The Whims of TikTok
Hi, The Investor’s Podcast Network Community!
In 2022, the United States boasted the third-largest global social media audience, with over 302 million users and a penetration rate exceeding 91%, trailing only China and India 🌎
Social media platforms have evolved beyond being just sources of entertainment and communication.
Now, they offer a wealth of free educational content, serve as vital news sources, and act as lucrative platforms for digital creators and businesses.
💭 Today, we’ll discuss how American companies are captured by the whims of TikTok, and more, in just 4 minutes to read.
— Weronika
Understand the financial markets
in just a few minutes.
Get the daily email that makes understanding the financial markets
easy and enjoyable, for free.
QUOTE OF THE DAY
“Social media is a powerful tool that allows businesses to engage directly with their customers and build lasting relationships.”
— Sundar Pichai, CEO of Google
BROUGHT TO YOU BY
Start, run, and grow your business without the struggle.
Be in control of every sales channel with Shopify. Sign up for a $1 per month trial period today.
READER RESPONSE
Last week, we asked readers: If you could live in another country, what country would it be and why?
Here are a few responses:
- “Croatia, like Italy but without the crowds..” — Jeff, Granite Bay, CA
- “France.” — Donna, Cypress, TX
- “Probably Spain in the Canary Islands. I’m kind of sick and tired of our four seasons when you can have +30 in summer and -20 in winter.” — Karolis, Lithuania
- “Bhutan. Rich in biodiversity, diverse climate, rich culture, and peaceful living in harmony with nature. Although will miss the beach.” — Rajneesh Patankar, India
- “Portugal – I was born there in a military facility. Great county, nice people, and good climate.” — Brad, Atlanta, GA
Answer this week’s question: What’s your favorite social media app that you can’t live without, and why?
Top Trending
Have you, or anyone you know, gotten caught up in the latest TikTok trends, trying out challenges or pulling pranks? Since TikTok has become the most downloaded app in the U.S., odds are you know someone who has.
In 2016, the Chinese company Bytedance launched Douyin in China and brought its global version, TikTok, to the world in 2017 after acquiring the video-sharing platform musical.ly to cater to a more global audience and compete with American giants like Instagram and Snapchat.
Although TikTok was initially popular among kids sharing goofy videos of their pets or dancing moves, it has rapidly expanded its user base across all age groups, evolving into a dominating competitor in social media.
TikTok’s revenue has skyrocketed. In 2022, it raked in $9.4 billion, making money on advertising and in-app purchases.
TikTok has grown more in its initial four years than Facebook did in 10, undeterred by potential government bans due to data privacy concerns.
Leveraging its algorithm that dishes out short, catchy videos with music, all based on what users like, TikTok has tapped into people’s fleeting attention spans.
About 82% of U.S. adults use social media, and TikTok has become their third favorite app, beating out Twitter, YouTube, Snapchat, Pinterest, and LinkedIn. And about 36% of Americans over 12 are on it, a big jump from just 11% two years ago.
In 2021, TikTok users already spent more time watching content than YouTube users.
Its growth has transpired despite declining usage for other platforms, where apps like Snapchat, LinkedIn, Facebook, and Pinterest are increasingly uncool.
TikTok is shattering growth records.
TikTok soared to 1 billion users faster than any other social app, reaching this number in just a bit over five years. In comparison, WhatsApp took over six years, Instagram more than seven, YouTube surpassed eight, and Facebook took nearly nine years to hit the same mark.
By September 2021, TikTok ranked as the seventh-most-used social media site, boasting 1 billion monthly active users, and by the close of 2021, it became the world’s most downloaded app.
Gen Z’s favorite place
Unsurprisingly, with its short videos spotlighting everything from cooking to dancing, beauty, and countless other categories, TikTok has captured the attention of the youth.
About 66% of TikTok users are below 30, and 41% fall in the 16-24 age bracket. Millennials (27-42) make up 28%.
Consequently, TikTok has already reshaped Gen Z’s behaviors. Young users aren’t just seeking fun and entertainment on the app but also utilizing it as a resource to explore and stay informed about major news events.
A survey of approximately 2,200 adults revealed that 14% of Gen Z users would initiate their research about a major news event on TikTok, a stark contrast to other generations.
While Google remains the main starting point for news research across all age groups, social media preferences show generational disparities:
- Gen Z leans towards TikTok and YouTube
- Millennials often begin on Facebook
- Baby Boomers head straight to a trusted news publisher’s site
Trapped businesses
TikTok has extended its influence beyond daily entertainment for over a billion users. It’s become a billion-person focus group, emerging as a financial powerhouse for top influencers and digital creators.
This activity can plunge companies into considerable uncertainty and vulnerability regarding seasonal trends. These trends can swiftly emerge, generating multimillion-dollar profits almost instantly, but can also lead to significant losses if they don’t pan out or vanish within a few days.
These days, TikTok is almost essential for anyone managing a consumer-centric business, with over five million businesses using it as a growth and sales tool, tapping into its capabilities.
Viral social media trends can spawn big business opportunities with occasionally bizarre or, at least, unexpected outcomes.
For example, the “Keithadilla,” created by a TikTok food influencer, became a surprise hit for Chipotle, challenging the chain with its special sauce and complex preparation, which resulted in longer wait times and occasional staff refusals to make the off-menu item.
Faced with customer demand and pressures to capitalize on cursory cultural relevance, Chipotle opted to make the Keithadilla a permanent menu item despite the operational hiccups it initially caused.
For years, brands like H&M and Zara have rapidly replicated fashion trends, producing them within weeks. A new wave of quick-fashion retailers creates garments in mere days, meticulously aligning their operations with the TikTok algorithm that determines the current style.
Edikted, a fast-fashion start-up, launches 150 styles monthly inspired by viral TikTok videos, according to its founder and CEO. The company tracks popular TikTok videos with its team of trend specialists to discern which styles to replicate.
Companies like Edikted are adopting an on-demand manufacturing model to navigate TikTok’s lightning-fast trend cycles, often subcontracting to third-party factories and maintaining low inventory by placing small batch orders.
Despite achieving a 12-day turnaround on new product production, the fast-paced nature of TikTok’s viral trends presents a risk of producing items that fail to hit the mark, which must be disposed of via substantial discounts. Otherwise, they simply go to waste.
Dive deeper
Discover how TikTok impacts businesses with this CNBC article.
WHAT ELSE WE’RE INTO
📺 WATCH: Capitalism doesn’t need consumers anymore because of AI
🎧 LISTEN: Epic lessons from a decade of 10-Baggers with Dede Eyesan
📖 READ: Money with Katie: Most of life comes down to value trade-offs
See you next time!
Enjoy reading this newsletter? Forward it to a friend.
Was this newsletter forwarded to you? Sign up here.
All the best,
P.S. The Investor’s Podcast Network is excited to launch a subreddit devoted to our fans in discussing financial markets, stock picks, questions for our hosts, and much more!
Join our subreddit r/TheInvestorsPodcast today!
