(Pons, 2019, para 3)
Based on the Ansoff Matrix, how effective
have the strategies applied by ByteDance been
to the growth of Douyin/Tiktok?
Concept: Change
Table of contents
Introduction.…………………………………………………………………………………….2
ByteDance……………………………………………………………………………….2
Ansoff's Matrix…………………………………………………………………………...2
Objective and Methodology…………………………………………………………….3
Research and analysis based on the Ansoff Matrix…………………………………….3
Market development.……………………………………………………………………3
Douyin…………………………………………………………………………….4
TikTok…………………………………………..………………………………..6
Acquisition of Musical.ly………………………………………………..6
TikTok´s global reach…………………………………………………...7
USA´s and Uruguay´s Markets……………………………………….10
Market penetration……………………...……………………………………………..11
Negative repercussion of the firm´s exponential growth.………………………….15
Conclusion…………………………………………………………………………………….16
Bibliography…………………………………………………………………………………..17
Appendix……………………………………………………………………………………….21
Supporting Document #1……………………………………………………………..21
Supporting Document #2………………………………………………………….….23
Supporting Document #3………………………………………………………….….31
Supporting Document #4………………………………………………………….….36
Supporting Document #5………………………………………………………….….39
1
Introduction
ByteDance
ByteDance Ltd., founded in 2012 by Yiming Zhang, is the most valuable privately held
company worldwide (ColdFusion, 2019). The Chinese giant owns a variety of apps
ranging from social media services to news aggregators (Kharpal, 2019). Over the last
few years, ByteDance grew exponentially. Today, it controls 23% of the Chinese digital
app market and values $78B USD (Iqbal, 2020). ByteDance implemented different
strategies to obtain global presence, such as acquiring companies like Flipagram and
Musical.ly (Jamshed & Boghani, 2019), and expanding into new markets. Nowadays,
Bytedance is present in over 155 countries and 75 languages (Shi, 2019).
ByteDance is best known for its app Douyin (called TikTok internationally), which
contributes to a substantial proportion of the firm's total revenue (Shi, 2019). In three
years, Douyin achieved the monopoly of the micro-video app market (ColdFusion, 2019).
It is the “leading destination for short-form mobile videos” and its mission is to “inspire
creativity and bring joy” (ByteDance, 2020, para. 4).
Change is defined by the Cambridge Dictionary as “the act of becoming different, or the
result of something becoming different”. The BNET Business Dictionary defines change
management as “the coordination of a structured period of transition from situation A to
situation B in order to achieve lasting change within an organization.” (Michigan State
University, 2019, para 1). Social media platforms must adjust and adapt quickly to
changing technology and user behavior. Quicker but well-thought-out change cycles and
transition periods are increasingly important for managers to ensure the smooth
transformation from process to process, from existing to new markets, from one brand
name to another.
2
Ansoff's Matrix
The Ansoff Matrix is a tool used by businesses to plan strategies and methodologies for
effective growth and development (CFI, n.d.).
Objective and methodology
The objective of this commentary is to analyze the changes implemented by
Douyin/TikTok based on the Ansoff Matrix. Quantitative and qualitative data were
obtained from secondary sources (articles, newspapers, studies, and videos). However,
media sources may be biased and have the tendency to exaggerate. Additionally, a
survey using convenience sampling was conducted to investigate the opinion of the
market. Nonetheless, its limitation is it only portrays the reality of a small section of
TikTok´s Uruguayan market.
3
Research and Analysis of “Change” based on the
Ansoff Matrix
Market development
Douyin
In August 2012 ByteDance introduced Toutiao, a news app, targeting Generation X (Li,
2019). In 2016, Douyin, a micro-video content creating app which aimed at targeting
Generation Z was launched in China (Wallaroo, 2020). This new platform supports
various types of content, from dance to comedy, offering music, filters, and effects (Junjie,
2019). Both Toutiao and Douyin are digital platforms but there was a change in the
approach of the firm, particularly with the target market. Bytedance applied market
development strategies by entering a new market with an already existing product. This
was the riskier change strategy applied, as it meant facing competition and uncertainty,
and required capital investment, which could have been lost if the opportunity was not
favorable.
According to Bo Ji1, ByteDance was able to accurately target their market, leading to an
immediate success. “The new generations (...) want to share their real feelings (...). They
are more direct and expressive (...). He (Zhang) understands the young people and their
psychology” (As cited by Bangkok Post, 2019).
1
Bo Ji: Assistant dean for the Cheung Kong Graduate School of Business
4
Year
DAU (millions)
January 2018
40
January 2019
250
January 2020
400+
Douyin´s daily active users through the years.
(Qu, 2020)
The amount of DAU2 has deduplicated from 40M3 in 2018 to 400M in 2020, illustrating
the increasing popularity of the platform in the Chinese Generation Z market. The entry
and transition into the new market proved to be successful in a short period.
