French commerce

TikTok scales back its live business ambitions, which could be a blow to the app

TikTok is facing a significant reassessment of its business expansion plans, as the company is forced to scale back its live e-commerce initiative in Europe and the United States due to operational challenges and lack of consumer interest.

TikTok has been working to integrate live shopping after seeing major success with the option in the Chinese version of the app. But his early efforts in the UK were hampered by various problems.

As reported by the Financial Times:

“TikTok had planned to launch the feature in Germany, France, Italy and Spain in the first half of this year, before expanding to the United States later in 2022, according to several people briefed on the matter. But plans for expansion were scrapped after the UK project fell short of its goals and influencers pulled out of the program, three people said.

TikTok has since refuted some of FT’s claims, saying the announced timeline for its business push is incorrect and that it is focused on fixing issues with its UK operation before expanding, which is still in its roadmap. But the basis – that his program is not going as well as expected – is correct.

TikTok’s buying push in the UK has also faced internal issues due to disputes over work culture and management.

Last month, reports emerged that TikTok’s parent company, ByteDance, had imposed tough conditions on its UK sales staff, including regular 12-hour days, unlikely sales targets and questions about rights.

Now, it looks like the combination of challenges has led to a new growth dilemma for the app – again highlighting the gap between Asian and Western app usage trends.

Social media and messaging apps have become a central part of daily life in several Asian countries, with apps like WeChat and QQ in China now used for everything from buying train tickets to paying bills, in going through groceries, banking, and everything in between.

This presents an opportunity for Western social media providers, with Meta in particular looking to use the Chinese model as a template to help it translate the popularity of WhatsApp and Messenger into even more ubiquitous and valuable features, which could then make them critical tools in various markets, strengthening Meta’s presence in the market.

But for various reasons, Chinese courier trends never translated to other markets.

Meta’s Messenger Bots push in 2016 failed to gain traction, and after its Messenger app became “too cluttered” with an ever-expanding range of features, including games, shopping, stories, etc., Meta eventually scaled back its messaging expansion plans, in favor of keeping the app aligned with its core use case.

Meta then turned to WhatsApp and made messaging a more critical process in developing markets like India and Indonesia. This expansion is still ongoing, but the signs at present do not suggest that WhatsApp will ever reach the same level of ubiquity as Chinese messaging apps.

Which then leads to TikTok, the world’s most successful short form video app, which has seen massive growth in China, paving the way for whole new business opportunities, and even market sectors, depending on how whose Chinese users have adapted to integrated commerce.

China’s version of TikTok, called “Douyin”, generated $119 billion in product sales via live streams in 2021, a 7x year-on-year increase, while the number of users engaging in e-commerce live streams exceeded 384 million, nearly half of the platform’s user base.

Overall, China’s e-commerce sector brought in more than $300 billion in 2021. For comparison, the entire U.S. e-retail market reached $767 billion last year. .

Given this, you can see why TikTok would see this as a key opportunity in other markets as well – but as noted, Chinese market trends aren’t always a good indicator for other regions.

The decision to scale back its e-commerce ambitions is a blow to TikTok’s expansion plans, not just from a broader revenue perspective (and it’s worth noting that TikTok’s parent company, ByteDance, recently slashed its workforce due to ongoing revenue pressures), but also with regard to revenue sharing. , and allowing creators to earn money from their in-app efforts.

Unlike YouTube, TikTok clips are too short to add in-between and pre-roll ads, which means creators can’t just turn on ads to make money off their content. This means they need to arrange brand partnerships to generate revenue, and on Douyin, in-app commerce has become the key path to achieve this.

Without optional streaming product integrations, this will severely limit creators’ in-app earning ability, which could eventually see them focus on other platforms, where they can more effectively monetize their production.

Which might not sound like a major risk, but that’s exactly what killed Vine, when Vine’s creators called for a bigger share of the app’s revenue, then moved to Instagram and YouTube at the time. place when Vine’s parent company, Twitter, refused to provide it.

Could TikTok possibly face a similar fate?

TikTok, of course, is much bigger than Vine ever was and continues to grow. But the limited monetization opportunities could end up being a big challenge for the app – as it also continues to come under scrutiny for its impact on young people and the potential for it to be used as a surveillance tool by the Chinese government.

In isolation, that might not seem like a major decision, slightly curtailing his e-commerce ambitions as he re-evaluates the best approach. But it’s a significant change, one that will slow TikTok’s broader expansion. And it might end up harming the app more than you initially think.