Case [3] TikTok's Rise to Global Markets (W19666)
1. What were the key factors behind Douyin’s success in China?
Douyin is a short-video sharing app created by ByteDance, Tik Tok’s parent company, which
emerged as a prominent force in the Chinese digital landscape. ByteDance, with its expertise in
harnessing artificial intelligence to power multimedia platforms, recognized the potential of this
technology in shaping user experiences. These cutting-edge AI capabilities, paired with the
widespread adoption of smartphones and the growing reliance on mobile internet services allowed
ByteDance to gain significant insights into user behavior, interests, and preferences,
revolutionizing how individuals engage with digital content. As a result, Douyin was propelled
into remarkable success within China, which can be attributed to a combination of key factors that
shaped its rapid rise in popularity.
Firstly, the widespread adoption of smartphones provided a robust user base and a convenient
medium for accessing the platform. This high penetration of smartphones set the stage for Douyin's
success. In addition, the growing trend of short-video sharing in the market offered Douyin ample
ground for growth and expansion. The platform's strategic approach to frequently updating its
versions and enhancing product features ensured continuous improvement in the user experience,
making it easy to use and providing creative toolkits for content creators to engage with.
One of the most impactful tools that Douyin employed which significantly propelled its popularity
was the “celebrity factor”. Douyin harnessed the power of famous celebrities to attract and engage
users. By collaborating with Chinese stars with substantial fan bases and deploying heavy
marketing promotions, including celebrity endorsements, sponsorship deals on TV channels, and
trending hashtags, Douyin effectively expanded its user base. Douyin also made substantial
investments in promoting its own internet celebrities and key opinion leaders (KOLs),
strengthening its content creator community and helping them gain followers and generate revenue.
Moreover, Douyin's strategic sponsorships of popular variety shows and later collaborations with
corporate entities through advertising campaigns further broadened its reach and appeal.
Finally, the platform's advanced AI techniques were instrumental in curating and pushing "hot"
videos to targeted users, which enhanced user engagement and viewer retention. This was further
strengthened by their content diversification, which encompassed videos covering a wide range of
entertainment genres, from music and cooking to fashion and travel; leading to increased
popularity and a growing user base across China.
Overall, Douyin's success in China can be attributed to its clever combination of factors that
capitalized on the mobile device boom, embraced user trends, invested in product improvement,
leveraged celebrity influence, and engaged in strategic marketing and content diversification.
Collectively, these factors contributed to Douyin's dominance in the Chinese short-video sharing
market.
2. What were the main challenges that TikTok faced outside of China? How did TikTok
respond to these challenges?
TikTok was a popular short-video sharing platform owned by the Chinese company ByteDance,
which faced several challenges outside of China. Here are some of the main challenges TikTok
encountered outside of China and how TikTok responded to these challenges as follows.
Challenges and responses to different regions
In Southeast Asia, despite attractive market prospects, there were no dominant short video sharing
apps in most southeast Asian countries in 2017. So localizing campaigns and promotions by the
internet celebrity economy through Youtube and Instagram had been well developed in Southeast
Asian countries, and some celebrities had accumulated millions of followers.
In terms of the Japanese market, as a content-focused product, going global was never easy for
TikTok, which had a distinct culture and an often biased view of Chinese companies. And the
Japanese market has always been harsh to beginners. As the director of TikTok Japan said, most
of the time, they would not give you the opportunity for communication with the excuse of busy
schedules, or there have been cases where the conversation went well but was finally dismissed by
top managers. For Ice breaking, the director of this team had fully blended into the Japanese society,
studying and working in Japan for 17 years. The other team members were either Japanese or
people who had studied in Japan. Everyone on the operation team was tasked with engaging
celebrities. The operation team grasped the opportunity to break the ice. And needed to talk to
them time and again to familiarize them with our product and show sincerity for cooperation.
Overall challenge and strategy
TikTok had globally achieved some exciting numbers by leveraging the strategy of localizing
content in each specific market. However, the local focus also brought a challenge, as it was
therefore difficult for TikTok to take advantage of its user base for global expansion. In the
meantime, TikTok had always been surrounded by competitors during its expansion. The success
of TikTok led other tech companies to release copycats or create similar features targeted at teens.
For instance, Facebook launched a new short video sharing app called Lasso in 2018. Although
TikTok racked up millions of users, many increasingly complained about the videos as cringe and
creepy. Indonesia's communications and information ministry temporarily blocked TikTok after
learning that it contained pornography, inappropriate content, and blasphemy. This ban was
overturned a few days later after TikTok agreed to clear the negative content, increase security
mechanisms, and enforce restrictions on users between the ages of 14 and 18. In overseas markets,
TikTok was still in the burn money stage for market growth and penetration and had yet to start
generating revenues. Also, facing low engagement rate and differences across markets, TikTok’s
monetization in global markets still had a long way to go.
Lastly, TikTok is a company who is always striving to move forward. Even though facing different
challenges among markets. They are still using strategic thinking to cope with different challenges.
Also, TikTok made efforts to address these concerns and problems. As TikTok grew in popularity,
the challenges it faced will increase as time goes by.
3. Why did TikTok acquire Musical.ly to enter into the North American market?
TikTok has made significant efforts to collaborate with localities and gain real insight into the
Asian market, solidifying its position as a global product with localized content. The acquisition
of Musical.ly was a strategic move to enter the North American market, and there could be several
reasons behind this decision, as follows.
1) Maintain its positioning as a global product and localized content
TikTok is highly committed to expanding its presence globally. Having achieved success in Asia,
TikTok recognized its increasing potential on the other side of the world, with over 100 million
users, comprising 20% of the world's internet population. ByteDance saw this opportunity and
made the merger and acquisition possible. By combining TikTok's AI technology with the
Musical.ly database, the platform can recommend more relevant content and engage with local
users more effectively.
2) Eliminate entering barriers and competitors
TikTok, which is now a big trend and will remain so until 2023, actually started as Douyin, a
popular short video platform in China. Being a Chinese platform, it was not easy to enter the North
American market and outshine the local competitors, particularly Musical.ly, which was the
biggest rival at that time. However, TikTok's acquisition of Musical.ly helped it to become the
next leader in the North American short-video market by increasing market share and reducing
market competition. At the same time, TikTok did not only acquire Musical.ly, but also the
knowledge and resources that would help in the company strategy to reduce costs in setting up
facilities and training new staff.
3) Gain the existing customer base and grow opportunities
As explained earlier, acquiring Musical.ly can provide TikTok with the potential for further growth
by tapping into its expanding customer base. Unlike Musical.ly, which was primarily focused on
music, TikTok now has the opportunity to broaden its entertainment content to include more
general topics such as cooking and traveling, which will enable it to expand its reach to a broader
audience in North America.
Despite the growth opportunity in the North American market, TikTok may face significant
challenges in the future, especially in 2023, as it competes with other established players who offer
more diverse products. For instance, Meta's Instagram now offers Instagram stories and reels,
which are more accessible and engaging. This is likely to be TikTok's next challenge as it tries to
deal with these emerging threats and diversify itself to unlock its other potentials.