One of Douyin's strengths is it operates under AI4, providing customers personalized
content. The algorithm makes a specific “For you” page for each user, based on previous
activity (Le, 2018). When the app launched AI was very innovative, distinguishing Douyin
from the competition and attracting new users (Li, 2019).
2
DAU: Daily Active Users
M: Million
B: Billion
4
AI: Artificial Intelligence
3
5
Moreover, 60.9% of survey participants agreed that the algorithm suggests personalized
content, while another 33.3% said that this happens occasionally.
TikTok
By August 2017, ByteDance faced a threat of rising domestic competition using AI. The
fast-paced changes in the industry saw other micro-video apps like Kuaishou, Yizhibo,
and Miaopai gaining market share and ByteDance decided to alter its course by
expanding into new markets (Wei, 2018). Also, two opportunities led ByteDance to
expand. First, in Southeast Asia and South America there is a significantly massive young
population, open to new social media and short video platforms. Second, China's microvideo services impacted overseas markets. Businesses decided to capitalize and invest
in new developing technologies (Wei, 2018). In August 2017 TikTok (international Douyin
version) launched to the global market (Li, 2019).
6
Acquisition of Musical.ly: A Change in Strategy
Tiktok´s main competitor was Musical.ly, a similar app founded in 2014, popular in the
USA (ColdFusion, 2019). In November 2017, ByteDance acquired Musical.ly. Zhang
Yiming5 stated: “By integrating Musical.ly’s global reach with ByteDance’s massive user
base (...), we are creating a significant global platform for our content creators and brands
to engage with new markets” (As cited by Li, 2019). In August 2018, ByteDance integrated
Musical.ly with Tiktok. At the time, Musical.ly had 100M users and its considerably large
American audience directly migrated to Tiktok, creating a globally powerful app (Iqbal,
2020). Therefore, this strategy fits into Market Development.
(Iqbal, 2020, para. 48)
5
Zhang Yiming: Founder of ByteDance
7
The horizontal integration of Tiktok and Musical.ly was a great success. By 4Q18, installs
had grown exponentially from 46.8M in 4Q17 to 205.7M, an impressive growth rate of
339.53%. In November 2018 it became the world's most downloaded app in Google Play
(Influencer Marketing Hub, 2020). Again, the firm proved that quick action to change has
created a longer-lasting impact on its competitiveness.
TikTok´s global reach
Since January 2020, Tiktok was the seventh most-used social platform with 800 MAU6.
In 2019, it ranked fourth between the international most-downloaded apps (Iqbal, 2020).
In comparison to other social media platforms like Facebook, Instagram, or Snapchat,
TikTok reached 800 MAU the quickest (three years) (Nicolau, 2019). The app´s rapid
growth reflects the effectiveness of Market Development strategies.
(Iqbal, 2020, para. 36)
6
MAU: Monthly active users
8
Today, TikTok is available in 155 countries (Mohsin, 2020).
Region
Asia and the Pacific
User Base segment
(%)
36
North America
12
Middle East and
Africa
Latin America
11
Europe
10
10
% of internet users aged 16-64 who are members of TikTok by
global region.
(Iqbal, 2020, para. 83)
(Iqbal, 2020, para. 83)
9
The firm's global reach is reflected as up to November 2019, TikTok and Douyin had 1.5B
total downloads combined. India's market had the biggest reception, a change that would
prove problematic to be discussed in a later section.
(Wallaroo, 2020)
USA´s and Uruguay´s Markets
In November 2019 TikTok was the second most downloaded app in the USA with 4M
downloads. Additionally, out of the 60M MAU (up from 20M in 2018), 60% aged 16 to 24,
and 80% aged 16 to 34 (Wallaroo, 2020), indicating TikTok´s audience was targeted
correctly. A similar thing happened in the Uruguayan market.
10
84% downloaded TikTok between 2019-2020. Also, 79% of TikTok users are part of
Generation Z (23 or below), indicating how ByteDance accurately focused on the targeted
market.
11
Market penetration
Market Penetration carries the lowest risk compared to the rest of the strategies as the
amount of capital required is much lower.
The first significant change was made in September 2016. ByteDance improved branding
by refining TikTok´s logo (Graziani, 2018), providing brand awareness (by increasing
visibility), identity and loyalty, as the new logo distinguished TikTok from the competition,
attracting more customers. 98.6% of respondents admitted the new logo is more
appealing.
In 2017, a significant number of changes to the app’s features such as effects, filters, and
stickers were incorporated to increase engagement (Graziani, 2018). In September 2018,
a new feature that lets users “Duet” and “React” to other people's videos was developed
(Locklear, 2018). By March 2019, 43% of the platform´s engaged users had uploaded a
“Duet” video (Influencer Marketing Hub, 2020), demonstrating the success of Market
Penetration techniques.
