Gen Z's favorite social media app, TikTok is charging advertisers up to $2 million per day on its top view ad space, which is the first thing users see when they open the app. The prices are a significant increase to what TikTok was charging just a year ago, as TikTok's userbase has grown astronomically as well. The app had 100 million+ monthly active users in the US as of last August, up from 11 million in 2018. Anyone who purchased the top view ad space could generate a staggering 109 million impressions. (that's one way to go viral)
TikTok is still not monetizing its user base to the extent rivals like Facebook, Instagram, YouTube and Snap are, but it's only a matter of time as TikTok builds out its advertising team. The app's Chinese owners, ByteDance have huge pockets, and booked more than $20 billion in revenue from China alone last year, and this year its global ad sales are forecasted to double to $40 billion.
TikTok's greatest strength are its teens. 45% of its user base is under the age of 18. Advertisers are less inclined to advertise to minors but ByteDance is sitting on a gold mine once TikTok's user base grows up.
Short Squeez Takeaway: TikTok was the most downloaded app of 2020 and Q1 2021. It's easy to contrast TikTok's fate to Vine, a similar short-form video app, which was sent to the the gulag by its owners, Twitter in 2016. When Vine faced problems and became a cash-burning machine, Twitter shut it down as it was not its core business. (a classic example of M&A killing a company) Even if TikTok is a fad, ByteDance will probably fight harder to support it than Twitter's half-hearted attempt to save Vine. TikTok's worldwide reach gives it strategic importance to China and even if the app is unprofitable for a long time, it doesn't look like TikTok is going anywhere any time soon.