Your neighbor’s teenage children are on it. So are Jimmy Fallon and the Washington Post, as well as Bollywood stars like Madhuri Dixit Nene.
But TikTok, which is downloaded more often than Facebook and Instagram, is not based in Silicon Valley or in one of Europe’s emerging tech hubs. The short-form video app is owned by Chinese unicorn ByteDance, founded in Beijing in 2012, and has become arguably the first app from China to become truly intertwined in the lives of its international users. ByteDance is now the world’s most valuable private startup and has a massive app universe whose combined monthly active users reached 1.5 billion in 2019.
A platform for short selfie videos, TikTok is supremely skillful at dragging its largely young users down a rabbit hole of quirky, endless videos. Like legacy social media, TikTok allows you to connect with people you already know—but that’s an almost irrelevant part of the app. The reason TikTok has become a global phenomenon is the eternal loop of videos from people you don’t know under the “For You” tab. Here, TikTok’s powerful algorithms surface videos from millions of users, personalized for you.
Depending on your likes, you might see a kid spraying shaving cream into a Croc and then stepping into the shoe, hashtag challenges that involve people imitating ants or putting soy sauce on unmentionable body parts, cats made to perform an almost psychedelic sequence of moves synchronized to the tune of “Mr. Sandman,” or 15-second history lessons. And of course, there’s the dancing—so much dancing, especially among TikTok’s Indian users, who spend the most number of hours on the app among users outside China.
“A precondition of TikTok’s global success is that it is a global app, not one that is rooted in Chinese culture or that caters to a Chinese audience,” says Scott Kennedy, an expert on Chinese economics at the Washington-based Center for Strategic and International Economics think tank. “That is unusual for products and services from Chinese firms.”
It is, in many ways, China’s first global app. Sucked in by funny, bizarre, or sometimes downright dangerous content, TikTok amassed 717 million monthly active users globally as of December, including users of the Chinese version of the app, according to mobile analytics provider App Annie, an increase of 70% from a year earlier. Its biggest overseas market is India, where it says it has 120 million monthly active users, followed by the US, where it has about 26 million active users.
And the popularity of the app in the US is spilling over to other markets. “I heard about TikTok through working at a summer camp in the US. All the kids were talking about it,” says Lucy Brown, a British student in her early 20s based in Chester in northwest England. Brown estimates she spends around half an hour a day sharing funny videos with friends and family.
Twenty four-year-old TikTok video creator Eric Yang, who is based in Bangkok and does online marketing, says he started using the app after seeing the success of it among Gen Z—people who were born between 1995 to 2009. “The growth rate in terms of followers is definitely much better on TikTok for me compared with Instagram,” says Yang, who started using the app last November and now has more than 8,000 followers on the platform. The better growth is partly because the competition for grabbing viewers on TikTok is not as fierce as on Instagram yet; around 10 to 20% of Instagram users also create content while the proportion is around one to two percent for TikTok users, says Yang.
The rise of TikTok highlights a significant development: China’s growing influence in consumer technology outside of its own borders. Life in China would be unthinkable without social media giant Tencent’s ubiquitous super app WeChat or e-commerce titan Alibaba’s consumer site, but they are not widely used outside China or the Chinese diaspora. TikTok’s reach shows it is finally possible for Chinese apps not only to survive, but even to flourish overseas, creating real competition for traditional Silicon Valley-based giants.
Yet its success has also come as the US and China embarked upon a trade war in which hostilities have often centered on China’s technology giants, China’s advancing tech prowess, and abstract but deep fears about what the Communist Party of China could do with the power it wields over tech firms like ByteDance. US lawmakers have already raised the alarm on the personal data that all those short videos allow TikTok to collect, and a US inquiry is beginning into the national security ramifications of ByteDance’s $1 billion acquisition of a American popular lip-syncing app in 2017, which paved the way for TikTok to become an American success story.
Last year was a great year for TikTok—it was downloaded 738 million times—and it is starting to explore how it can monetize that popularity. But this year it will face perhaps the toughest challenge yet for any Chinese tech company: proving itself to the US government.
