Though there are some important differences between TikTok and platforms such as Instagram and Snapchat, it has grown to a point where it's a meaningful rival -- particularly for Snapchat.
For those unfamiliar, TikTok is something of a cross between Instagram's traditional photo and video-sharing service and popular "stories" services. Users upload short, full-screen, portrait-mode videos that are attached to profiles and shared to followers, and which can be discovered with the help of searches and hashtags. The videos, which are often goofy or whimsical in nature, can garner likes and public comments, and usually (though not always) feature a music soundtrack.
TikTok is owned by China's ByteDance, which rolled out a video-sharing app known as Douyin in China in 2016 before launching a version branded as TikTok for international markets in 2017. The platforms have both grown like weeds: In February, research firm SensorTower estimated that global TikTok/Douyin downloads had topped 1 billion even when excluding Chinese Android app installs (which are undoubtedly substantial).
India has been a particularly strong market for TikTok, with Mark Zuckerberg recently stating that TikTok is "past Instagram now in India in terms of scale." However, it has also gained a healthy following among younger Americans, with SensorTower estimating that app installs in U.S. had topped 96 million as of February.
For its part, ByteDance said in July that it had 1.5 billion monthly active users (MAUs) and 700 million daily active users (DAUs) across its platforms, which also include popular Chinese content app Toutiao. Meanwhile, Reuters has reported that ByteDance, which is in the early stages of monetizing TikTok via video ads, posted revenue of 50 billion to 60 billion yuan ($7 billion to $8.4 billion) during the first half of 2019. With much of this revenue having come from China, ByteDance has become a headache for Tencent (TCEHY) , which during its Q2 earnings call suggested that the flood of video ad inventory now being supplied by ByteDance's apps was weighing on its ad sales.
Could Facebook (FB) and/or Snap Inc. (SNAP) end up facing similar headwinds as TikTok ramps its ad sales? There is some risk of ad dollars that might have otherwise gone to Instagram or Snapchat being directed to TikTok, particularly given the similarities between TikTok's portrait-mode video ads and the ads that are run against Instagram Stories and Snapchat Stories (and which Facebook will eventually start running against WhatsApp's Status stories service). But at the same time, the differences between the platforms also need to be kept in mind.
Unlike TikTok, stories services are used to share both photos and videos, and more often than not without any music playing in the background. Just as importantly, stories content typically disappears after 24 hours, and doesn't feature any likes or public comments. As a result, someone frequently sharing content to one or more stories services probably isn't going to stop on account of TikTok. Indeed, TikTok seems aware of this, given how it allows users to link to their Instagram profiles on their TikTok profile pages.
And more broadly speaking, TikTok's content, while clearly popular with many younger consumers, also clearly isn't for everyone. As The Verge recently noted, many people who try out TikTok often end up abandoning the service after a short while (echoes of Twitter (TWTR) ).
There's also some risk that the fact that TikTok is owned by a Chinese firm could lead to greater regulatory scrutiny in the U.S. and elsewhere. Last month, TikTok caught some heat over a Washington Post report that indicated the platform was censoring content related to the Hong Kong protests.
With all that said, to the extent that consumers using Instagram or Snapchat view TikTok as an alternative entertainment source, it does act as competition. While it's unlikely that many daily Instagram or Snapchat users will abandon the platforms due to TikTok, some could conceivably use them a little less than they previously did in the event that they become hooked on TikTok's content.
From a business standpoint, Snap appears to be in the crosshairs here a lot more than Facebook. Snap is far more dependent than Facebook on younger consumers for eyeballs, and from the looks of things, there's a lot of demographic overlap between Snapchat and TikTok. Moreover, while Facebook (though ramping its stories ad business) still gets the lion's share of its revenue from Facebook and Instagram feed ads, Snap depends heavily on Snapchat stories ads.
At a minimum, the risks posed by TikTok to Snapchat usage and revenue are something that Snap investors should keep an eye on at a time when the company is still burning cash and Snap's stock remains well above its late-2018 and early-2019 lows.
