TikTok – Circumnavigation.

ByteDance expands its presence overseas.

• TikTok is moving to ensure that it dominates Digital Life segments both inside and outside of China which will make it unique as its peers have all struggled to make any headway overseas.
• The world of Digital Life services is divided just the world of mobile standards was divided in the 2G and 3G generations.
• Then, there was Japan and the rest of the world and now with digital services, there is China and the rest of the world.
• The landscape has developed with three successful companies (two in particular) developing Digital Life services that have dominated China.
• However, none of them has had any real impact overseas except one; ByteDance.
• ByteDance owns TikTok which now has over 1bn MaU (monthly active users) who are not just located in China.
• Tencent’s WeChat has over 1bn MaU but they are almost all Chinese, whereas TikTok is much closer to 50/50.
• This makes TikTok a credible threat to SnapChat and Instagram evidenced by their moves to try and emulate TikTok to avoid losing engagement to the new upstart.
• TikTok has been particularly successful in India which has around 120m users which have been enabled by the very cost-effective data plans in recent years.
• It also helps that TikTok goes very well with the Indian music industry which is largely driven by Bollywood movies meaning that video and music go very well together there.
• This fits with TikTok’s offering which combined with its ability to recommend videos that users will like with a high degree of accuracy goes a long way towards explaining its success in India.
• However, ByteDance is not content to rest on its laurels and has also launched a music app called Resso to challenge Spotify.
• At the moment, this is going to remain very India focused as while TikTok has secured the rights to a good portion of Indian music it does not have a deal with any of the big three global players.
• I see Resso as an experiment to whether it can leverage the appeal of TikTok into a media consumption service that will increase the total level of engagement it receives.
• Resso is a subscription service but very few Indians are going to pay $1.70 a month for the service (same as Spotify) meaning that it will succeed or fail based on the performance of the free tier.
• Resso represents the growth strategy of ByteDance overseas.
• It already is very strong in both Instant Messaging and Media Consumption in China and Resso represents a move to expand its appeal which may lead to a more complete ecosystem outside of China.
• This is key to long term growth as RFM research has repeatedly shown that monetisation (particularly by advertising) is driven by the amount of time users spend engaged with one’s services.
• Hence, the more successful services one has, the greater the opportunity.
• ByteDance is fairly early on this strategy as outside of China it is still pretty much a one app offering.
• I suspect that ByteDance will also be thinking about Social Networking and potentially Gaming which are the other big Digital Life Service outside of China that it does not yet have a service for.
• I think that we will be seeing a lot more of ByteDance in the next 24 months.