“I expect there to be increased regulatory pushback on TikTok and ByteDance this year—and it looks like TikTok sees this coming and is taking steps to deal with,” says Fergus Ryan, an analyst with Australian Strategic Policy Institute which regularly analyzes China’s tech giants and propaganda activities.
Table of contents
A brief history of TikTok | An algorithm for popularity | The competition | The China challenge | What’s next?
A brief history of TikTok
TikTok’s origin story is partly American. It begins on a train traveling to Mountain View, Calif., where Google is based. Imagine a group of teenagers horsing around, some of them listening to music, the others taking selfies or short videos of one another that they shared with friends. That boisterous yet wholesome scene apparently inspired Alex Zhu, a Chinese entrepreneur, to dump the educational part of the short instructional video app he was trying to develop at the time.
Instead, he and his Shanghai and San Francisco-based business partners turned to making an app that could combine the selfie, video, and music. In 30 days, it went live as Musical.ly, according to Business Insider. The combination of 15-second selfie videos and music took Musical.ly to the No. 1 position on the iTunes app store by July 2015, a year after its launch. At its peak, Musical.ly had over 100 million monthly active users.
Around the same time, a little-known tech company was also taking off in Beijing. Born in 1983, ByteDance’s founder and CEO Zhang Yiming is low-key and low-profile. After successfully founding a property listing website, Zhang, excited by the advent of smartphones, left the company and founded ByteDance in 2012 from a small apartment in Beijing, looking to create products that offered more personalized recommendations. One of its first hits was the news aggregator Toutiao.
Unlike the first generation of Chinese tech entrepreneurs, such as Jack Ma, who founded Alibaba in 1999 and chose to focus only on the domestic market until much later, Zhang, now 36, put overseas markets at the center of his vision for short video apps. “At that time, few of my colleagues had been abroad, but we believed that mobile internet would bring us huge opportunities globally,” Zhang recalled in a speech to his employees in 2019. The company needed to do this in two ways, he remembered thinking, both taking its own products overseas, and through acquisitions.
Zhang’s global ambitions became clear starting in 2016, when he reportedly tried to buy Reddit but failed over disagreement on multiple issues including price. He later bought and rebranded struggling US video-sharing app Flipagram, but it didn’t manage to gain much traction. Musical.ly was a logical next step for Zhang, who had rolled out the short video app Douyin in China, where Musical.ly wasn’t available, and followed it with an international version, TikTok, in 2017. When ByteDance acquired Musical.ly in November 2017 for $1 billion, the deal marked the beginning of TikTok’s real global journey. In August 2018, Musical.ly users found themselves migrated over to this new app.
But now this and other aspects of the acquisition are set for fresh scrutiny. TikTok at the time didn’t seek review of the deal from the Committee on Foreign Investment in the United States (CFIUS), which looks at mergers and acquisitions involving foreign buyers for their national security implications, giving the committee an opening to take a look now.
The committee has already taken a far closer look at potential Chinese acquisition in tech in recent years, nixing digital payments giant Ant Financial’s efforts to buy MoneyGram, and ordering a Chinese tech firm to divest itself of gay dating app Grindr. While it’s too early yet to know how this will play out, in the worst case, it’s possible the committee could require ByteDance to undo that deal.
“Any restrictions there will be costly in and of themselves but also as a possible example to other countries and investors,” says Sarah Cook, a senior China researcher at Freedom House, a US government-funded think tank. “That being said, there are users and governments in many countries who aren’t as concerned about security issues surrounding Chinese companies so I imagine it will still be able to spread globally.”
An algorithm for popularity
At the core of TikTok’s popularity is its almost unsettling ability to recommend content that sometimes people don’t even know they want. Similar to Instagram and Facebook, the app likely studies and analyzes users’ engagement patterns to decide what content to push to them. Through the use of technologies including machine learning and natural language processing that can study text, images, and videos, ByteDance’s products can customize content for each of its users. The process is a positive feedback loop: the better the apps are in refining its content, the more users they will attract. With more users’ data, the apps in turn get better at recommending content and the cycle continues.
