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If TikTok is acquired by Microsoft, who will be the biggest beneficiary of the US online advertising market?

TikTok has not yet reached the end. Within one day on August 3, news about the polarization of TikTok's destiny occurred separately.

On the same day, Microsoft issued a statement stating that after CEO Nadella had a dialogue with US President Trump, the company was ready to continue to promote the purchase of TikTok's US business negotiations. According to the Wall Street Journal, the talks were temporarily suspended due to the White House's unclear position. According to the latest news, White House consultant Navarro said that Microsoft may not be the right company to acquire TikTok.

On the other side, Zhang Yiming, CEO of Bytedance, released a letter from all employees of the company on the same day. The letter stated that ByteDance disagreed with CFIUS's decision on "determining that ByteDance must sell TikTok's U.S. business", and "does not give up exploring any possibilities."

The "possibility" mentioned by Zhang Yiming has traced elsewhere. According to overseas reports, the British government gave the "green light" for TikTok to set up its headquarters in London, and the ministers expressed their support for this. TikTok told Jiemian News that it is indeed exploring the possibility of setting up TikTok headquarters outside the United States.

No matter where it ends, TikTok's business in the United States will be greatly affected. As one of the controversial points in this incident, what changes will happen to the US Internet advertising market structure? As TikTok's competitor, Facebook, how much benefit can it get from this huge change?

TikTok's "Allure"

It is not surprising that TikTok has been targeted, and data from various research organizations have shown its rapid growth.

According to Sensor Tower data, in February 2019, TikTok, which was officially merged and renamed, exceeded 1 billion worldwide cumulative downloads. In April this year, the number reached 2 billion. According to AppTrace, since February 2019, TikTok has almost steadily ranked among the top four in the global app download rankings, and this ranking has dropped from 269.

In the global market, the United States is the third largest market for Douyin and TikTok, and the second largest market for TikTok. As of the end of April, TikTok has been downloaded 165 million times in the United States, accounting for 8.2% of the total global downloads. At the same time, US users contributed $86.5 million in total in-app purchase revenue, accounting for 19% of TikTok's total global in-app purchase revenue, ranking second among global users.

Not only that, in the first and second quarters of 2020, TikTok was the first and second non-game app download list in the US market, and it was also the only app launched by a non-US company in the top ten.

All the evidence points to the conclusion that TikTok, which has more than 100 million American users and comes from a Chinese company, has continuously climbed its position in American social media, and is approaching social apps owned by giants such as Facebook and Google.

According to reports, the TikTok platform is mainly composed of young people under the age of 25, of which the 18-24 year old group accounts for the largest proportion of 35.3%, and the 25-34 year old user group accounts for a rapid increase. In fact, the composition of such young users did not over-attract advertisers in the past (such as the problems Snapchat once faced), but it is now a very important target for advertisers.

In fact, TikTok is vigorously improving its advertising sales capabilities.

In terms of organizational structure, Bytedance hired Blake Chandlee (Blake Chandlee) as vice president of TikTok's global business strategy in June last year. The latter had worked for Facebook for 12 years and served as its vice president of global partnership business; It is reported that the company has hired a head of an advertising company for small and medium-sized enterprises to lead the advertising sales of small and medium-sized enterprises. This business is Bytedance's strengths in China, but is dominated by Facebook and Google in the US market.

In addition, it is reported that TikTok was contacting ad technology companies from various parties to seek cooperation in ad buying software. Moreover, TikTok will participate in NewFronts remotely for the first time this year, a demonstration event that can help technology companies get the attention of advertisers.

These actions currently seem to match TikTok's revenue. According to foreign media reports in June this year, people familiar with the matter revealed that TikTok expects to earn 500 million U.S. dollars this year, which is nearly twice its global revenue in 2019 (200 million to 300 million U.S. dollars), and may also include the new crown. The impact of the epidemic.

From the perspective of specific industries, according to Sensortower data, "State of Survival", "Fortress Night", "Endless Showdown" and "Tomorrow's Ark" and other moderately heavy games have been placed on TikTok by more than 30%, which means that game manufacturers have already Substantially recognized TikTok's position in advertising channels.

