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TikTok is on Pace to Triple Ad Revenue This Year

Motley Fool - Tue Jun 21, 7:00PM CDT

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"Is TikTok destroying civilization? Some people think so," pondered potential future Twitter owner Elon Musk this weekend.

Destruction or not, the short-form video app -- responsible for multi-million view hits like an irresistible smiling baby and an impressive hide and seek illusion -- only represents a fraction of the digital ad market, but its rolling into this week's industry-leading Cannes Lion ad festival as a fast-growing track to Gen Z's hearts and wallets.

The 1.9%

Google and Facebook-owner Meta are still the kings of the digital ad market -- they will earn half of the global digital ad revenues in 2022, according to Insider Intelligence estimates. TikTok will earn just 1.9%. But with more than half of its one billion monthly active users, as of September 2021, under 25, it's left other social media companies looking like the How Do You Do Fellow Kids meme.

But TikTok is drawing a windfall of new advertising clients because of rapid shifts in the digital ad market. Last year, Apple made it more difficult for advertisers to target consumers and measure ad performance, denting the cookie-based business of old that Meta and Google have used to build digital ad empires. As a result, companies have shifted their ad spending to cover more ground, with significant redeployment going to TikTok:

  • A subsidiary of China-based Bytedance, TikTok is on pace to make up to $12 billion in advertising revenue this year, or three times what it made last year, according to sources who spoke to The Wall Street Journal. Bytedance, which owns other social-media apps in China, is on pace to increase ad revenue by 50% this year, according to Insider Intelligence.
  • Naturally, with more demand, rates are going through the roof: the cost of a branded Hashtag Challenge, which pairs a feat that viewers are challenged to duplicate with, duh, a hashtag (example: #PlayWithPringles), was $500,000 late last year vs $180,000 in 2019, marketing agency Byte Dept told the WSJ.

One Powerful Search Engine: Not to be outdone, Google said last week that 1.5 billion people every month use its two-year-old TikTok copycat YouTube Shorts. A study by Inmar Intelligence found 70% of web users regularly watch short-form video, meaning whatever Mark Zuckerberg does with the metaverse, he probably wants to keep it under two minutes.

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