TikTok does not reveal in detail whether, or how much, it uses ByteDance’s technology. But, according to Cao Huanhuan, principal research engineer at ByteDance, several of the company’s short video apps, including Douyin, use the same content recommendation system (link in Chinese) as Toutiao, the news aggregator. “ByteDance was the first company worldwide to have achieved the fully automation of the content recommendation system…The system is intelligent and can adjust its recommendations based on both positive and negative signals, such as the number of times a video has been viewed,” Cao said in a speech (link in Chinese) at a tech conference in China in 2019.
So, a teen in the US might see loads of TikToks about the upcoming US presidential election or Selena Gomez dancing with friends to her new song “Rare.” One in the western Indian state of Maharashtra might be fed videos of a small shopkeeper in a loud floral shirt dancing jubilantly. Meanwhile, on Douyin, users are seeing bored citizens playing mahjong or dancing in their living rooms to pass the time during a coronavirus outbreak that has stopped them from going out.
“The technology can quickly analyze what users like to watch in different countries and recommend more content like that, which is as powerful as a localization strategy can get for apps,” says William Bao Bean, a general partner at SOSV, a global venture capital firm that has invested extensively in China.
That’s been crucial to TikTok’s success in India, where the mass audience, in contrast to those in China, lives mostly in lower-tier cities. “It challenges one basic assumption about regional Indian audiences—that they are not comfortable recording their videos,” says Yashwant Kumar, CEO of Hyderabad-based digital firm, GenY Medium. “Apps like Vine and Periscope never really took off in India as they focused on the ‘premium’ users, instead of regional masses.”
There are other traits that distinguish TikTok from its rivals. The minute you open the app, even before you’ve created an account, it immediately starts to play a vertical video that occupies your mobile phone’s full screen. There’s no loading page or “content you may like” section that requires you to initiate engagement; instead, it acts like a bossy friend who puts stuff in your face without your approval. The app also does not show the time on your phone on its interface, nor does it show any other items such as the carrier information—small but tiny details that add to the immersive experience.
“This design is aimed at making you concentrate on the app fully, just like how casinos usually have no windows to minimize the distractions,” wrote Lie Yun Wang, a Chinese tech media outlet, in an analysis of Douyin.
The popularity of the app is gradually bringing it opportunities to monetize—TikTok earned $177 million in revenues globally last year, according to Sensor Tower, with the last quarter of 2019 its best quarter ever. (That figure is small by the standards of major social platforms. For comparison, Snap brought in three times that revenue just in its last quarter.) Most of that revenue was from Chinese spenders, while the US accounted for about a fifth of spending. It makes money through in-app purchases, including sales of coins that can be used to purchase virtual gifts by users over the age 18 to reward TikTok creators—a “tipping” concept that WeChat pioneered first.
ByteDance will also try to replicate its success in online advertising in China on TikTok. The app introduced ads a year ago, presented mainly in three ways: a launch screen ad, in-feed videos, and hashtag challenges, which allow brands to create themes under which TikTok users can post related videos. The ads can cost hundreds of thousands of dollars. Hashtag challenges, for instance, can cost around $150,000 a day, according to Ad Age.
The competition
As TikTok explodes in popularity, it has supercharged interest in short video. Armed with the realization that millions of young people obsessively make, like, and share clips, existing social media companies and startups have raced to copy the app.
It’s hard, though, to define the boundaries of TikTok’s competition. Time spent on TikTok doesn’t just vie for time on Snapchat or Instagram—it’s also up against Netflix, and sleep, and paying attention in class. In China, TikTok competes against other Chinese short-video apps, and in the US, it grapples with a global set of copycats. Depending on geography, target audience, and function, one could argue that TikTok competes against everything.
In the US alone, Facebook has explored short video with Lasso (to limited success) and with Instagram’s Reels, which so far has exclusively launched in Brazil. Startups like Firework, Triller, and Byte have also jumped into the race, each putting their own spin on short video. Firework, for instance, has pushed for longer, 30-second clips while catering to a growing Indian audience. Meanwhile, Triller has specialized in AI-powered music discovery, signing licensing deals with major music companies. (Stalled music licensing deals may actually threaten TikTok’s continued dominance, leaving room for a company like Triller.)
