TikTok ad revenues grow 5x

Filings reveal that the short-form video sharing app TikTok grew its European ad revenues 5x over the course of 2021, even as growing costs weigh on the company.

Why it matters

Privately-owned TikTok: social media’s new kid on the block, beloved of Gen-Z, and very difficult to imitate, filings reported by the Financial Times show a company investing heavily in growth around the globe but finding its most serious revenue opportunities in Europe (inc. UK).

While costly in the short term, this serious investment (losses have increased by more than a third) is yielding big user numbers of the sort that draws in advertisers; as a result, they are now a significant player in the space.

By the numbers

According to filings to Companies House, the UK register of firms, the app – which is owned by the much larger, Beijing-headquartered ByteDance – has reported the following numbers for its European operation:

• Revenues: +$990m (up from 172m in 2020)
• Pre-tax losses: $896m
• Selling and marketing expenses: $666m (up 90%)

Advertising remains the biggest revenue source for the app, at $802mn of turnover – a fivefold increase on the year before.

The reliance on ads is an interesting aspect, especially at a time when many other non-endemic companies are turning to selling ads on top of commerce businesses.

The figures, especially the selling costs, indicate how expensive servicing a growing ad client base is, and provides some indication of why the company continues to push ahead with commerce in the US and potentially in Europe, through outsourcing.

It is a business that ByteDance’s Chinese app Douyin has excelled in, part of a broader growth in livestreamed commerce that has worked extremely well in it’s home market but that has struggled to internationalise. Earlier this year, TikTok’s commerce experiments in the UK showed limp results, reports suggest.

In context

On a global scale, TikTok’s influence is vast. On one side, its growing importance in the search game has arguably contributed to Google accelerating its evolution of the search experience toward visuals and exploration. For more on paid search, check out WARC’s big picture report on paid search for a macro view of the scene.

More broadly, TikTok is also pulling a move reminiscent of an earlier social media giant with an incredibly similar service to the French photo-sharing app BeReal as it seeks to cover new avenues of user growth.

Sourced from the Financial Times, WARC, Business of Apps