary".

Compared with the mature system of domestic show live broadcasts from content to operations, a large number of overseas anchors on the TikTok platform lack a dedicated operation team. Not only is the live broadcast content single, mostly chatting and interacting in front of the camera, but many of the gameplay methods are also not mature.

Industry insiders have different opinions on whether TikTok will continue to invest in live show streaming, depending on the specific conditions of different markets. Xie Tao from the Middle East market believes that TikTok live show streaming currently has an advantageous position and is expected to invest heavily in the future; while Sun Ting from the Vietnamese market believes that live streaming e-commerce in Southeast Asia is growing very fast, and e-commerce monetization is TikTok's focus.

3. Expansion accelerates, localization "discomfort" intensifies

Whether it is entering the e-commerce market or focusing on the show market, every move of TikTok, which occupies a high traffic position overseas, may have an impact that cannot be ignored. Therefore, every step TikTok takes overseas has also attracted much attention from the public.

This year, TikTok not only experienced the failure of its e-commerce business in the UK market, but also had to face the fierce resistance of local employees to its "wolf-like" corporate culture.

Previously in China, it was common for ByteDance employees to work overtime until after 9 or 10 p.m., and most employees have become accustomed to it, or have assumed that "there is no problem as long as the pay is enough," but some overseas workers do not agree with this way of doing things.

In June this year, a wave of resignations occurred in the TikTok Shop team that was recently established in the UK, with more than half of the employees resigning voluntarily and the remaining employees also becoming restless. The reason behind this is that TikTok has continued the domestic "996" work model in the local area.

TikTok e-commerce employees in the UK reported to the media that they often work more than 12 hours a day and are exhausted after the live broadcast at night, but are still required to submit a "feedback report" immediately. Not only are the working hours too long, but TikTok also sets employee assessment targets that are "too high to achieve" and sends emails to criticize employees who fail to meet their performance targets.

"The relationship between employees and companies is built on fear, not respect. They don't care whether employees are burned out because it's a big company and they can replace you at any time," said the former head of TikTok's London office.

This is not the first time TikTok's corporate culture has sparked discussion.

Previously, Joshua Ma, head of TikTok's European e-commerce, said at a meeting: "As a capitalist, I don't think companies should provide maternity leave." This statement aroused strong dissatisfaction among employees. Even though TikTok later stated that it had suspended Joshua Ma and launched an investigation, it still could not eliminate the anger of local employees.

TikTok has also been questioned about its corporate culture in the United States. Lucas Ou-Yang, the former head of TikTok's engineering team, once said on social media that due to the pressure of keeping up with the pace of Chinese colleagues and arranging work according to their work schedules, all 10 product managers who had worked with him resigned after about a year in the company.

Other TikTok US employees also often complain about lack of sleep due to frequent overtime. One employee said that he persuaded his boss not to let him work continuously all night after providing medical examination results proving that his physical condition was life-threatening.

In addition to overtime and excessive work, in recent years there have been reports that several TikTok department heads have resigned due to reasons such as "not being trusted" and "inability to participate in important decision-making."

In addition to challenges in corporate culture, TikTok faces policy risks in many parts of the world regarding geopolitics, data security, personal privacy security, youth protection, etc., which have a key impact on whether its regional business can be carried out smoothly.

As we all know, in 2020, TikTok encountered sanctions and crackdowns on the grounds of "data security" in many markets, represented by the United States.

This year, the relevant risks are still ongoing. According to a report from GF Securities, TikTok has experienced 9 policy risk events overseas this year, involving North America, Europe, Asia, and Oceania. Specifically, the US Department of Commerce continues to review TikTok; the British data protection agency is considering imposing a fine on TikTok; Italy has issued a warning to TikTok for user privacy protection; Afghanistan has banned people from using TikTok; Azerbaijan has announced the suspension of TikTok; Australia has pointed out TikTok's data privacy issues, etc.

As TikTok's various businesses grow bigger and bigger overseas, related risks may become an increasingly critical factor in determining its subsequent development.

"From a product perspective, I think TikTok has done a good job in globalization. TikTok videos have little text, so it is easy to spread in a fission-like manner, and it does not require too much effort to localize. But a big tree attracts the wind, and TikTok has to be cautious in its words and deeds overseas, and sometimes it seems to be restrained in many aspects." An analyst lamented.

4. It started with short videos, but it’s more than just short videos

Finally, I want to mention TikTok's short videos.

Starting out with short video content, TikTok has quickly accumulated more than 1 billion monthly active users in five years, faster than other social platforms such as Facebook.

Although TikTok's overall user base is still smaller than Facebook or Instagram, and it is also facing a slowdown in user growth, thanks to its algorithm-driven approach, TikTok users' stay time is still far longer than platforms like Facebook.

