Original link: https://www.latepost.com/news/dj_detail?id=1346
“LatePost” learned that TikTok has set a goal of over 1.05 billion global daily active users (DAU) by the end of 2022. At present, the world’s largest short video platform has more than 800 million daily active users.
With over a billion people opening apps every day, there are only four globally: Facebook, WhatsApp, Instagram and YouTube. The daily active users of WeChat are around 900 million, and the daily active users of Douyin are around 730 million.
1 billion DAU is not the end. A TikTok person said that the company hopes that TikTok’s overseas penetration rate is comparable to Douyin’s domestic penetration rate. TikTok’s current global penetration rate is less than 20%, while Douyin’s domestic penetration rate is close to 54%. If it reaches a global penetration rate of 54%, TikTok will increase by more than 2 billion daily lives around the world.
LatePost learned that since this year, in order to further improve business growth and management efficiency, TikTok has made some adjustments at the organizational level.
TikTok has changed the previous relatively fragmented market division model, and integrated the same type of markets to form six regions: Japan, South Korea, South Asia, Europe, the Middle East, Latin America, and the United States, Canada and Australia. Before the adjustment, Europe alone was divided into: the United Kingdom and Western Europe, Germany, Poland, and multiple markets such as central and eastern Europe, and Eastern Europe.
The growth center that was originally responsible for TikTok’s user growth around the world was removed, and Zhao Qi, the person in charge, has been transferred to the group to be responsible for ByteDance’s human resources related affairs. In order to improve the autonomy and flexibility of business, video, live broadcast, e-commerce and other departments have added growth functions.
TikTok has also received further support from Douyin in terms of technology and business strategy. A ByteDance source revealed that Zhang Nan, CEO of Douyin Group, will intervene and follow up on some of TikTok’s business progress, such as the live broadcast business. Overseas users do not have the habit of using related products, and TikTok is still struggling to explore the live broadcast business.
TikTok’s users have grown rapidly, but it has not received revenue to match the size of its users. ByteDance CEO Liang Rubo said at the All Hands conference in September that the current commercialization progress of TikTok is lower than expected.
TikTok’s revenue in 2021 will be around $4 billion , with a target of $12 billion in 2022, an increase of 200%. However, “LatePost” learned that in the first half of 2022, TikTok’s advertising revenue has not reached the established target, and the growth rate has slowed down.
A TikTok commercialization person said that many factors have led to the slowdown in growth: the Russian-Ukrainian conflict and global inflation have led to a decline in global digital advertising spending, TikTok’s advertising conversion effect is weaker than that of rivals such as Facebook and Google, and the expansion of overseas major customers has not. Not smooth.
TikTok had set a goal of surpassing Facebook’s mobile ad revenue for three years. At present, TikTok’s advertising revenue is only equivalent to about 1/30 of Facebook’s 2021 advertising revenue. Instagram’s embedded short-form video app Reels has also hit $1 billion in revenue more than a year after its launch. Reels users spend less than one-tenth the time they spend on TikTok.
According to TikTok’s financial situation in Europe recently announced, revenue in 2021 will be $990 million, while losses will increase by 37% year-on-year to $896 million.
Compared with Douyin back then, today’s TikTok’s revenue pressure is even greater. It needs to become strong as soon as possible. If it is passively cut off from its parent company, China-based ByteDance, it needs to ensure that it has the ability to survive independently.
A TikTok person told LatePost that starting from the third quarter of this year, the team already needs to calculate CPA (Cost Per Acquisition, cost per user acquisition) and the retention of new users when doing user growth. A senior executive of ByteDance’s commercialization department said at a recent internal meeting that TikTok should further acquire those who have more spending power—they are more able to attract advertisers and bring revenue to the product.
Difficulty exceeds expectations, commercialization is not as smooth as Douyin
TikTok will officially start commercialization in 2020. Initially, its overseas advertising team only set up positions for local strategy and sales, not for commercial products and technologies, and relied on Douyin for support.
Relying on the Douyin system allows TikTok to quickly launch its advertising business at the lowest possible cost. TikTok has also inherited domestic innovations in many aspects, such as splitting an open-screen traffic into four parts on average and selling them to four customers. A TikTok person explained that, assuming that the price of an open-screen advertisement is $20,000/day, the traffic is divided into four advertisements and sold to four customers. more income. The above-mentioned person said, “I just went directly without doing any research.”
TikTok lacked certain initiative in commercialization in the early days. For example, some products from TikTok will be prioritized after Douyin. A TikTok commercialization strategist said that until 2021, TikTok will gradually build its own advertising system.
Douyin was the first in China to introduce bidding advertisements and performance advertisements in short video products, and the algorithm recommendation ability is the best, so “customers can only choose it.” A Douyin commercialization person said. Overseas, TikTok faces mature and powerful competitors like Google and Facebook.
A TikTok commercialization employee said that the scale of users reached by TikTok in major markets is comparable to that of Google and Facebook, but it cannot provide the same accurate customer acquisition. “Clients prefer to place branded ads here rather than performance ads”.
Google has eight applications with more than 1 billion users, including a search engine that records users’ direct needs, billions of Android phones that accompany users, maps that provide users with navigation, and YouTube, the largest video platform. These apps have detailed portraits of user interests and living habits, which can help advertisers find the audience they need more accurately. When Google sells general application advertisements, it can accurately acquire customers with hundreds of millions of point tag systems, which is unparalleled in the industry. “Most manufacturers generally put 60% of their budget on Google, 30% on Facebook, and the remaining 10% can be adjusted at any time according to the performance of different channels.” The above-mentioned person said.
