China’s TikTok is here to take on Facebook – The Wall Street Journal

So far, China has struggled to break into social media outside of China. And, while US social media companies dominate globally, they have never managed to break into China (because they're basically illegal thanks to China's strict internet rules). But TikTok may be changing that – it's the first Chinese social app that has captured the attention and eyeballs of Westerners. Interestingly, it has done so by spending billions to advertise on Instagram, Snapchat, Facebook and the like. Inevitably, there are now rising concerns about what the Chinese owners of TikTok may do with the personal information of their users. After all, it's not like the EU or US can force them to obey Western rules for data protection (such as they are). Sounds like a new front in the growing confrontation between US and Chinese interests. – Felicity Duncan.TikTok's Videos Are Goofy. Its Strategy to Dominate Social Media Is Serious.By Georgia Wells and Yang Jie in San Francisco and Yoko Kubota in Beijing.(The Wall Street Journal) Sometime in 2018, executives at Snap Inc. realized their biggest advertiser was also a rising competitor. It was an addictive app featuring cat videos, pranks and people doing robot dances. The Chinese video-sharing app TikTok was splurging by spending nearly $1 billion on advertising for the year, according to a person familiar with the spending, helping turn it into the first ever Chinese consumer-tech company to break out big in the U.S..___STEADY_PAYWALL___.TikTok has also flooded Facebook Inc. and Instagram with ads, rattling the social-media giants by targeting their audiences on their own turf..Its Beijing-based parent, Bytedance Inc., is now among the world's most valuable startups, with an estimated value of $75 billion and an initial public offering expected this year or next, people familiar with the matter said..Pivotal to TikTok's success is its skill in serving up snappy, lighthearted videos people didn't even know they wanted until Bytedance's powerful algorithms pushed them, in an increasingly personalized stream, until users are hooked..Before now, China's tech giants have largely failed to create brands with big followings in the West. E-commerce operator Alibaba Group Holding Ltd. and WeChat operator Tencent Holdings Ltd. , both of which dominate in China, have for the most part struggled abroad. Washington wants Huawei Technologies, which makes smartphones and telecom equipment, out of the U.S..Bytedance is bucking the trend—and drawing scrutiny. Washington regulators and privacy advocates have raised concerns about children's activity and predators on the site. With tensions over Huawei rising in recent months, TikTok scuttled plans to air a commercial it created for the Super Bowl, people familiar with the matter said. Bytedance executives worried about the attention it could draw, some of the people said..Bytedance has expressed interest in buying Snap if the U.S. company gets closer to profitability, people knowledgeable about Bytedance's plans said. Bytedance has also considered buying Twitter Inc. and Quora, several people said. Snap CEO Evan Spiegel has said he has no interest in selling, and a person familiar with Snap said Bytedance didn't express its interest to Snap. Twitter and Quora declined to comment..Using high-end artificial intelligence, TikTok has figured out how to serve up the fun parts of social media—focusing squarely on fluff—and to create a viral user-made video network that none of the other giants have managed to pull off..Most of TikTok's videos last 15 seconds or less. Users make the videos with TikTok editing tools that let them add music and other effects. The format lends itself to sight gags and silliness. In one video, an orange puppet dances to the words, "If you like chicken nuggets, then you've got to sing along.".Instead of sharing videos only with friends, as is typical on Facebook or Snap, users can share them with the whole world, YouTube style, and build large followings. The tools make video production simple, and celebrities, including Jimmy Fallon, often start "challenges" to draw people in..Compared with social media such as Instagram and Twitter, which can create stress with social pressure or news, TikTok strives to be like candy..It was the third-most installed app world-wide in the first quarter, behind Facebook's WhatsApp and Messenger. It has about 104 million American downloads to date, and nearly 1.2 billion world-wide..Beth Lambdin, a 21-year-old living outside Chicago, said she started noticing TikTok when ads for it flooded her Facebook feed last fall. She said she felt "harassed with ads for months" before she caved and downloaded TikTok this year..She didn't spend much time on it at first. Then she got attached to content creators on the app, including a single mom with a messy house who didn't wear makeup and was making efforts to flirt with a friend in Europe. After all the curated photos on Instagram, she said, it seemed more