The TikTok Company Overview

Overview of TikTok

The primary intention of TikTok was to create and share fast online content, which was limited to a playtime of 15 seconds. The online media include homemade short videos that include dancing, lip-syncing and different challenges (Feldkamp, 2021). This unique type of online media content has inspired the success of TikTok to be among the top companies worldwide. Currently, TikTok is a multi-billion dollar investment. The tremendous success associated with TikTok justifies the worth of studying its management model. This article explores the model of management and the operating strategy behind TikTok’s success in the entertainment and social media industries. The management model and the operating strategy pushed TikTok past the dominant social media giants such as Facebook, Instagram, Twitter, and LinkedIn. The level of user engagement in TikTok’s application is on a different level compared to its competitors. TikTok provides a platform on which users create free accounts and develop and publish homemade content they share among the millions of users on the TikTok app. The population dominating this platform is the young generation.

A Brief History of TikTok

TikTok was launched in the year 2016 by ByteDance. ByteDance Company is associated with Zhang Yiming, a former software Engineer. Two years later (2018), TikTok merged with another software product from ByteDance Company, Musical.ly. The merger between TikTok and Musical.ly in 2018 ignited the spark that spiked TikTok to the top of the worldwide social media and entertainment industry. TikTok is present in about 150 countries worldwide, and the application can be used in about 75 languages. The application has over one billion users and a record of over 2 billion downloads, which positions TikTok in the fourth position worldwide in terms of the size of the user base (Feldkamp, 2021).

Ownership

TikTok is owned by a Chinese company, ByteDance in China, with Liang Rubo as the chief executive officer (CEO) (Think Insights, 2022).

TikTok’s Mission Statement

“To inspire creativity and bring joy” (Think Insights, 2022, 1).

TikTok’s Management Model

A management model refers to the choice of decisions made by the organization’s top management or the executives. These choices define the organization’s specific objectives, the strategies for effort motivation, and the allocation of the organization’s resources. These work harmoniously to achieve the organization’s short-term and long-term management (Al Khajeh, 2018). TikTok’s model of management can be viewed from different angles. For example, TikTok is characterized by innovation and creativity due to the constant release of new products, diversification of products, employee diversity, organization into groups and departments, and many others ways. In this case, the management structure shapes an organization’s nature.

With this in mind, it is evident that TikTok’s management model borrows much from the human relations model because of TikTok’s over-reliance on employees. The organization is organized into different departments which exhibit significant interactions or communication (Peng, 2021). On top of the departments, the organization has many groups, all of which are tasked with different tasks or responsibilities to build on the organization’s overall objectives. Communication in the organization is prioritized and well-established. TikTok embraces both vertical and horizontal communication, allowing top managers to communicate with employees at the lower level of the hierarchy and across departments and individual employees (Peng, 2021). On top of this, the management values employees as human beings with the understanding that the employees are not machines. In this case, the management has embraced better ways of employee management to enhance their productivity. In this case, employee motivation and compensation (in terms of salaries) is a dominant practice, which explains the high level of innovation and creativity among its employees.

Again, the management has high regard for employee diversity and inclusivity, especially due to the global nature of the company (Peng, 2021). All cultures and values are motivated to create a global representation in the organization. Employees are encouraged to be creative and innovative to provide competent ideas that could provide a competitive advantage for the company. In other words, the management takes the employees as the primary tool for engaging the competition in the market. But it is important to understand that an organization’s management model defines the environment in which the organization’s strategy should operate (Peng, 2021). Now that the environment (TikTok’s model of management) is highlighted, it is important to highlight the strategy that places TikTok at its current level of success.

TikTok’s Operating Strategy

TikTok is not different from other social media companies as its management model focuses on advertisements as the primary approach for making profits. However, TikTok diversified its approaches to include purchases for the app (referred to as TikTok Coins) and e-commerce offers (Pineda, 2021). Like its competitor Facebook, TikTok has customized its adverts to reflect the tastes and preferences of every individual user. Some of the brands offered in this context include Takeover, Hashtags, and Effects. The Takeover (TikTok Branded Takeover) is a special form of advert which pops out to cover the user’s screen every time the app opens. This is complemented by TikTok View ads, which do not pop on the screen but appear on the feed (Pineda, 2021).

