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The biggest risks to TikTok

August 6 · Issue #362 · View online
The Interface
With Facebook under antitrust scrutiny around the world, the company is spending more time making the case that it is beset on all sides by competitors. There are other messaging apps, other professional networking apps, and other video apps. And when it comes to good old-fashioned social networking — public broadcasts, following influencers, and that sort of thing, there’s TikTok.
“In just three years, TikTok has become one of the world’s most popular online social network platforms,” Facebook wrote today in a letter to Rep. David Cicilline, D-RI, who has championed an antitrust inquiry into the company. “The app has been downloaded more than one billion times globally, is available in more than 150 countries, and in 2018 was installed more times than either Facebook or Instagram.”
TikTok’s ubiquity is all the more striking considering that it just celebrated its first birthday on August 2nd. That’s when the Chinese company ByteDance, which had bought an American app named in November 2017, rebranded it as TikTok. In the year since, the app has become a global hit, thanks to a core feed powered by machine learning that’s entertaining even if you never follow anyone. (TikTok’s “duets” feature, which allows you to easily remix others’ content, also skillfully married a strong creative tool with a useful engagement hack.)
At the same time, much of TikTok’s growth has been bought and paid for by ByteDance investors.The company spent nearly $1 billion on advertising the app in 2018, the Wall Street Journal reported in June. And platform executives familiar with ByteDance’s spending have told me that a significant majority of new users still abandon the app within 30 days.
And so as TikTok enters its second year — and becomes a key talking point in Facebook’s this-market-is-competitive-we-swear global tour, how durable should we expect it to be?
TikTok clearly has a lot going for it: it’s a bona fide cultural phenomenon, as you can see from the way it propelled Lil Nas X’s “Old Town Road” to the longest-ever reign atop the Billboard charts. ByteDance already has several hugely popular apps around the world, and the startup’s $75 billion valuation gives it the resources to compete with anyone. (Most recently it declared ambitions in web search.) The company also has a famously workaholic culture, access to much of the best talent in China, and a recent influx of American executives.
But the company also faces some real risks in the near future. Here are four:
One, TikTok has to fix its funnel. Too many people try TikTok, use it a few times, and never return. We saw something happen similar with Twitter years ago. The app developed universal awareness among Americans, but most who downloaded Twitter abandoned it shortly thereafter. With TikTok spending $3 million a day on ads in the United States, it could become a household name in short order. But if it can’t sustain users’ interest, it could find itself mired in the same trough of despair that Twitter has been in for most of its life.
Two, TikTok has to keep shipping hits. Every social app is, on some level, a fad, and those that don’t evolve are doomed to fade away. (See Vine or, more recently, HQ Trivia.) Any novel social app can have a good year — it remains to be seen to what extent TikTok’s video feed has staying power. Something to watch closely: what new features does TikTok launch in the next 12 months? Both Vine and HQ felt novel at launch but never meaningfully iterated on their core experience; Snapchat survived by following up its original hit (disappearing messages) with something even bigger (ephemeral stories.) If TikTok is going to survive, it has to be less like Vine and more like Snap.
Three, TikTok has to court influencers — and keep them happy. Celebrities on social media tend to go two places: wherever the audience is, and wherever the money is. A fast-growing new social platform has an easy time attracting influencer interest, because it tends to be easier to grow an audience there than on a more established platform. But influencers are liable to leave if the audience, or the money, is better elsewhere. (That’s another lesson from Vine.)
And so it’s at least of moderate concern that TikTok has so far offered users no direct way to make money in the United States. (It does in China.) TikTok is already arguably less attractive to influencers than, say, Instagram, because the app is designed to work even if you never follow a single creator. Then again, Instagram still doesn’t really offer users a direct way to make money from their posts, either, unless you count its experiments around e-commerce.
Four, TikTok has to manage its relationship with regulators around the world. ByteDance has already run afoul of the US government, settling privacy concerns with the Federal Trade Commission in February for $5.7 million. But a larger concern should probably be the trade war with China, which has found the United States much more skeptical of Chinese businesses generally. (See this year’s blow-up over Chinese ownership of Grindr.)
The Chinese version of TikTok is already a propaganda outlet for the government. What happens if TikTok becomes a propaganda outlet for China here in the United States? Think Russia’s RT network, but with 1 billion monthly users and an algorithmic feed that it can manipulate however it wants. That seems like something the US government might take an interest in, too.
Of course, ByteDance also has to stay out of trouble with its own government, which has repeatedly chastised it for failing to censor everything it’s supposed to under Chinese law. It’s a lot to work through.
Maybe a year from now TikTok will be much bigger than it is today. But looking at what the startup is up against, it’s easier for me to make the case that it won’t be. The odds are long for any startup, and the odds for a social startup are even longer. It’s not hard to envision TikToks losing momentum as its novelty fades. And if it does, Facebook will lose a genuine competitor — not to mention a highly lucrative advertiser.

Made some mistakes yesterday: AR-15 rifles are semi-automatic rather than automatic weapons, as I said. I also described the Ohio shooter’s weapon as a “rifle,” following the news outlet I cited; someone wrote to me to say that it’s technically a pistol.
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And finally ...
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