A brief background on the founder and parent services ByteDance and Toutiao
ByteDance was founded by CEO Zhang Yiming. He has been interested in microelectronics and the software development process since his childhood, and as a young man, he enrolled in Nankai University in these fields.
ByteDance’s first product was called “Jinri Toutiao” and was launched in August 2012. The easiest way to describe it is as a Facebook news feed with no content from friends and hyper-targeted content and ads.
The product peaked in mid-2018, with about 200 million users (DAU) using it for an average of 74 minutes a day; nearly twice as long as Facebook, Instagram and Snapchat.
At the time of Toutiao’s launch, the Internet news market in China was completely controlled by state media and web portals such as Sina and Sohu. These portals had a major problem, posting exceptionally long and boring text, written and properly optimized only for desktop computers.
Toutiao’s original product had the functionality to scan content from its competitors’ pages and reformat it for mobile devices. At one point, the company went so far as to remove the original ad integrations and replace them with its own.
Toutiao was initially promoted through Influencers and opinion leaders on the Weibo platform (Chinese Twitter). Toutiao aggressively used push notifications and pushed users to share content as often as possible, which helped it grow to 10 million users in just 90 days.
New users logged in using their Weibo account, information from which, Toutiao used to find initial interests and friends. The individual data each user received (how they clicked, scrolled or paused, time spent on an article, their comments, location, time of day and more) was used to provide each user with the most personalized content possible.
Toutiao changed many elements of the articles: titles, cover images, and even shortened most of them. All of these manipulations allowed users of the product to read 80% of each article in less than one day of use, resulting in the largest lifetime retention rate of 45%, which Toutiao laudably claimed in the early stages of development.
All of this article editing and personal recommendations was instant and free, compared to the work of editors and writers working for competitors, giving Toutiao a product 10 times better than competitors at a lower cost, which by some estimates was 8-10 times lower than competitors.
All of this frankly pissed off the traditional media companies, and caused a wave of lawsuits against Toutiao, with litigation that may not end for years.
The main essence of the competitors’ claims was that the app did not allow users to properly navigate to the original source site, due to their poor formatting on mobile devices.
The result of all the litigation was that Toutiao allowed users to navigate to the original source’s external sites. This further resulted in more than 60% of the publishers’ traffic coming from Toutiao users.
Toutiao’s next step was to convince publishers and journalists to create content directly in the app, for which Toutiao was willing to share a share of the revenue.
Soon after reaching this step, it was content written by partners directly in the app that made up the top popular reads. Toutiao’s advanced targeting allowed its partners to get a wider and more relevant audience much faster than on any other platform. This fact further encouraged other companies and Influencers to join Toutiao – and by 2017, the number of partners of the app already exceeded 1.2 million.
Tencent, Alibaba, Baidu and many startups eventually launched similar news products, but this failed to shake Toutiao’s lead in this market. It helped that the company generously shared the revenue it received with its partners, allowing them to monetize their content like nowhere else and continue to be its loyal followers.
Over time, Toutiao moved to build functionality into its app and gradually added many different features, such as: friend comments on articles, the ability to share photos in the feed, job listings, buttons to launch fitness apps, music and podcasts; as well as live shows, interactive Q&A channels, and a full feature-length movie viewing platform (Xigua).
In parallel, the company followed the lead of other Chinese tech giants and in 2018 introduced mini-programs that allowed developers to create apps, based on Toutiao. This led to the creation of successful delivery services for restaurants, groceries, and pharmacies.
The most important innovation, however, was Toutiao’s inclusion of functionality to add video to content in the app. This innovation allowed ads to be inserted into videos.
Initially, Toutiao had a hard time finding decent advertisers, because big brands, at the time, were just starting to invest in mobile advertising. However, despite being much smaller than its competitors Baidu and Tencent, Toutiao was able to convince brands to try Toutiao’s hyper-targeted advertising product, which already had a huge user base from the largest and most desirable cities in the app.
The targeting proved so good that by July 2019, marketing companies like Meituan were spending 85% of their ad budgets on ByteDance apps.
In September 2016, ByteDance used its algorithm for matching personalized recommendations, created and refined while working with Chinese users and advertisers, to launch the Douyin short video app in China and, later in 2017, the TikTok app for the rest of the world (important to note that these are two very different products).
This expanded the available pool of Toutiao video ads, but also created opportunities to expand the established CA, which at the time consisted mostly of men.
Most importantly, by 2018 it was clear that Toutiao had reached maturity, and future growth for ByteDance must come from new products.
The road to becoming a phenomenon
It’s hard to argue with TikTok’s success. In June 2019, the platform had over 1.5 billion MAUs (monthly active users), and by the end of October 2019 and DAU had surpassed 1 billion.
And all this was possible for 2 main reasons, namely the “ruthless growth strategy”, which will be written about in more detail in the next chapter, as well as specific user interface solutions that allowed to surpass all competitors.
A user interface geared towards video
A key feature of TikTok is the video-centric interface, the “Page for You,” which takes up the entire screen and immediately starts playing, drawing users in to watch.