genuine..Ms. Lambdin recently spent 11 hours in a week on TikTok, according to Screen Time analytics on her phone..The average user opened TikTok more than eight times and spent about 45 minutes on the app daily as of March, according to internal documents viewed by The Wall Street Journal. Targeted ads pop up when users open the app and throughout the feed; TikTok is still ramping up ad sales in the U.S., according to a person familiar with its efforts..Bytedance, founded in 2012, makes a variety of video and news-aggregation apps that are popular in China, but it emerged after Alibaba, Tencent and others had already locked up the domestic market. Bytedance looked overseas for growth. TikTok made its debut in the U.S. market in 2017..U.S. parents have complained about videos promoting suicide on TikTok as well as minors performing suggestive dance moves. A BBC investigation in April found hundreds of sexually explicit comments on videos posted by children as young as 9. India and Indonesia have temporarily banned downloads or restricted access to TikTok..In February, TikTok agreed to pay a record $5.7 million fine to settle Federal Trade Commission allegations that it illegally collected personal information from children under 13..Bytedance has responded to complaints about TikTok and other apps by hiring thousands of content moderators in China, the U.S. and elsewhere and by pledging to respect privacy. After its FTC settlement, TikTok tweaked its app to split users into age-appropriate areas. "Promoting a safe and positive app environment is our top priority at TikTok," a spokeswoman told the Journal..Bytedance also maintains a room in one of its Beijing offices where a Chinese police cybersecurity team is stationed, as some other Chinese tech companies do, a person familiar with the matter said. When Bytedance finds criminal content like terrorism or pedophilia on its platform, following an established internal protocol, it informs the police and provides user information for further investigation, the person said.."We comply with local laws and regulations for each of our local products in the specific markets where each product operates," the spokeswoman said..U.S. tech companies, meanwhile, are waking up to the challenge TikTok poses. Inside Snap, a debate erupted over taking the competitor's ads. Many employees felt they were aiding a rival trying to lure away its users..Snap decided to keep selling the ads—for now, a person familiar with the company's thinking said..Tech companies have accused Bytedance of cloning American innovations. The company's Duoshan app replicates many of Snapchat's Stories features, including disappearing videos, the editing tools and method of discovering other videos..They are also encouraging Washington to scrutinize Bytedance. Washington recently forced a different Chinese company to unwind an acquisition of gay-dating social media app Grindr, because of fears the personal data it collects could be exploited by Beijing for blackmail..Officials are trying to work out whether TikTok might similarly present some sort of security risk, a person familiar with the matter said. A White House executive order signed in May that gives the government authority to block services from foreign adversaries in the U.S.—widely seen as targeting Huawei—could be a mechanism for action against Bytedance if necessary, the person said..In China, authorities permanently shut a Bytedance app, Neihan Duanzi, in April 2018 over worries its humor-related content wasn't in keeping with public morals. The shutdown wiped out a business that had more than 10 million daily active users, according to people familiar with the matter. Beijing also temporarily removed Jinri Toutiao, a Bytedance news-aggregation app, from app stores for hosting content deemed by authorities as improper and harmful. Such terms often refer to material the Communist Party finds politically objectionable..Bytedance's founder, 36-year-old Zhang Yiming, saw a market for content that simply entertains or passes the time. "Most people need to revolve around something, and it doesn't matter if that is religion, novels, love" or Bytedance apps, the software engineer told a Chinese magazine in 2016. Bytedance declined to make him available for an interview..People who know him said he is shy and somewhat geeky. In Bytedance's early days, "people often skipped me and went straight talking to my other colleagues when they were introduced to us, due to my baby-face look," he said in a TV interview. He insists on being called by his first name—unusual in China..Investors said they were impressed by his mastery of AI, which underpins Bytedance's powerful recommendation engines, and his aggressive decision making..Mr. Zhang learned early on that consumers don't always know what they want and are highly open to suggestions. While working at a travel-booking website in his 20s, he developed software to ping users with deals instead of waiting for them to input what they wanted, a Bytedance investor said..Mr. Zhang