Remember when shows used to air each week live and in order to watch the show you had to be tuned in at the predetermined time? For me that show was The Office, I would look forward to Thursday night’s when it would air. I would have to watch through 8 minutes of commercials just so I could watch 22 minutes of content. A lot has changed in the way we view content since 2008. With the introduction of Netflix, specifically in its current form, every season of The Office became available on demand without ever seeing a commercial. If you ever need to pull up a specific scene of The Office, there is YouTube allowing you to watch as many clips as you desire with a few 15 second commercials here and there. This shows over a thirteen-year period of time how quickly things have evolved in the way we consume content. What if you could cut out the ads, cut out the expensive studios and use AI to master what content a user sees all while increasing their screen time to unprecedented levels? Well this is essentially the business model of TikTok.
TikTok which was founded in China in September of 2016 by the company ByteDance and is known in China as Duoyin, which explains why their logo is shaped more like a d than a t. The company was created with AI at the forefront of their business strategy. TikTok uses AI in two ways, the first is very simple and not different from what YouTube, Netflix and Instagram do in that they track how long each video is watched by each user and look to customize the content users see so they watch as much as possible. What differentiates TikTok’s platform is the videos are short, usually less than 60 seconds, enabling the algorithm to collect a lot of data very quickly. The second and much more unique way that TikTok uses AI is in helping content creators edit their content and create viral videos. On most applications when content creators film a video the editing becomes the most cumbersome part, it can require hours of editing to get a fifteen-minute video. This is one of the many reasons that content creators on YouTube post weekly opposed to every day, the editing can be very tedious. TikTok looks to eliminate this friction through AI. The AI software embedded in the app has editing capabilities making it easier for content creators to quickly upload videos and have more content to post. “With TikTok, users can film, add filters, cut/paste clips, overlay audio, leverage sophisticated AR, and more due to the company’s high research investment into “computer vision [and] virtual reality” (HBS, 2019). This creates a cycle of easy content for the consumers and makes creating viral videos even more accessible. The below figure shows that as of 2019 this strategy and investment in technology is working. TikTok is shattering the competition when it comes to screen time.
TikTok currently makes money though selling adds on its platform that are seen by users. With over 2 billion downloads of the app the company is not short of eyes looking to view their apps. Exact figures of how much ByteDance makes from TikTok is complicated and unclear as the information is not publically available. ByteDance is a private company however analysts value ByteDance as high as $180 Billion according to CNBC. (CNBC, 2020)
From a business perspective it is very significant what TikTok has been able to accomplish. Consumer’s attention spans have been dwindling for years and as cable companies have struggled with how to adapt to this TikTok took in one step further. Instead of paying millions to create content as the big studios do they created a platform for short easy to maneuver content attracting billions of users which will translate to attracting billions of dollars in advertising dollars.
I have never used TikTok personally, but I am sure we have all seen a TikTok video even if it was not directly on the TikTok platform. I am personally a big fan of cooking shows and predominantly watch them on YouTube. Earlier this month, March of 2021, YouTube released a beta version of what it calls “YouTube Shorts”. These are essentially TikTok videos on the YouTube platform, in fact the majority of the videos that I see are filmed on the TikTok platform and then uploaded by the content creators to YouTube. This as significant because in addition to influencing the way that consumers view content TikTok is influencing the way that other companies do business. This is a trend that I believe is here to stay for a variety of reasons but most importantly if I can watch Kevin Malone make Kevin’s Famous Chili in sixty seconds why would I watch the same video over fifteen minutes?
It will be interesting to see where TikTok goes over the next decade. Will their AI be able to evolve to the level at which it needs to remain the leader of the pack? Will it be able to avoid legal issues in the United States? These are complex questions that the leadership at ByteDance will have to navigate.