The Merger between TikTok and Musical.ly

One of the best and most effective sources of competitive advantage for business is mergers and acquisitions. This is one of the strategies that TikTok owners used to promote TikTok’s entry into the social media industry. TikTok owner, ByteDance, acquired Musical.ly in November 2017, and the following year (2018), ByteDance Company merged the newly acquired Musical.ly with TikTok, and the two operated under a single brand name which was TikTok. Due to this merger, TikTok benefited from direct access to over 200 million users across different countries (Savic, 2021). Before, Musical.ly had already gained exposure in about thirty countries worldwide, including countries like the United States, Canada, Germany, the United Kingdom, Japan, and the Philippines, among others, in 2015. All this access was granted to TikTok due to the merger. This demonstrates a superb strategy by ByteDance, which acquired Musical.ly and merged it with TikTok. The merger easily facilitated the entry of ByteDance’s homegrown app into the international community. Another aspect of the operating strategy hidden in this merger was acquiring a proficient team of talented employees who were already oriented toward the industry. On top of this, TikTok acquired the already existing technology and other resources such as a large library of filters and effects to supplement TikTok’s library of resources, quality programs (codes) that were already developed and tested, cutting-edge editing features and improved systems for publishing user content.

TikTok’s Unique Selling Proposition

TikTok strategy is closely tied to its unique selling proposition. A unique selling proposition refers to one or more elements of the business that makes the business in context to do better than its competitors in the market. For TikTok, the unique selling proposition engaged several aspects of its competitors (such as Snapchat and Instagram), which majors in sharing short videos (Ma & Hu, 2021). TikTok also shines on content creation and sharing (consumptions), such as Facebook, YouTube, and Twitter, which are competitors for TikTok. Despite these similarities, TikTok is quite different from all its competitors. For example, Facebook boasts several layers of efficient features and use cases.

On the other hand, YouTube focuses on long videos. Twitter is characterized by its micro-blogging nature, Instagram is known for its image and video sharing, and Snapchat is known for its short multimedia messages. TikTok is different from all of these as it majors in content creation based on short videos (which range from 15 to 180 seconds in duration) (Ma & Hu, 2021). On top of this, TikTok empowers the user experience through powerful tools for recording and editing short videos due to efficient filters and effects enhanced by augmented reality (AR). Other features that enhance the experience on TikTok include efficient cutting and clipping tools for stitching videos, sound, and effects. In this context, it is important to understand that there are several hundred filters that users can choose from and unlimited access to thousands of audio clips to use as sound effects. The music Library avails samples of music tracks from mainstream media, music from upcoming artists, and remixes from upcoming talents and hobbyists (Ma & Hu, 2021).

TikTok’s Strategy: Technology

One of the factors or strategies that have contributed to and shaped the success of TikTok is the company’s focus on developing and deploying technology, specifically communication and computing technologies. The company has demonstrated relentless motivation in pursuing modern technologies such as artificial intelligence, virtual reality, augmented reality, data mining, and image recognition, among other new technologies (Wang, 2020). These technologies, especially augmented reality, are a dominant factor in the success of in-app video recording and editing features in TikTok. And more so, this feature is one of TikTok’s unique and outstanding features that offer the company a competitive advantage. Other than the current cutting-edge technology, TikTok has invested significantly towards technology advancements to reach higher capabilities. For example, TikTok has exploited the power of camera systems in modern smartphones (from both iPhone and Android) to add to its current features (Wang, 2020). Like Facebook, TikTok has employed artificial intelligence and deep learning to achieve data customization. This means that TikTok sends the type of data relevant to its customer’s tastes and preferences. Current advancements in augmented reality enable users (especially business users) to design, develop, publish and share rich ad campaigns with appealing content. According to TikTok’s nature, one cannot define the application without mentioning its advanced and sophisticated machine learning algorithms that harmonize TikTok’s features and functionalities. The FYP (“For You Page”) appears on TikTok’s feed and is the primary cause of appeal witnessed on the TikTok app. This page plays a major role in customizing user-based content because it allows the discovery of new content in line with the user’s search history. In other words, the “For You” page is the actual implementation of artificial intelligence, deep learning, and image recognition technologies in TikTok. The “For You” page has special algorithms which track users’ search patterns, analyze the most common type of content searched, and propose more and similar data to the user (Wang, 2020). In this case, the usage of the TikTok app is linear. If a user starts with dance challenges, there will be more similar searches relating to the dance challenges with minimal variations.

