Though Meta has four apps in Sensor Tower’s Q3 2022 top-10 downloaded app list, only one other company has more than one app on the list: ByteDance with top-ranked TikTok and 9th-ranked CapCut, a video editing app. And, both ByteDance apps are ranked ahead of Spotify, Netflix, Twitter, and Amazon.
ByteDance’s strength is no coincidence. The company has been built to lead the app ecosystem. CapCut, a video editing app is already a top-10 downloaded app and it only launched in April 2020. It’s pretty clear that ByteDance’s rationale for launching a video editing app was to make it easier to create videos to run on TikTok (though today, many videos on Facebook and Instagram are also edited on CapCut). It’s this holistic approach to the app ecosystem that, barring regulation, that will make ByteDance a dominant player in the global app stores.
Even Google sees TikTok as a threat to the company’s search business. Company Senior VP Prabhakar Ragavan recently noted that “40% of young people, when they’re looking for a place for lunch, they don’t go to Google Maps or Search. They go to TikTok or Instagram.”
Beyond video, in 2022, ByteDance announced a push into commerce in the US by enabling American TikTok users to make purchases directly through the app via a feature called TikTok Shop.
European ecommerce financial platform Juni announced that TikTok was already the #3 destination for UK ecommerce ad spend in 2022 behind Meta and then Google but ahead of Amazon, Pinterest, and the rest of the ad platforms. Meta and Google accounted for 65% and 23% of ecommerce ad spend followed by TikTok (4.3%), Amazon (1.4%), Pinterest (.5%), and Snapchat (.4%). Beating ecommerce leader Amazon by 3x in the UK market is no small feat.
But the 800-pound gorillas in this Cinderella story are government regulators. Specifically, will American regulators follow India, which banned Chinese apps including TikTok in 2020 due to military tensions on the Sino-Indian border? Not sure TikTok CEO’s appearance before Congress helped TikTok, but will that even matter?
And then, as if to top of the news about TikTok, the company invests in user acquisition for another lifestyle app, called Lemon8, which just entered the top-10 in US App charts.
In the beginning
The founders of ByteDance had co-founded a Chinese real estate search engine in 2009, and in 2012, launched Toutiao, an app that relied on personalized user preferences to classify news recommended to users. Today, Toutiao is one of China’s largest advertising Demand-Side Platforms (DSPs). ByteDance AI Labs was established as the company’s research division in 2016. ByteDance Labs and Peking University co-developed Xiaomingbot, an AI bot that wrote news articles, also in 2016.
ByteDance launched Douyin (originally called A.me), in September 2016 in China. At the time, ByteDance co-founder Zhang Yiming said that “China is home to only one-fifth of Internet users globally. If we don’t expand on a global scale, we are bound to lose to peers eyeing the four-fifths. So, going global is a must.”
ByteDance launched the international version of Douyin, TikTok, in September 2017. The company then acquired musical.ly, a Chinese app where users created and shared short lip-sync videos which was popular with American teens, for $1 billion in November of that year. TikTok and musical.ly were merged in August 2018 to create a larger video community.
Pushing into commerce
In 2022, the number of US shoppers who made purchases via TikTok increased by 72.3% to 23.7 million, surpassing Pinterest. The company accomplished this in part by adding shoppable ad formats. Now, TikTok rolled out its Shop feature in the US market and is planning on building fulfillment centers in the US, based on LinkedIn job postings uncovered by Axios. According to an analysis from eMarketer, 27.3% of TikTok users will buy on its platform in 2022. That percentage is expected to increase to 38.6% in 2024, overtaking the 37.6% of Facebook users expected to buy on its platform in 2024. TikTok will also be partnering with TalkShopLive on livestream commerce after abandoning the company’s live ecommerce initiative following a failed UK pilot as reported by the Financial Times. Regardless if TikTok’s livestream commerce efforts in the US succeed, social commerce is still expected to grow between 20-30% annually between 2022-2025.
Despite ByteDance’s successes, not every one of the company’s apps succeeds. In July 2022, the company launched Kesong, a social networking app for shopping and lifestyle recommendations which was similar to Xiaohongshu, a social lifestyle and commerce app with greater than 200 million users and known outside of China as Red. But Kesong was pulled from the app stores a few weeks after it was launched due to a relatively small amount of downloads.
Sharing culture
If one looks at ByteDance’s culture, one corporate attribute which stands out is the centralization of many business, operating, and technology functions. By sharing resources, ByteDance is able to roll out new functionality and even new apps in record time, integrating winning internally-developed technologies across apps. The company developed and launched an education app in four months which would have taken most other companies more than one year to develop. ByteDance’s sharing culture, where teams will work across apps, also encourages a flatter organizational structure. This enables employees to focus more on getting the job done and less on status.
ByteDance’s internal communications and collaboration platform, which is similar to Slack, was ultimately rolled out as an enterprise app offering under the name Lark.
Not only does ByteDance launch new apps quickly, but the company also explores targeted markets broadly to ensure delivering the most effective app. While running Douyin (TikTok in China), the company was also testing two other short-form video apps. Though the company tries multiple iterations, it also stops quickly, as it did last summer with Kesong, by relying on data analysis.
Will they or won’t they?
These days, as noted above, the big question regarding TikTok is whether the US government will follow Montana’s lead and ultimately ban the app. Though most in the industry don’t think TikTok will be banned, no one is betting money against it.
Working in ad tech, I’ve seen the ByteDance app ad offerings mature over the years as the company’s apps gained scale and commerce conversion sophistication. Anyone in the app ecosystem not taking ByteDance seriously, is doing so at their own risk.
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