The growth of TikTok as a digital advertising medium is a striking feature of the social media market.  TikTok, Twitter, Snapchat, Meta, and YouTube are the dominant providers in the growing market for online advertising. But it is the Chinese-owned video-sharing platform TikTok that is the fastest growing social media advertising platform with forecasted advertising revenues of $23.6 billion.  

These are some of TikTok’s most successful advertising campaigns:

• Guess Jeans hashtag encouraged users to post videos of themselves initially wearing scruffy clothes, and then transforming themselves into fashionable outfits that include Guess-branded denim products.
• Candy brand Gushers makes the most creative TikTok adverts. Their TikTok videos get millions of views and huge engagement.
• Energy-drink brand Red Bull has a very big TikTok presence. With over 4 million followers, TikTok’s format of short, energetic videos engages so many viewers, particularly sports fans.
• Fashion brand Ralph Lauren was one of the first brands to try out TikTok’s Hashtag. The #WinningRL asked users to share a time when they won a real-life challenge. This challenge was timed to coincide with the US Open tennis event, and the winner’s received official Ralph Lauren US Open clothing.

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TikTok’s user base has grown dramatically in the last two years with users spending huge amounts of time on the app. TikTok is seen as so powerful because of the deep connections it develops between video creators and the users it engages. Four years after its launch TikTok reached its billionth user which is half the time it took Facebook, YouTube, and Instagram. TikTok is forecast to reach 1.5 billion monthly active users this year.

TikTok is particularly strong amongst the 18 to 25-year-old demographic. These users also spend lots of time on the App with the typical TikTok user spending 19.6 hours on average per month on the App.

But it is Mark Zuckerberg’s Meta that still dominates the social media market with Facebook achieving 2.9 billion monthly users, and Instagram another 2 billion. This earns Meta annual advertising revenues of nearly $170 billion.

The rise of social media advertising through companies such as TikTok, Meta, and YouTube shows how important this form of medium is for businesses promoting their products. It can also be important for governments trying to increase the consumption of merit goods and discourage the consumption of demerit goods. There are TikTok videos discouraging smoking and encouraging the use of vaccines.

Points for discussion with a class

1. Discuss the effect will the successful promotion through TikTok of the products of the firms in the case example have on the demand for their products?

2. To what extent can the social media market be described as oligopolistic?

3. How important do you think social media advertising might be for governments?

4. Do you think the social media market should be regulated by governments?