To date, none of these apps—from legacy players to startups—have replicated TikTok’s runaway success. As of October last year, Facebook’s Lasso had just 425,000 downloads, a surprisingly small number nearly one year after its launch. And Reels is simply too new, and perhaps too small, to assess. Firework also lags far behind with the app closing in on 3 million downloads by last October, per Digiday. In January, Triller claimed it had 75 million downloads. But it’s tough to say how enduring, and ultimately, how profitable, this will all turn out, even for TikTok.
“Analytics companies have put out huge numbers for how many times TikTok has been downloaded,” says Debra Aho Williamson, a principal analyst who researches social media marketing at eMarketer. “Those [huge download numbers] catch a lot of attention, but they don’t necessarily translate into how many users TikTok has,” she explains to Quartz. “You could download TikTok and try it, and then maybe not open it again. Those numbers indicate interest, but I would caution [downloads don’t represent] actual numbers of how many people use the app.”
In Williamson’s view, Instagram probably poses the biggest threat to TikTok today, in part because its parent company Facebook could flip a switch and invest heavily in short video if it deems the venture worthwhile. She highlighted Instagram’s previous success ripping off Snapchat’s Stories, and suggested it might have the brand equity and audience to do something similar with TikTok. While Instagram probably won’t unseat Snap or TikTok completely, with Facebook’s backing, it could continue to offer alternatives, slowly siphoning off users who prefer Facebook’s suite of integrated apps.
Williamson also called attention to massive competitors in China, among them Kuaishou, a short-video app backed by Chinese conglomerate Tencent. In December 2019, Tencent reportedly invested $2 billion in the app. Kuaishao claims to have 200 million daily active users, mostly in China, but whether it can break into the Western market remains to be seen.
For now, TikTok is notably trailing in e-commerce, instead choosing to focus efforts on its advertising platform. But with that choice, TikTok leaves room for Instagram to build out its in-app sales feature and capture Western consumers. Additionally, while TikTok has some augmented reality features, it’s possible that virtual reality apps could eventually supplant this version of social media. Facebook and Oculus are at the VR forefront.
In the US, it’s worth keeping an eye on Byte—no relation to ByteDance—in particular. Dom Hofmann, creator of Vine, launched the app in January 2020, rebooting the extremely popular six-second video format. (In 2012, Twitter acquired Vine and kept the app going for about four years. However, it struggled to monetize the app and eventually shut it down in 2017.) In its first week, Byte (think “Vine 2.0”) topped 1.3 million downloads, a promising, if early, sign for a possible US-based answer to TikTok.
If there’s one takeaway, it’s that the short-video industry is wildly fractured. Things are still buffering. There are dozens of competitors of varying size and affiliation, but aside from TikTok, there are no obvious winners. Competitive pressures will probably lead to failures and consolidations, but for now companies are throwing everything at the wall and seeing what sticks.
Of course, there’s one thing many of these rivals have going for them that TikTok doesn’t—the perception that they’re “American” and not Chinese.
The China challenge
TikTok’s roots are a double-edged sword. While the app was able to get to where it is today thanks to ByteDance’s deep pockets and masses of Chinese data, it now needs to prove the shallowness of the ties between it and its parent, and, more importantly, the Chinese government. Rivals, on the other hand, are keen to link the two together as closely as possible. In a speech last year, Facebook CEO Mark Zuckeberg repeated an unproven claim that TikTok censored Hong Kong’s anti-government protests, which have been all over Twitter and Facebook but are largely invisible on the video app. “Is that the Internet that we want?” he asked.
Experts on emerging Chinese tech say Beijing’s relationship with TikTok could allow China to subtly promote its political agenda abroad.
“The Chinese government is interested in shaping and exerting influence across the social media landscape, and the prominence and global expansion of companies like ByteDance can advance those objectives,” Elsa Kania, an adjunct senior fellow at the Center for New American Security, wrote to Quartz via email.
Former TikTok employees who worked at the company as recently as a year ago told the Washington Post that they were pressured by ByteDance moderators in China to censor “culturally problematic” content. The Guardian reported last September that moderator guidelines recommended censoring material related to the 1989 Tiananmen student protest and religious group Falun Gong, both taboo in China, as well as guidance to ban foreign figures, among them Donald Trump and Barack Obama. The company told the Guardian that it earlier took a “blunt approach to minimizing conflict” on the platform, and that the guidelines were no longer in use. It also said it was empowering local moderators and developing “localized” content policies and that it has set up “moderation hubs” in Dublin, Singapore, and San Francisco. In the US, for example, it has hired former US lawmakers as part of an external committee to advise on its content policies.
