The news: Despite regulatory challenges and a potential US ban, TikTok remains a driving force behind ByteDance's financial growth, contributing significantly to the company's $17 billion international (non-China) revenues in the first half of 2024, reports The Information.
Why it matters: This international growth underlines TikTok’s importance to ByteDance, especially as its China-based apps like Douyin and Toutiao face lower ad demand due to economic slowdowns.
State of play: The short-form video market is largely concentrated among TikTok, Instagram Reels, and YouTube Shorts, leaving limited alternatives for advertisers if TikTok were to exit.
An evolving model: While advertising remains TikTok’s primary income source, the company is also expanding its ecommerce and livestream revenues, including sales during livestreamed shows where fans purchase virtual gifts.
ByteDance’s ongoing investment in TikTok, especially in ecommerce and AI, underscores its commitment to the platform, even as these expenses reduce its operating margin from 30% to 25%.
Zooming out: TikTok’s growth arrives as ByteDance nears Meta’s revenue scale; ByteDance reported $73 billion in the first half, compared with Meta’s $75.5 billion. ByteDance’s faster growth rate hints at potential parity in coming years.
Despite the revenue growth, ByteDance’s valuation sits around $230 billion in secondary markets, many times lower than Meta’s $1.4 trillion. This discrepancy likely reflects the regulatory challenges ByteDance faces in both China and the US, affecting IPO timelines and driving some investors to offload shares.
Our take: US legislation requires TikTok to cut ties with ByteDance in January to avoid bans, and the Supreme Court may soon hear TikTok's appeal. For now, TikTok’s approach to stability, strategic messaging, and innovative ad and ecommerce offerings has reinforced its critical role in ByteDance's global expansion strategy.
First Published on Nov 5, 2024