Most people believe TikTok is the highest valued startup currently in the world but I believe we can look at the other side of it. What if it’s just hype?
The $75 BILLION valuations.
They certainly have some impressive stats:
- 800 million installs.
- 500 million monthly active users. (more than Twitter)
- Users who log into the app 43 times and spend an average of 52 minutes per day.
The Other side:
1 – LOW ENGAGEMENT:
It’s extraordinarily easy to fall in love with “vanity metrics” and base TikTok’s success on the number of installs of the app.
You may be thinking: “Well, monthly active users is not a vanity metric.” And you’d be right in most cases, but when you have an advertising-based revenue model, you need eyeballs to monetize, and monthly active users is not enough.
You need daily attention from your users. That’s why Facebook and Instagram earned $55 billion in ad revenue during 2018: because they had an average of 1.18 billion daily active users.
Meanwhile, TikTok’s engagement rate (proportion of monthly active users who are daily users) stands at 29%. That’s really low when you contrast it with other social networks:
- Facebook: 96%
- Instagram: 95%
- YouTube: 95%.
- Snapchat: 95%.
2 – TIKTOK HAS A LOW RETENTION PROBLEM?
Too many people try TikTok, use it a few times, and never return. Only 10% of downloaders continue to use the app 30 days after downloading.
A study published by Tencent Market Insight found that 48% of users who stopped using the app did so because of the lack of variety in the content posted.
I mean, apart from some fascinating accounts like Gary Vaynerchuk’s, TikTok is pretty much the same: teens doing crazy/weird stuff and old guys dancing.
3 – THE ZUCK
Whether we like it or not, Mark Zuckerberg’s Facebook has become a force of nature when it comes to killing startups:
They annihilated Path, Tumblr, Foursquare, and Vine. They are killing Tinder and Snapchat, and I believe they are gonna kill TikTok.
I know what you are thinking: “Just another one of Charly’s conspiracy theories,” but hear me out.
Here’s what Zuckerberg said about TikTok on an interview for The Verge:
So we have several approaches that we’re going to take towards this, and we have a product called Lasso that’s a standalone app that we’re working on, trying to get product-market fit in countries like Mexico.
I think we have time to learn and understand and get ahead of the trend. It is growing, but TikTok is spending a massive amount of money promoting it.
What we’ve found is that their retention is actually not that strong after they stop advertising. So the space is still fairly nascent, and there’s time for us to kind of figure out what we want to do here. But I think this is a real thing. It’s good.
I read this twice, and then IT HIT ME. Facebook’s startup killing strategy. It’s so simple, it’s even elegant:
- They see a newcomer (Snapchat) getting lots of traction.
- Facebook builds an app outside of the Facebook/Instagram/Whatsapp ecosystem to compete with the newcomer (remember Poke app?)
- The new app get lots of users, but in the end, they “fail” to kill the newcomer.
- Everybody laughs at facebook for their failed attempt.
But… did they fail?
The way I see it, they build these apps with the sole purpose of getting first-hand user data, then they use the whole facebook powerhouse to achieve product-market fit. And when they find “the thing” that makes users tick …
They roll it out on the leading platforms just like they rolled out:
- Instagram stories (to kill snapchat)
- The check-in feature on facebook (to kill foursquare)
- Facebook dating (to kill tinder)
- 15 secs video sharing on Instagram (to kill vine)
Just wait and see what happens with Lasso 😉
4 – BURNING THROUGH THE CASH
Just like a post, I saw this morning about fitness informed me, “There’s no exercise that can fix daily pizza,” there’s no amount of money that can fix low user retention.
Tiktok spent $1b last year advertising in the USA, and this year it’s on track to surpass that figure, with $3m/day in US ad spending.
I don’t know about you, but I don’t remember Facebook or Instagram paying for billboards .