Another problem is that TikTok users are very young, and some young brands are willing to increase their brand investment on TikTok, but mature brands are not necessarily.
TikTok e-commerce will enter the United States, Brazil
TikTok posted job postings on LinkedIn to find talent to develop e-commerce projects in the United States. Job listings show that TikTok plans to provide sellers with warehousing, delivery and return services. Many of the open positions are based in Seattle, the US headquarters of e-commerce giant Amazon.
According to LatePost, it will open a local e-commerce business in the United States by the end of 2022, and only sell goods from local merchants or importers in the United States.
TikTok e-commerce has not set a clear GMV target for the US market for the time being, and the team hopes to start the business cautiously to avoid regulatory risks.
“LatePost” exclusively learned that TikTok e-commerce has recently advanced the time to enter the Brazilian market – from the second half of 2023 to the first half of the year. Huang Yuanjian, the former head of international products of Didi, will be responsible for the market operation of TikTok e-commerce in Brazil and report to Kang Zeyu, the top person in charge of TikTok e-commerce.
At the same time, LatePost learned that TikTok e-commerce has recently increased the priority of the Brazilian market.
Brazil will be the ninth country in which TikTok e-commerce has entered. Similar to the strategy it has adopted in most other markets, it will do local e-commerce first and then cross-border e-commerce. Local business only needs to attract local businesses with factories and goods to enter, so that the transportation distance of goods is shorter, the delivery is faster and cheaper; while cross-border business is more complicated, it is also necessary to consider the cross-border logistics of goods and national tariffs. And other issues.
A TikTok e-commerce person analyzed that an important reason for raising the priority of the Brazilian market this time is that he has seen the active expansion of the fast fashion e-commerce platform SHEIN in the country.
According to local media reports in Brazil, at the end of 2021, Xu Yangtian, founder of SHEIN, went to Brazil to inspect the clothing supply chain factory; in May this year, Felipe Feistler, the former head of Shopee’s Latin American e-commerce business, joined SHEIN as the Brazilian market principal. At the same time, SHEIN has recently expanded its local investment promotion team in Brazil.
“When SHEIN becomes firm and bigger in Brazil, it will be much more difficult for TikTok to enter.” The above-mentioned person said. Although SHEIN and TikTok have different sales models, both of them focus on women’s clothing and beauty. It is difficult for TikTok to provide users with a differentiated purchasing experience in a short period of time. “The timing of entry is important.”
The TikTok e-commerce team itself has also been optimistic about the Brazilian market. There are 150 million netizens in Brazil, and about one-third of them use TikTok every day; in recent years, with the improvement of e-commerce infrastructure such as online payment and logistics in Brazil, it has become one of the fastest growing e-commerce markets in the world. one.
According to eMarketer data, Brazil ranks fourth among the countries with the fastest growth in the global e-commerce market in 2021. In 2021, the scale of e-commerce in Brazil is close to 34 billion US dollars, and the compound growth rate from 2022 to 2025 is expected to exceed 20%. Different social classes in Brazil are embracing e-commerce. According to the report of the local research center for the development of the information society, the growth rate of e-commerce buyers in Brazil from the affluent, middle class to the bottom has increased by 20%.
The Brazilian e-commerce market is relatively fragmented. Mercado Livre has a market share of about 33%, followed by Americanas, a subsidiary of B2W. The market share of other Brazilian e-commerce players is relatively small, and Shopee, which has been in Brazil for three years, only accounts for 5%.
High inflation, rising unemployment and complex local tariff policies have not stopped the enthusiasm of e-commerce platforms to break into Brazil. In 2022, Shopee, which is laying off workers and shrinking its business, will continue to weigh on the Brazilian market. In July of this year, Shopee’s monthly visits exceeded that of Meikeduo. Kuaishou is also considering entering the Brazilian e-commerce market.
It is understood that when TikTok e-commerce enters Brazil, it does not rule out the possibility of simultaneously launching the mall function (shelf e-commerce). In the middle of this year, TikTok e-commerce has tested the entrance of the mall in the Indonesian market, which is located in the second column at the bottom of the homepage.
This is also a more efficient option for TikTok e-commerce. It is easy to buy live e-commerce, but the preparation process is long and complicated, including finding suitable e-commerce experts, accurately matching talents and products, persuading merchants to accept new live streaming methods, and cultivating users to accept the new way of live e-commerce. Habit. During the beta test in Indonesia, the mall has contributed more than 10% of the GMV to the TikTok e-commerce market in Indonesia, without affecting user retention and usage time.
It will take time for ad revenue to catch up with the U.S. giants. E-commerce has become another path that TikTok seeks to accelerate commercialization. This road has also been verified on Douyin before.
In Douyin e-commerce, merchants and anchors will continue to place advertisements on Douyin in order to sell more goods to attract users to watch short videos and live broadcasts. In May 2021, this part of the revenue accounted for about 10% of Byte’s domestic advertising revenue; in the second quarter of this year, this proportion has exceeded 40%.
TikTok learned from Douyin and tried to expand its e-commerce business in different markets. If e-commerce can operate overseas, it means that advertising revenue has a new room for imagination.
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