Nevertheless, just months later TikTok found itself in the middle of controversy for removing a viral video from an American teen who embedded criticism of China’s treatment of its Muslim population in a makeup tutorial. The company blamed the removal of the fake tutorial video on a “human moderation error,” and restored it. Meanwhile, in India, a once-popular TikTok creator, Ajay Barman, alleges that the app is now censoring his content, which promotes Hindu-Muslim unity. His videos, which regularly drew 30,000 to 40,000 likes each, have sunk to the low thousands.
Exhibit A for many people concerned about the idea of whether speech can flow freely on TikTok: its Chinese twin, Douyin, and other ByteDance apps. A former ByteDance employee who worked as a content reviewer told Quartz that there were more than 10,000 content reviewers working for the company across China as of last year. The former reviewer, who hasn’t worked for either TikTok or Douyin, said although the specific rules for each product are different, the overall direction of content moderation guidelines for them is largely the same. Content related to politics, violence, pornography, and especially criticism toward the ruling Chinese Communist party and the government, should be censored. The company also follows occasional orders issued by China’s top cyberspace administration to censor content, said the employee.
On Douyin, searches of terms like Xinjiang and Hong Kong led only to “positive” content promoting Beijing’s policies or showing beautiful sceneries in the two places on Douyin, while searches of the same terms on TikTok managed to yield criticisms toward the Chinese government about its treatment of groups like the Ugyhur Muslims, with reports estimating that as many as a million of them have been subjected to “reeducation” in internment camps in western region Xinjiang. A Quartz attempt to post a video containing terms such as “human rights” and “Xinjiang” in Chinese failed on Douyin, prompting the message that the video was in “violation of community guidelines.” The video was later deleted from the app.
Following such rules—or facing the consequences—is a fact of life for internet companies in China, one many of them list under the risk section of their prospectuses when going public. ByteDance saw Toutiao temporarily removed from China’s app stores in 2018 by Chinese regulators as part of the watchdog’s tightening grip on online speech. The company’s popular jokes app Neihan Duanzi was permanently shuttered that year due to the authorities’ concerns about its “vulgar” content.
Zhang, the CEO of ByteDance, said in an apology peppered with Communist Party buzzwords that the company would expand its vetting team to around 10,000 people, and ban creators whose content was “against community values.” China Media Project, a research initiative that scrutinizes the Chinese public sphere, described the move as “a mea culpa made under extreme political pressure, in which Zhang, an engineer by background, ticks the necessary ideological boxes to signal his intention to fall into line.”
“All along, we have placed excessive emphasis on the role of technology, and we have not acknowledged that technology must be led by core socialist values,” wrote Zhang on WeChat.
ByteDance’s public efforts at government pacification in China now present a record that the company’s skeptics can point to when questioning its assurances on a second grave concern—doubts over the privacy of its US user data, and whether it could resist “significant” pressure from Beijing to make such data available to it, said Cook at Freedom House.
More specifically, TikTok could require users to provide data such as their age, phone and social-network contacts, location and device information, as well as IP address, according to their privacy policy updated on Jan. 1. To be fair, other social media apps also collect similar information as what’s obtained by TikTok, but should we be especially alert to what TikTok asks for, given its Chinese ties? Ryan from ASPI thinks the answer is yes.
“That data can be used to create a mosaic picture of users’ lives and habits which could then be used to blackmail or influence officials from other countries,” he said. What is especially worrying, he says, is that a line from TikTok’s current privacy policy that says the app “may share your information with a parent, subsidiary, or other affiliate of our corporate group.”
“It looks to me like TikTok’s privacy policy still includes plenty of wriggle room for them to send data back to Beijing,” said Ryan.
