TikTok rides the ad slowdown wave and rises to the top

TikTok, a short-video app of Chinese tech firm ByteDance, is expected to ride out the advertising slowdown worldwide, as the Chinese-owned social media platform is likely to double its advertising revenue in 2022, a new report said.

The report, which was released by GroupM, a media investment company owned by global advertisement and public relations agency WPP, linked TikTok's success to the decreasing demand from advertisers for its rivals such as Meta and Snapchat.

Microsoft, which is considered to be less of a direct competitor for TikTok, has not witnessed such a notable drop in advertisement revenue, it said.

GroupM predicted that the global advertising growth will reach 6.5 percent this year, compared with its June forecast of 8.4 percent given the economic downward pressure. The company also expected global advertising to grow 5.9 percent in 2023.

China's advertising industry is dominated by the internet, the report said, estimating that more policies aimed at boosting the economy are expected going forward and ad revenue growth in China will rise to 6.3 percent year-on-year next year.

TikTok generated nearly $4 billion in revenue in 2021, mostly from advertising, and its revenue is estimated to reach $12 billion this year, according to the research firm eMarketer.

Online video advertising will generate over $331 billion in 2027 and 37 percent of those revenues will belong to TikTok, data from market consultancy Omdia showed. The advertising revenue from TikTok is expected to exceed Facebook's parent company Meta and video streaming platform YouTube's combined video ad revenues in 2027, Omdia said.

"Advertisers are beginning to move away from Meta and YouTube and towards TikTok to reach their vast follower base," said Maria Rua Aguete, senior director in Omdia's media and entertainment practice group.

TikTok has overtaken other social media platforms to become the most popular place to watch videos in the United States, according to Omdia. It leapfrogged online video streaming service provider Netflix to become the second most popular app in the US, said Aguete. "This is a platform which offers a huge audience reach and potential to advertisers which cannot be ignored".

Omdia said TikTok has gained popularity among young consumers, a sought-after demographic by advertisers. This market has been traditionally hard to reach via channels such as traditional linear TV and other social networks.

After a strong start in 2022, worldwide advertising spending growth slowed significantly in the second half amidst global economic uncertainty. Nevertheless, the ad revenues still grew by almost 7 percent year-on-year to $795 billion this year, said global media investment and intelligence company Magna.

Global social media ad sales grew by just 4.4 percent to $149 billion in 2022, a far cry from the growth rates of 20 percent to 35 percent observed in the previous three years. Meanwhile, Magna anticipated social media advertising to increase 7 percent next year.

China is the world's second-largest ad market, accounting for 15 percent of global advertising revenue, and the ad revenue from China is foreseen to rise 7 percent on a yearly basis to $128 billion in 2023, according to Magna.