TikTok Strategy: Capitalizing on Pop Culture

Pop culture has become a trend among the young generation to the extent that one feels excluded if they don’t match the current pop culture. Pop culture refers to practices, beliefs, and behaviours shared by an international population, ranging from dance moves, songs, language, challenges, comedies, and many more. TikTok offers one of the technological platforms to achieve sharing of these elements of pop culture through special filters and effects for short videos and songs. On top of this, the power of effective and efficient editing tools makes the company a centre for trends in pop culture worldwide. Before TikTok, ByteDance majored in pop music trends, which motivated the decision to acquire the famous Musical.ly aiming to extend and diversify its music database or library. After the Musical.ly and TikTok merger, the company established an even larger media database due to the introduction of short videos which are not limited to music only (Kaye et al., 2021).

TikTok Strategy: A Marketing Platform

Another factor contributing to the almost instantaneous success of TikTok is the diversification of its products. Other than relying on sharing short videos and music, TikTok advanced to a prominent online marketing platform. In this case, TikTok addresses the marketing needs of a wide range of marketers, which has unlimitedly boosted its fame and popularity (Haenlein et al., 2020). Other than marketing, TikTok has launched a special platform within the application where media influencers and content creators meet with investors, thus helping them (influencers and content creators) land business deals and connections to promote talents, ideas, and even brands through endorsements. On top of this, TikTok adopted YouTube’s way of enabling users to earn from content creation and establish deals with business partners and endorsers. This helped the company to attract the majority of young people and, more so, outshine YouTube in its game (Haenlein et al., 2020). But how does actual marketing take place? TikTok boasts a large base of users and international coverage, and its powerful artificial intelligence algorithms manage users’ data. From this angle, organizations and markers take advantage of these features to promote their products and services.

TikTok Strategy: Revenue

As mentioned earlier in this discussion, the primary source of revenue for TikTok is advertisements, just like the other social media giants. In other others, TikTok sells digital ads to its users or organizations. However, TikTok diversifies by creating different ad products that the buyers must select from (Iqbal, 2020). For example, TikTok sells in-feed videos, brand takeover ads, top-view ads, branded Hashtags, and effects, among others. On top of sales for ads, TikTok also earns revenue from app sales which involve selling tokens to access filters and effects that are not availed to users for free. As mentioned earlier, the overall TikTok strategy is similar to that of other social media players. However, TikTok has capitalized more on the power of its unique selling proposition, which makes the difference from the rest, thus positioning the company at a competitive advantage over its competitors (Iqbal, 2020).

TikTok SWOT Analysis

Strengths

The powerful algorithms used by TikTok distinguish the firm from its competitors, forming one of the organization’s strengths. For example, Facebook is concerned with collecting the users’ private and background data, such as family and friends. On the contrary, TikTok capitalizes on the type of data generated when a user engages in the application. Another example is that Facebook uses the users’ “likes” to determine what the user like. On the contrary, TikTok algorithms filter millions of videos and present a fine list of videos for the user to determine what they want from the list. Another strength is that TikTok is free and has coverage in over 150 countries, with China (with the highest population) being the host country (Ziyi, 2020).

Weaknesses

• Like any other social media platform, TikTok experiences the challenges of inappropriate content, which might be against social norms and conventions in many countries.
• TikTok has also been termed as addictive to users, especially school-going users, and this tends to compromise productivity and performance.

(Think Insights, 2022)

Opportunities

• TikTok has become of the best online platforms for marketing due to its robust technology, wide market coverage, and one of the largest market bases (users).
• TikTok provides business deals for its users as they can earn from their content and get an endorsement from investors and brand promoters.
• TikTok is a nice online platform for the pop culture and sharing daily life experiences, ideas, and even accomplishments, among other things.