Data from mobile research firm Data.ai shows that American users currently spend about 29 hours on TikTok per month, which is more than the total of Facebook (16 hours) and Instagram (8 hours).

In addition, multiple surveys show that TikTok still maintains a considerable advantage among young groups.

In November this year, The New Consumer and Coefficient Capital conducted a survey of more than 3,000 American consumers. When asked, "If you were trapped on a desert island and could only choose one social platform, which one would you choose?", more than half of millennials and older people chose Facebook, while TikTok became the most popular choice for Generation Z.

A survey conducted by the Pew Research Center in April and May this year also showed the same trend. In this survey of American teenagers aged 13 to 17, 67% said they would use TikTok, while only 32% used Facebook.

The young generation who hang out on TikTok has pushed up the traffic of short videos on various topics. Driven by algorithms, TikTok has become a "connector" for online users with the same interests. This year, many communities including fitness, books, and food have become popular.

Among them, the total number of video views under the topic of "Fitness #GymTok" on TikTok reached 133.1 billion, while the number of video views under the tags of "Books #BookTok" and "Food #FoodTok" reached 93.8 billion and 38.4 billion respectively.

The strong influence of online traffic radiates to offline and also drives the offline retail trend.

According to data from BookScan, a statistics agency for the U.S. book publishing industry, #BookTok helped authors sell 20 million books in 2021. In the first half of this year, sales increased by another 50%.

According to foreign media reports, many offline bookstores in Europe and the United States have opened up a special "#BookTok Hot Books" area to boost offline sales. After uploading their works to TikTok, some young writers have not only gained a large number of readers and fans, but also received favor from publishers and film and television companies.

In response to the popular food trends on TikTok, TikTok also announced earlier this year that it would launch an online virtual takeaway restaurant "TikTok Kitchen" in the United States, which would collaborate with offline restaurant kitchens across the country to provide fans with the hottest "Internet celebrity food."

Although TikTok is not really planning to enter the catering industry for the time being and is only doing food delivery for marketing purposes, the high traffic and attention under the #FoodTok topic still makes overseas users curious and expectant about "TikTok food".

TikTok has accumulated huge traffic with its short video content. This year, TikTok continues to introduce traffic into various segments to seek new growth points. In addition to the e-commerce field mentioned above, TikTok has also accelerated its layout in games, music and other fields.

According to the "2021 Global Mobile Game Player White Paper" released by Newzoo, nearly half of the mobile game players surveyed in the global core markets are using TikTok, and global mobile game revenue reached US$93.2 billion in 2021. Therefore, it is not surprising that TikTok attaches importance to the development of the gaming field.

In May this year, TikTok began testing independent gaming channels in Vietnam, allowing video creators to link some simple games.

Relevant professionals have also been in place recently. In October this year, Assaf Sagy was appointed as TikTok's global head of games. Prior to this, he was a manager at McKinsey, a system architect at Intel, and worked at Snap for three years.

In terms of music services, TikTok formally submitted an application for the TikTok Music trademark to the U.S. Patent and Trademark Office in May this year. Earlier in March, TikTok also launched the music distribution platform Sound On for musicians, providing services for transferring music to mainstream platforms such as TikTok, Spotify, and Apple Music, as well as a number of promotion support tools.

The popularity of TikTok short videos has successfully brought a large number of songs that serve as "video soundtracks". According to TikTok's 2021 music report, the platform's most popular phenomenal song videos have been viewed more than 20 billion times. In the same year, more than 175 TikTok hits were listed on the Billboard Hot 100, the authoritative singles chart in the United States.

Under such circumstances, it makes perfect sense to launch TikTok Music in response to the popularity, linking music promotion and streaming services to form a closed loop of music consumption.

It’s just that it’s not yet clear whether TikTok Music will become an independent app.

Previously, ByteDance already had a music streaming platform, Resso, which was mainly aimed at the Brazilian, Indian and Indonesian markets. In October this year, the Wall Street Journal reported that ByteDance was negotiating with music record companies to continue to promote Resso globally. And there are reports that Resso may be launched in more markets under the brand name of TikTok Music.

In summary, after a year, TikTok, which has accumulated huge traffic through short videos, urgently needs to find more "places to use its skills". From e-commerce to fashion shows, to music and games, in a wider range of fields, TikTok is trying to challenge the masters of various tracks.

As one American media commented: "TikTok is tirelessly working to make all your favorite apps obsolete." The changes triggered by TikTok in these new tracks have just begun, but judging by its usual speed, there may be answers soon.

Author: Maji; Editor: Song Han

Source: Public Account: Xiaguangshe (ID: Globalinsights); see the brilliant rays of light of the new economy.