This holiday season could be pretty instructive as to whether TiKTok will continue to be a place for smaller-sized ad budgets, rather than larger ones.
After all, this season is notorious for its bouts of irrational budget spending — a “use it or lose it” scenario when it comes to marketing expenditure.
If TikTok is ever going to capture a larger share of the advertising pie, this is the opportune moment. Marketers tend to be more generous with their budgets during this time of the year than any other, primarily because if they don’t utilize their remaining dollars, they risk having a smaller allocation in the future.
Yet, up until now, TikTok hasn’t made a huge dent in those advertising budgets. Yes, more money is pouring into the app at a faster rate than many of its competitors, but it’s starting from a smaller base. Advertising on the platform is still predominantly in the experimental phase, and it’s not where the big ad dollars are going. You only need to look at the likes of Uber and Athlete’s Foot to see the focus is still on their organic strategies.
“While TikTok accounts for less than 10% of total spend for our marketing firm, it has more than doubled year over year,” Rob Jewell, chief growth officer at marketing agency Power Digital, which works for clients such as Procter & Gamble, Uniqlo and Casper, previously told Digiday. “We anticipate a similar growth trajectory in 2023 as the channel keeps attracting more advertisers eager to scale their TikTok efforts.”
Fast forward to now and Power Digital’s existing clients are already on a 32% upward trajectory from the same period last year, both in scaling their spend and new brands entering the TikTok advertising space with lower budgets. The agency’s director of TikTok, Jenny Howell-Stiles, even anticipates a 30% increase in ad spending year-over-year in the fourth quarter.
And it’s not just Power Digital; other agencies are making similar predictions about spending patterns.
“We grew more than 100% YoY from 2021 to 2022 on TikTok and expect to do the same this year,” said Natasha Blumenkron Mears, vp of paid social at Tinuiti. “Given the diversification of TikTok’s ad products expanding into new fronts like high-impact video, commerce and search units, I expect that TikTok investment will expand beyond just ‘social’.”
The same trend is observed at the Good Peeps ad agency (which has clients including protein snack brand Chomps, and Chinese chilli hot sauce Fly By Jing), where CEO and founder Shray Joshi explained: “I would say last year (2022) TikTok was anywhere from 1-5% of our brands spend (whereas Meta was about 70-80%), whereas this year TikTok is around 10-20% for our brands (Meta this year sitting around 65-80% for our brands).”
Still, there’s always a chance that marketers could allocate even more of their ad dollars to TikTok than initially planned in the coming weeks. All in all, the app is better positioned than ever to capture a larger share of ad dollars during the holiday season and beyond. Notably, the introduction of TikTok Shop has bridged the gap between users discovering products on the app and actually making purchases. This could be a game changer for advertising as it’s a great incentive for marketers to pour their money into TikTok.
“We’re continuing to see the size and amount of spending allocated towards the platform continue to rise across the board, especially with the rise of TikTok Shop and live shopping ahead of the holiday season,” said Ryan Detert, CEO of Influential.
Turns out, TikTok’s pitch for festive ad dollars hasn’t fallen on deaf ears completely.
To set itself up for a successful holiday period, the platform has sent out sales material to advertisers, which included a Holiday Media Plan, to be used between October and December 2023, with the addition of a supporting pitch deck — albeit the deck was dated last year. Though TikTok declined to comment.
“I received it in the same thread as the holiday full funnel media plan,” said one U.S. ad exec who wanted to remain anonymous. “There isn’t an updated pitch deck for this year, or at least one that has been sent out to account reps yet.”
The holiday strategy, which was shared with Digiday, is a comprehensive, full funnel approach to the platform during Q4, which encapsulates the start of the season: Black Friday/Cyber Monday.
“I think this is geared towards brands that might not have a full consistent strategy on the channel,” said Chris Matheson, media manager at Markacy, who reviewed the material that was shared with Digiday.
The plan presents a step-by-step guide about what campaigns to execute and when throughout the three month period, with suggested budgets.
“This type of document looks like something we would have received from Meta four years ago, about how we prepare for holiday and spend money,” said Tucker Matheson, managing partner at Markacy, who also reviewed the material. “There’s definitely a push towards seeing TikTok as more of a conversion-based platform that Meta or Google have matured into today. But I think we’re still at the very early innings of that journey.”
A similar view is shared by Amy Gilbert, vp of social innovation at The Social Element, who said that it’s a nod to TikTok’s continued goal of driving purchase on their platform. “I’ve seen similar material from Pinterest in the past, but TikTok is putting their own spin on it, given that brands are moving their sales time outside of the normal Black Friday period to gain additional traction.”
That’s not to say this is a negative. It’s quite the contrary. TikTok is arguably the fastest growing platform of its competitors, having only introduced its ads platform about four years ago, and is already being compared to the tech giants of the industry. Seeing similar strategies play out on TikTok now as it pushes a full funnel narrative only serves to show it’s on the right track.
Still, TikTok does need to make its full funnel capabilities, particularly its bottom funnel, to win the larger ad budgets it covets. This is why there’s a lot riding on TikTok Shop.
Over the last two years, TikTok Shop has been made available in the U.K. and the U.S. as well as Southeast Asian countries (Malaysia, the Philippines, Singapore, Thailand and Vietnam). Already, TikTok is targeting a hefty $20 billion in merchandise sales this year (up from the humble $4.4 billion last year). Of course, there are caveats: Indonesia has already become the first to ban TikTok Shop specifically, after the country banned social commerce to protect local business owners. And it’s already been reported that TikTok Shop is expected to lose more than $500 million in the U.S. this year alone.
These are the types of setbacks that parent company ByteDance doesn’t need right now, given that its revenue growth is already slowing, according to internal financial documents seen by The Wall Street Journal. The documents revealed that while the company’s revenue increased 38% in 2022 to $85.2 billion, it was still a much slower growth than the company’s 80% increase in revenue the year prior. A successful TikTok Shop could be a reprieve to those revenue pains.
As Jasmine Enberg, principal analyst, social media at Insider Intelligence pointed out, while Meta is a strong player within social commerce, it still hasn’t been able to get people to convert in-app, and that’s exactly what TikTok is now trying to do. “I think of all the social platforms, TikTok has the highest chance of being successful at that,” she said.