In March 2019, TikTok added new screen time management options, allowing users to
select a limit of 40, 60, or 90 minutes on the app (Carey, 2019). 20.3% of respondents
use this feature or are interested in using it, while another 29% answered they are
somewhat interested, proving the feature may have attracted more customers who were
self-conscious and wanted to restrict the time spent on the app.
12
In 2019, TikTok introduced 'Go Live' and users with more than 1000 followers became
able to livestream (Reed, 2019). A 'Live Q&A' function also became available, where
influencers answer questions while live streaming (Graziani, 2018). These features were
very successful and produced a new wave of growth. They attracted customers who were
eager to see their favourite celebrities live. However, only 27.1% of survey respondents
use the feature, suggesting that it was not as successful in the Uruguayan market.
In 2019, the firm began to pay $500 USD to influencers and celebrities for them to join
the app (Wallaroo, 2020). From the survey, 27.5% replied that they downloaded the app
to watch what their favourite celebrities post, implying that as they started downloading
13
the app, so did their fans, multiplying TikTok´s user base. This change proved to be
effective, a win-win strategy for both the firm and the growing number of influencers.
In February 2020, ByteDance introduced “Family Safety Mode”, which allows parents to
limit their children's TikTok utilization. This new feature enabled screen-time management
controls, restricts inappropriate content, and limits direct messages (Perez, 2020). This
change was a game-changer for TikTok as it could now attract new young audiences
whose parents had previously prohibited, thereby once again increasing its user base.
34.7% of survey participants were 15 years old or below, meaning that a big segment is
targeted with this new feature. Furthermore, most of these changes occurred in 2019,
when 44% of total TikTok downloads occurred (Influencer Marketing Hub, 2020).
(Mohsin, 2020, para. 22)
In 1Q19, TikTok was the most-downloaded app on the Apple App store with 33M
downloads. Although there is no certain way to prove the correlation, one can assume
that these major changes and updates successfully achieved expanding the app´s market
share.
14
Negative repercussion of the firm´s exponential growth
As the app became globally known and transparent, controversial issues and ethical
concerns emerged.
In February 2019, ByteDance was fined $5.7M USD by the FTC7 for violating the USA´s
child privacy law and illegally collecting personal information from children under 13
(Amiri, 2019).
Also, Tiktok was banned for short time periods in Indonesia (2018), Bangladesh and India
(2019) for the spread of ´negative´content (Tech2, 2019). The app was accused of
allowing pornographic material to propagate among youngsters and encouraging
paedophiles and predators (Parkin, 2019). Considering that India is TikTok´s biggest
market, a definite ban would have had a negative repercussion on its growth.
Entering new markets (both demographic and geographic) required a significant amount
of changes to be made to comply with legal and cultural factors. The Indian government
had ordered Google and Apple to take down TikTok from its platforms. The firm was
forced to deactivate six million videos which had infringed on its guidelines. (Nicolaou,
2019). Interestingly, this approach resulted in a backlash on the Indian government’s
censorship policies and the issue is now a political debate.
7
FTC: Federal Trade Commission
15
Conclusion
ByteDance exponential growth was a result of evolving market behavior and strategic
changes to the firm’s internal and external growth strategies. Based on the Ansoff Matrix,
ByteDance has applied Market Development and Market Penetration strategies for the
growth of Douyin/TikTok, which have been highly effective. Market Development was
used when launching both Douyin to the Chinese market and TikTok internationally. Two
opportunities and a threat led TikTok to launch, and the acquisition of Muiscal.ly was very
useful. Moreover, Market Penetration was used when refining the logo and adding
features like “Duet”, and “Go Live”, and parental controls incentivizing more customers to
download TikTok.
However, the changes implemented by the firm have resulted in negative consequences
and the firm must face legal battles which are costly and time-consuming.
Regarding aspects that need further investigation, apart from China´s, USA´s and
Uruguay´s markets, the repercussion of TikTok on European markets could have also
been included to add more perspectives to the research.
Word Count: 1793
16
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20
Appendix
Supporting document #1
ByteDance. (2020). Our products. Retrieved March 10, 2020, from
https://www.bytedance.com/en
21
22
Supporting document #2
Iqbal, M. (2020, February 21). TikTok Revenue and Usage Statistics (2020). Retrieved
March 14, 2020, from https://www.businessofapps.com/data/tik-tok-statistics/
23
24
25
26
27
28
29
30
Supporting document #3
Graziani, T. (2018, October 21). How Douyin became China's top short-video App in
500 days. Retrieved March 23, 2020, from https://walkthechat.com/douyin-becamechinas-top-short-video-app-500-days/
31
32
33
34
35
Supporting document #4
Nicolaou, A. (2019, November 8). How to become TikTok famous. Retrieved March 17,
2020, from https://www.ft.com/content/dd7234e8-fcb9-11e9-98fd-4d6c20050229
36
37
38
Supporting document #5
39
40
41