Changes in the competitive landscape of the US Internet advertising market

In recent years, the size of the US Internet advertising market has been rising.

According to data from eMarketer, the size of the market rose from US$42.8 billion in 2013 to US$107.4 billion in 2018. In addition, the Los Angeles Times cited an e-commerce research report saying that by the end of 2019, the scale of digital advertising by U.S. companies is expected to reach 130 billion U.S. dollars. Compared with about 110 billion U.S. dollars for traditional advertising, its market share has exceeded 50%.

This market currently shows a serious oligopoly pattern. In the aforementioned 2018 data, Google, Facebook, and Amazon have together accounted for 61.9% of the total U.S. online advertising market share.

According to Facebook’s financial report, its overall advertising revenue in 2019 was US$69.655 billion, of which Instagram contributed nearly US$20 billion. According to the 2019 financial report of Google's parent company Alphabet, its total annual advertising revenue (website revenue and online revenue) was US$141.8 billion, of which YouTube advertising revenue was US$15.15 billion.

Even with such a leading position, Facebook is not so careless in advertising. From 2017 to 2019, Facebook's advertising business accounted for 98.25%, 98.52%, and 98.53% of total revenue, respectively.

Such a high share means that Facebook is a pure advertising company at the commercial level. If this core business is threatened, it is equivalent to finding an ant colony in the base of its business empire. Therefore, even if TikTok's small goal of $500 million does not seem worth mentioning, Facebook will spare no effort to provoke it.

The problem now lies in two directions. If TikTok is acquired by Microsoft, can it maintain its existing advantages and continue to grow, and finally become a product that can compete with Facebook and Google? And what if the actual situation is getting worse?

Prior to this, there were also discussions about the possibility of TikTok being sold to Google or even to Facebook.

Like Microsoft, the two have the power to acquire from the market value, but as the heads of the four major US technology companies attended the antitrust hearing some time ago, the US Internet market has been dominated by Google, Facebook, Apple, and Amazon. , TikTok sold to any one of them will intensify market monopoly. Although the current attitude of the White House is ambiguous, Microsoft is indeed a suitable acquisition initiator.

From a product perspective, Microsoft lacks tentacles in the C-end market. After owning TikTok, it is expected to participate in the battle of the American social network camp and get a share of the pie. On the commercial level, this acquisition can also help balance the duopoly of Facebook and Google in the US Internet advertising market (although it may not be what Zuckerberg wants)-no matter what it looks like, it should be an advocacy of freedom, Supported by the American economy of equal competition.

However, the outside world is worried about Microsoft's acquisition. This technology company has undoubtedly created great success in the PC era, but it has fallen behind in the mobile Internet era. In addition, Microsoft's three acquisitions of instant messaging software Skype, corporate social network Yammer and workplace social product LinkedIn are not considered successful.

This may leave companies such as Facebook and Google with a certain opportunity.

Facts have proved that the giants agree on TikTok. In June of this year, Google's YouTube began testing features similar to TikTok's 15-second video. Facebook also launched Reels on Instagram in July this year. Although this move was called copycat (imitated product) by Kevin Mayer, the head of TikTok US, even its other imitated product Lasso has failed. But Reels kept walking.

It is understood that this feature has been launched in India, Brazil, France and Germany, and will officially land in more than 50 countries including the United States and Japan early next month. There are media reports that Facebook is using large subsidies to transfer influencers.

It cannot be denied that Facebook has brought innovative experiences to social networks, but for a long time, Facebook's image in front of competitors has been portrayed as "copy can not win, then buy." This is true for both the transaction with Instagram and the idea of Poke and Slingshot for Snapchat and Story, which was launched on Instagram.

Zach Burke has always had this determination. This time Reels is also burdened with the same task, only to see where TikTok is going in the end, and if there are new entrants, whether it has the ability to prevent the existing ones The turned balance is out of balance again.
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