Each video is looped by default, and users swipe up and down to navigate through the endless stream of videos, sideways to go to the creator profile for more content, or press one of the many little buttons along the edge of the screen.
By comparing the direct competitors you can see their differences with the naked eye and how the competitors are wasting most of the valuable limited screen space on their mobile device.
For comparison, the following competitors and the percentage of how much screen space is allocated for video can be cited:
- WeChat (16% of the screen)
- Instagram (31%)
- TikTok (100%).
I think after this it’s clear which app a user is more likely to watch a video or be interested in an ad in.
Short video format
Content on TikTok is very short – originally no more than 15 seconds, now up to 120.
The short form of the video makes it easy to both create and consume. Most TikTok videos are created by a single creator, and many post multiple videos per day.
A 2018 ad from ByteDance claims that 34% of users in the U.S. shoot content daily. Whereas long-form content on other platforms isn’t typically filmed or edited on mobile devices, and their creators often create entire production teams around them.
From a consumption standpoint, it’s much easier to consume short content. Each short video can trigger a dopamine release and subsequently get you hooked on the needle of mild pleasure.
All videos are played by default, which often leads to multiple repeat viewings (which is also of great benefit in algorithm development).
This format allows for very fast training of each user’s algorithm, for example, compared to YouTube, on average it takes a user about 10 minutes to watch 1 video, while on TikTok, in 10 minutes a user can watch 40 15-second videos, which are dozens of times better to help train the algorithms.
The format also encourages users to watch videos to the end (which are played with sound by default), which makes them more susceptible to ads. And the large number of videos watched allows TikTok to provide frequent, natural ad breaks.
TikTok requires no friends, followers or even an account. A hyper-personalized algorithm recommends content based on thousands of items and tags analyzed for each individual user and their browsing history, repeat views, likes, comments, and even actions after viewing.
TikTok is the first mass-market consumer app whose product is artificial intelligence. This is in stark contrast to the algorithms of outdated social products based primarily on interactions with other users.
Expansion and why it was possible
TikTok used a very deliberate expansion strategy:
For starters, it created a better tool for editing short videos on mobile devices.
This was made possible with simple cut-and-paste and cleanup, as well as multiple filters and a large music library.
Many creators who originally used it as an editing tool intentionally started posting more when they noticed that fans started following and interacting with them on the app.
In addition, TikTok made sure creators felt like Lynx personalities by giving them full support, including weekly emails with content suggestions, one-on-one conferences with TikTok staff, and in-person live events to build community and encourage collaboration.
Thoughtful product solutions maximized expansion growth. Extremely short videos, minimal importance of subscriber schedule and consistent traffic to the app through intensive marketing, cross-platform publishing, active promotion of purchased opinion leaders and (ultimately) habit-forming user experience have enabled TikTok to achieve such phenomenal growth and retention rates.
TikTok, an airfield for phenomenal new products to emerge
Like China, ByteDance aims to leverage TikTok’s artificial intelligence capabilities, content and user base to launch other products around the world.
In the case of TikTok, adding more types of content over the past two years and expanding its reach is just the beginning. We need to think of TikTok not only as a means to collect data, deliver ads, and distribute content, but also as a platform that pushes users to other products.
And here’s a short list of areas where ByteDance has already set its sights:
Long-form video and streaming services
Starting in mid-2019, Douyin (China’s TikTok) allowed some creators to upload videos as long as 15 minutes. It seems inevitable that global TikTok will launch the corresponding functionality in the near future as well.
Like Spotify’s playlists, TikTok’s algorithms and trends determine which songs make it to the top of the global charts. Some songs are now even published on TikTok earlier than on streaming services.
ByteDance also recently launched its own music streaming app, Resso, in India, Indonesia, and Brazil.
TikTok knows exactly what kind of music its users like, and that they should be able to connect to a streaming service (in our case Resso) and listen to the whole song, an excerpt from which they are so many times in the TikTok feed.
ByteDance has been very vocal about entering the games market. The company has bought several game publishers in the past two years, and now has more than 1,000 employees in its games division.
And ByteDance also has dozens more in other areas, such as:
- Consumer Finance.
- Corporate software
What steps to expect next from the legend?
Going back to TikTok, most likely it will follow the beaten path and adopt many features from its Chinese brother Douyin.
So soon we might see the integration of e-commerce into video. Chinese authors on Douyin can already create videos with direct integrations for buying specific products in stores.
TikTok also recently released donation stickers that will begin to train users to make in-app transactions, namely making purchases and tipping creators.
And it may actively begin to promote to brands and content creators, a special recommendation tool that will use artificial intelligence to give useful advice on creating and promoting content and products in it, depending on what works well: what effects to use, what changes to make to the video or what content to create together and with whom.
Taking into account all the other products described above that are in development, we may eventually see what TikTok is going for, namely a universal tool that will cover the entire ByteDance ecosystem: video hosting, music, e-commerce, podcasting, analytics and even financing.