TikTok is enormous. Joining the exalted league of apps with 2+ billion downloads, it just finished 1Q20 with the most downloads in a quarter for any marketplace app ever, with the quarantine undoubtedly contributing. As jejune as TikTok may seem (childish, devoid, unhealthy), it marks the culmination of user-generated content and carries significant business implications for future success strategies, exemplifying advancements which are anything but fads.
TikTok’s primary medium of communication is short, full-screen videos on its “For You” page, which automatically recommends tailored content to each user. This delivery method contributes to TikTok’s success by leveraging its 3 ‘A’s: addictiveness, accessibility, and artificial intelligence.
In terms of UI/UX, fifteen-second clips invite users to constantly cycle to the next video, and capitalize on the need to quickly capture people’s attention to win their time. This format races past YouTube and other social media giants who bombard consumers with stimuli to make the most easily consumable content. The app also snares users in magnetically immersive, automatically playing full-screen video. In this way, the black mirror becomes a crystal fishbowl, enveloping users within their screens which obscures their sense of time, and pacifying the goldfish-like attention spans of the 800 million monthly active users on the app.
TikTok’s content contributes further to its addictiveness because it conforms with material that children and adolescents want to see and become. Harris Group on behalf of Lego found that when asked to choose their preferred career path, children most commonly answered “YouTuber” (in the US and UK), characterizing how influencer and user-generated content is the most sought-after for young viewers. While TikTok stardom comes laden with bullying, impressionable children, like aspiring actors or gambling addicts, are impervious to the slim prospects for success.
TikTok makes the transition from content consumer to content creator effortlessly accessible. The overhead needed to get started is often just a set (bathrooms vastly outperform other locations), 15 minutes to memorize a dance routine, and a splash of thirst for social validation. TikTok’s content format and tools far surpass the equivalent for YouTube for example — which would require scripting, recording, and editing know-how. While various creative outlets can be explored through the app, the most prevalent TikTokers are ones who plainly but industriously copy or iterate upon passing trends. This is facilitated by the short video format because new trends can circulate quickly, and individuals can then dispense their adaptations quickly.
TikTok’s AI capability is its most involved and often overlooked success factor. TikTok’s main screen, the “For You” page, has no menus and automatically plays a video which you can implicitly only skip, watch, or engage with. This forced input, combined with hundreds of millions of monthly active users, provides TikTok with boundless data to feed into and hone its machine learning algorithm. Users are efficiently sorted into personal pits of quicksand, permitting twenty minute breaks to end two hours later.
BYTEDANCE — THE INCONSPICUOUS AI BEHEMOTH
You would be forgiven for not knowing about TikTok’s parent company, ByteDance. It is however the world’s highest valued startup at $75–100B, (dethroning Uber) and is acclaimed in the field of AI Innovation. The company’s first core product was a tailored, AI-aggregated news service, and now uses the same technology to operate TikTok’s influential “For You” page. Exposure on the page is coveted, and plenty theorize about strategies to be featured, but it all comes down to the lightning-fast pattern recognition and extrapolation which determines what you will receive.
It is a mistake to not pay TikTok any heed and to construe it as simply the newest passing fad sweeping through Gen Z. Tiktok’s AI Lab is headed by Wei-Ying Ma, a former assistant MD of Microsoft Research Asia; Microsoft’s most productive research team. To get a sense of the elite calibre of such engineers, when Microsoft set up this team it “sent teams to Chinese universities to administer I.Q. tests in order to recruit the best brains from China’s 1.3 billion people. Out of the 2,000 top Chinese engineering and science students tested, Microsoft hired 20,” reports multi-Pulitzer prize laureate Thomas Friedman from his conversations with Microsoft. Insights can be gleaned by questioning why TikTok and its aggregation of user-generated content, of all applications, is the vessel for this intellectual firepower.
Tiktok’s success can reveal clear future paths to success for business; particularly honing in on two of its 3 ‘A’s; accessibility and artificial intelligence; and what they mean for customer acquisition.
User-generated content is less costly and more effective than internally produced content, and TikTok’s monopoly over the short video market is a result of prioritizing the accessibility of creating content. Therefore, TikTok is most capable of outsourcing the costs to entrench new customers to its content-producing user base. As entrepreneur and ex-Stanford AI PhD candidate Neal Jean puts it, “Aggregating consumer demand is THE remaining differentiator, and no one is better at this than individual content creators,” which is because masses of individuals are surgically competent at following the path of least resistance to meet demand. Reduced costs and increased efficiencies bestow onto TikTok; the best in the user-generated content game; the epitome of economic customer acquisition, which is what Shark Tank tycoon Kevin O’Leary advises as paramount to operating a standout business.
The rise of content creators is also significant because tools to enable the “enterprization of consumer,” as recent VC firm Andreessen Horowitz partner Li Jin notes, are becoming more the norm. Soon, commoditized services will face an influx of indirect competition from individualized service providers and content creators, which are harder to cast a consistent value proposition over. For those standardized service marketplaces insulated from this personalized competition, Li Jin forecasts that the next frontier will be breaking into regulated service industries, which can be partially enabled by AI.
AI breaks into regulated industries by automating away the need for licensed service providers, such as bypassing licensed truck drivers or dermatologists. Another thing AI can automate away is customer relationship management systems and processes to capitalize on existing customers, especially for companies which find ‘empowering content creators’ infeasible. TikTok applies both strategies, by encouraging user participation as well as leveraging its AI to show users what they want, but companies in varied industries are quickly adopting AI to fuel their future strategy.
In the fast food industry, the titan McDonald’s made its largest acquisition in 20 years by purchasing the digital personalization company Dynamic Yield in 2019. The goal is to use machine learning to optimize segmentation and touchpoint actions towards individuals, with platforms ranging from the McDonald’s mobile app to the drive-through menus.
In the videogame industry, Steam, the largest digital PC game distributor, launched Steam Labs in 2019 to test its AI experiments. One product is ‘Interactive Recommender’, which uses a neural network trained on billions of game sessions to recognize patterns and suggest titles to users. Another product is ‘Micro Trailers’, which uses AI to help sell games as it has generated six-second trailers for every title in Steam’s library — over 30,000 games.
AI, as exemplified by ByteDance and these other surface-scratching, demand-side implementations, is presently installed and primed to revolutionize every industry. Billionaire Mark Cuban suggests that scripting Amazon Alexa skills is “really, really easy. But everybody thinks it’s really, really hard,” imploring that AI is not as intimidating and unattainable as it seems. He astutely equated the position of AI today to that of the Internet when the millenium turned: “If you don’t know AI, then you’re the equivalent of somebody in 1999 saying, ‘Yeah, I’m sure this internet thing will be okay, but I don’t give a sh-t.’ It’s the same thing,” and later, “If you want to be relevant in business, you have to [adopt AI] or you will be a dinosaur very quickly.”
User-generated content is a lucrative avenue for businesses to attempt economic customer acquisition, but TikTok has already cemented its dominance with the perfect formula and the process is not practical for all industries, which is where AI fills the gap. As AI becomes a minimum entry requirement for conducting business, it is also becoming increasingly accessible. Oblivious ‘dinosaurs’ will certainly perish beneath the astronomical impact, and as the opportunity to adapt hurtles shut; businesses must hasten their strategy to innovate and think about the future forward. The clock is ticking. Tik, tok.