(Think Insights, 2022)

Threats

• Threats to ban the use of TikTok in various countries due to its content. For example, The US banned the use of the TikTok app in the country, although this was reconsidered. Countries such as India and Pakistan have strict restrictions on Chinese apps due to immoral content in the apps (Ziyi, 2020).
• Recently, TikTok updated its privacy terms to include the collection of “face-prints” and “fingerprints”, and this has become an issue of concern globally (Ziyi, 2020).

Appendix: Business Model

Adverts are the main revenue sources of revenue for TikTok, although the organization added two more revenue sources: app purchases (TikTok Coins) and E-commerce offers. TikTok excels in advertisement because it has used cutting-edge technology to customize adverts for the individual user. More so, TikTok has several advert brands.

TikTok Coins

TikTok coins are available for TikTok users with over 1000 followers, and these are mostly the users who are active content creators. In such a case, the followers, such as the user, might send their content creator some gifts in the form of TikTok Coins as a form of appreciation for the content created through live videos. To facilitate this, TikTok users must purchase the TikTok Coins with real money in a transaction where TikTok charges some fee or commission. This is another way through which TikTok makes revenue from the users.

E-commerce Offers

As a technology-oriented organization, TikTok has invested significant capital and time to achieve e-commerce operations on the platform. These efforts include technological tools enabling active events or selling products and services during live videos. TikTok earns a commission for every successful sale.

Customer Segments

TikTok has a three-dimensional way of customer segmentation, as illustrated below.

• Users – this customer segmentation engages people with an average age of 34 years who develop and share content on the TikTok platform.
• Celebrity – this customer segmentation capitalizes on successful celebrities or other public figures (politicians, artists, athletes, sports people, actors/ actresses, and influencers, among others) who wish to share their experiences, ideas, engagements, upcoming events, and projects and gain new followers.
• Brands – this customer segmentation capitalizes on companies or firms who wish to promote or market their products and services via the TikTok platform.

Value Proposition

The value proposition on TikTok includes:

• Users who view short and funny videos/ music customized according to their tastes and preferences
• Celebrities who share daily activities and create content to earn more followers by publicizing their posts and videos
• Brands involve companies or firms promoting their products and services by creating brand awareness on TikTok.

Channels of Acquiring TikTok

TikTok has two main channels for acquiring the TikTok app. These channels are

• Apple Store
• Google Play

Note that the TikTok app is free on both channels

Customer management in TikTok

Tik has two types of customers; regular (individual) users and advertisers. TikTok – User relationship management involves a robust customer care department that helps the users to draw the best user experience from the platform. For TikTok – Advertiser relationships, TikTok has established metrics that guide the advertisers on how to publish their adverts or posts.

Streams of Revenue in TikTok

TikTok has four main streams of revenue which include

• Revenue from sales of TikTok Coins
• Revenue from Sales of Ads
• Commissions from E-commerce activities
• Revenue from Partnerships with other businesses

The key sources of revenue, which double as the key resources for the organizations, are

• The TikTok platform
• Partnership contracts from wealthy business people and firms – the key partners include prominent content developers, celebrities and influencers, e-commerce firms, and prominent companies that wish to promote their products on social media.

The primary activities that dominate TikTok as an organization are the continuous development and updating of the TikTok platform to fix and prevent bugs and attacks from cybercrime as efforts to enhance customer experience.

Expenditure

TikTok spends most of its revenue on managing data centres, employee compensation, and infrastructure and office investments.

Competitors

Below is a breakdown of TikTok closest Competitors

• Snapchat – the social media app was launched in 2011 and had about 500 million users
• Twitter – the social media app was founded in 2006, and it capitalizes mainly on micro-blogging messages
• YouTube – This is one of the most prominent rivals and the biggest rival to TikTok. It has over 1 billion hours of content being watched every day.
• Facebook – is one of the largest and oldest social media platforms, with over 2 billion users.
• Instagram – this is another prominent rival with over 1.5 billion users
• Kawaii and TikTok are the only Chinese social media apps mentioned in this list. The platform boasts over 45 active users monthly with products similar to TikTok.

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