The company’s overwhelmingly young user base also poses a challenge when it comes to data protection. TikTok paid $5.7 million to settle accusations of violating the US’s child privacy law with the Federal Trade Commission that oversees consumer protection in February 2019. The FTC accused the app of illegally collecting personal information such as email addresses and names from children under 13, without requiring the group to obtain their parents’ permission first—a default requirement of most social apps in the US. This is the largest civil penalty ever in a children’s privacy case, according to the commission.
In response to questions from Quartz, TikTok pointed to past statements on its policies, as well as to an update to its community guidelines released in January. The company said in an October statement that it “does not remove content based on sensitivities related to China.” “We have never been asked by the Chinese government to remove any content and we would not do so if asked. Period,” read the statement. It also said it stores all TikTok US user data in the United States, with a backup server in Singapore, and that none of the data is subject to Chinese law.
While TikTok insists that it’s free from Chinese political influence, many observers aren’t convinced.
“There are reasons to remain deeply skeptical that TikTok is independent of the authority of China’s Party-state, particularly when it comes to censorship on sensitive [issues],” said Kania, of the Center for New American Security.
Of course, the political concern cuts both ways. Matthew Brennan, a frequent China technology consultant for Fortune 500 companies, has riffed on TikTok’s current social and political positioning, comparing it to Facebook and Twitter’s treatment in China in 2009:
While TikTok’s pursuit of a new US-based CEO may alleviate some concerns, its potential to shape the political opinions of its young audience could create fresh ones. Because of its sheer scale, TikTok could play an important role in the spread of information to voters across the world—including in the upcoming US election. TikTok said in an October statement that it will not allow political ads, including election-related ads, advocacy ads, or issue ads that “promote or oppose a candidate, current leader, political party or group or issue at the federal, state or local level.” Earlier this year it announced new notifications around election-related hashtags intended to combat misinformation.
What’s next?
The biggest uncertainty facing TikTok in 2020 is arguably the CFIUS review.
Other headwinds include possible rising scrutiny in other countries. India, for instance banned the app from being downloaded on app stores briefly last April over concern it was exposing children to sexual predators, pornographic content, and cyberbullying, according to an Indian court ruling. The overall trend of governments and individuals putting more efforts on protecting data privacy could put the app in the crossfires again. “There are data protection laws and regulations globally that can create challenges for TikTok, as well as for other social media apps,” said Anand Prasanna, a managing partner at Iron Pillar, a Mumbai-based investment firm. India, for example, is in the process of drafting new data storage rules.
On its business front, the app had its best month in terms of user growth in the final quarter of last year, with more than 200 million new installs, according to Sensor Tower. The company is also said to be developing a curated feed of “safe”content: videos that are carefully chosen and produced by quality creators or professional publishers. This feed could provide premium brands a better place for releasing its ads, helping the app charge a higher rate in return. Its exploration of a “social commerce” function, which refers to the trend of brands using social media platforms to promote their products or services, could also accelerate. It already allowed users to add links in their bios to e-commerce sites. Next it could consider introducing a shopping tool to let users purchase things directly from brands, Blake Chandlee, the VP of TikTok’s global business solutions in the US said an interview.
When it comes to the CFIUS review, there are three likely scenarios: lots of noise, but no action from the committee; some form of blacklisting or restrictions; or an outright ban of the app. The last one is deemed by observers as the least likely situation, as both the backlash from users and the political implications could be huge. Meanwhile, even if the app is put under greater US scrutiny, this might not hurt its development globally. TikTok could follow the example of another Chinese tech giant—telecoms equipment maker Huawei—big everywhere except the US, where it’s been basically shut out since 2012 over spying fears.
“Even the worst-case scenario that results in some kind of blacklisting in the US won’t matter when it comes to TikTok’s dominance around the world. Users in places like India or Europe are not going to care,” says Samm Sacks, a China digital economy fellow at the Washington-based New America think tank.
But it’s clear that ByteDance wants the US to be part of TikTok’s global success, and will apply its attention and skill to mollifying the US government—as it has done with the Chinese government in the past.
“The challenge here is that TikTok already claims it does the very things that I would think any mitigation efforts would need to address both on censorship and data access,” says Sacks. “Frankly, the only mitigation effort TikTok could take would be to just not be a Chinese company.”
Matthew De Silva and Niharika Sharma contributed to this report.