TikTok is offering digital ads at a lower cost than rivals as it attempts to lure more advertisers and brands away from Meta, YouTube and Twitter amid the slowdown in global ad spending.
Platforms such as Twitter and Meta’s Facebook and Instagram are seeing reduced ad spending as brands pick TikTok due to lower costs and better levels of engagement, the Financial Times reported on Tuesday (January 10), citing advertisers, industry bodies and brands.
TikTok generates most of its revenue from advertising and in 2021, the company reportedly raked in nearly USD $4 billion in revenue.
The ByteDance-owned app is predicted to have ended 2022 with 1.8 billion monthly active users from 1.2 billion at the end of 2021. In China alone, its home market, TikTok has over 600 million daily users.
But with the slowdown in global ad spending, TikTok slashed its global revenue target for 2022 by 20%, or by at least $2 billion, to between $12 billion and $14.5 billion the FT reported in November.
YouTube is also no exception to the downturn as its ad revenue slipped 1.9% in the third quarter to $7.07 billion, contributing to the overall 27% drop in Alphabet’s revenue in Q3. Twitter, now owned by Elon Musk,
To weather the slowdown, TikTok has reportedly enhanced its ad offerings for brands.
New York-based media agency VaynerMedia noted that obtaining 1,000 impressions from video advertising on TikTok costs nearly half that of Instagram Reels and a third cheaper than Twitter and 62% less than advertising on Snapchat, the FT most recently reported.
As a result, the top 1,000 advertisers in the US alone boosted their spending on TikTok by 66% to $467 million from September to October 2022, the newspaper added, citing data from market intelligence firm Pathmatics.
“So many of our brand partners . . . used to be 100 per cent Instagram,” Permele Doyle, founder and president of creative agency Billion Dollar Boy, was quoted by the FT as saying, adding: “Now for 2023, we’re seeing 80 or 100% TikTok.”
Market research firm Insider Intelligence recently noted that Meta and Alphabet are losing dominance over digital ads in the US from rivals TikTok, Amazon, Microsoft and Apple.
The firm also predicted that TikTok will soon beat YouTube in viewing time, although it does not expect TikTok to surpass Netflix’s viewing time anytime soon.
TikTok’s social buyer penetration is also climbing rapidly in the US, outpacing Pinterest. By the end of 2023, it is expected to beat Instagram and tie with Facebook, according to Insider Intelligence.
“There is a big opportunity for brands to create incredible advertising on TikTok, whatever the budget,” Kris Boger, general manager of global business solutions at TikTok, was quoted by the FT as saying.
Insider Intelligence estimates global ad spending in 2023 to grow 10.5% year over year to $626.86bn from $567.49bn. The figure is expected to skyrocket to $835.82 billion in 2026.
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