TikTok – Ticking clock.

Any move needs to happen fast.

• The fact that TikTok is not that difficult to emulate shows that its real asset is its network of users which is why it has to restore confidence soon or see an erosion of its user base that could prove fatal.
• ByteDance, along with Huawei is one of the few Chinese technology companies that have gained traction overseas which makes them vulnerable to being used as pawns in the escalating rivalry between the US and China.
• Australia, the UK and now India are also becoming increasingly hawkish on China which most recently has led to a blockade of Chinese apps in India (see here).
• India is a particular problem as many Chinese companies such as ByteDance and Xiaomi have established a significant presence there and won substantial market share.
• Furthermore, TikTok’s service is a very good cultural fit for India and in a fairly short space of time, it has attracted 200m users.
• These users are not generating much if any, revenues yet but India has great potential for offline to online (O2O) giving ByteDance an opportunity to monitor the usage it is getting in other ways.
• However, this will be dependent on its ability to hold onto that engagement which is looking increasingly under threat.
• Following the ban on TikTok in India, users have been flocking to rival apps like Roposo which stated that it has been adding as many as 500,000 users per hour during its peaks and expects to have 100m users by the end of July.
• Prior to the ban, TikTok had 200m users and unless something changes it looks likely that these users will quickly migrate elsewhere leaving TikTok with nothing in India.
• The one advantage that TikTok has is its recommendation engine which is very good at surfacing videos that individual users will like and I very much doubt that its local rivals have anything close to this level of performance.
• Hence, when the ban is lifted, there is a chance that users flock back to TikTok as a result of this feature, but the longer this takes, the less likely this will become.
• This is due to the power of the network where when an online location has become the go-to place, it becomes very difficult to dislodge.
• This is why the blockade of TikTok and the other Chinese apps represents a rare opportunity for the homegrown developers to take back their home market.
• However, TikTok is not standing still and I suspect that the company has seen this coming.
• This is why it has recruited a senior Disney executive to be the CEO of TikTok which I think will be followed by its spin-off as a separate entity.
• In addition to India, the US is also weighing whether or not to ban TikTok and a rapid move to extricate itself from Chinese control would go a long way towards mitigating these decisions.
• This could involve a separate entity with data centres outside of China where ByteDance has only an economic interest in the company and no say over how the operations are run or how the company is governed.
• I suspect that this would require an IP licence between ByteDance and TikTok because to keep the service competitive, the recommendation engine will be needed.
• This needs to happen fairly quickly as the example of India demonstrates that users could quite quickly move over to rival services should TikTok no longer be available.
• There are no shortages of innovative apps waiting in the wings to fill any gaps left by TikTok should it not move fast enough to prevent a ban.
• Instagram and Snap are two that leap immediately to mind but there is no shortage of others.