elaborated his views in 2013, when Google announced it would kill Google Reader, an RSS-feed news aggregator—which supplies subscribers content based on their identified areas of interest. The service was unfriendly to users because people were "forced to figure out 'what I like and what I want' themselves" rather than having algorithms tell them, he wrote in an essay published on social media..The company's first hit, launched in summer 2012, was Toutiao, the news app, which used AI to push interesting and addictive news clips to users..While the user inputs some personal details, the system over time built a profile for the person with as many as 2,000 tags to drive recommendations, according to a former employee. If a user swiped up while reading an article to check a paragraph a second time, for example, keywords from that paragraph would become tags associated with the user..Toutiao featured some serious content, but Bytedance found most users "just want to kill time," the former employee said. Bytedance would try to push certain articles, but whenever it looked at what was popular, it was usually fun or sensational news..In 2016, Bytedance launched Douyin—the app that would eventually be called TikTok outside of China..Douyin drew criticism for mimicking features of Musical.ly, an app founded by two entrepreneurs in Shanghai in 2014 and popular in the U.S. that featured young people lip-syncing and dancing to music. Several companies, including Facebook and Disney, were considering acquiring it, according to a former Bytedance employee. Bytedance pounced in November 2017, acquiring Musical.ly for $1 billion..Bytedance upgraded the app's recommendation engine and added features, including letting users respond to videos, giving them more of a sense of participation. The app's retention rate shot up around 3 percentage points in a week—a big gain in an industry where 3 percentage points a year is considered good, according to a former Bytedance employee..In August 2018, Bytedance dropped the Musical.ly name in favor of TikTok. It took off in the U.S., and also signed up hordes of users in India, Japan and Southeast Asia. In the U.S., artists such as country-hip hop star Lil Nas X got boosts to their careers when their songs became fodder for memes on the app, with masses of people posting videos of themselves dancing. TikTok told ad buyers it was the fastest-growing platform for Gen Z globally, according to an ad buyer TikTok pitched..TikTok's own ad spending, to drive downloads of the app, jumped to as much as $3 million a day in the U.S., a person familiar with the matter said..In October 2017, Mr. Spiegel, Snap's chief executive, met with Bytedance in China, where he was impressed with how Toutiao served people content based on what they had clicked in the past, rather than friends' recommendations—a strategy common on Facebook that had been rejected by Snap, people familiar with the visit said. He ordered staff to redesign Snap's app using more AI to order content, in part based on ideas from Bytedance, but glitchy technology caused it to flop with users..Soon, TikTok's aggressive advertising on Snap and fast growth became more of a worry. Mr. Spiegel reminded people he believes consumers only want to share content with friends on social media—not the whole world, as on TikTok..Late last year, Facebook launched a TikTok clone called Lasso, but monthly downloads have averaged less than 1% of TikTok's..Some tech executives have suggested TikTok would turn out like Vine, the video-sharing site that exploded in popularity in 2013, only to disappear three years later when its then-owner, Twitter, decided it wouldn't be profitable. Vine was criticized for being niche, because it featured content created by a small number of users. TikTok has tuned its algorithm to promote content from a broader range of users, driving engagement..Bytedance generates lots of cash from its numerous apps, people familiar with its operations said. Douyin and TikTok globally contributed more than $1 billion to Bytedance's 2018 revenue, the Journal has reported. Bytedance isn't consistently profitable, a person familiar with the matter said..TikTok employees are now being encouraged to target older people, with various efforts such as ads using colors and fonts attractive to more mature users. The idea is to develop a broader audience, modeled partly on Instagram, which one former employee said has been the most closely watched non-Chinese product at Bytedance. The photo app attracts a wider range of ages and its social element—users share photos with friends—tends to help retain subscribers. In June, Bytedance hired a vice president at Facebook, which owns Instagram, to help build TikTok's international business..Earlier this year, TikTok started approaching people with large followings on Instagram to ask if they would run TikTok ads to attract users, a person familiar with the matter said. In one case, TikTok paid more than $1 million for an influencer to run a single video, the person said..—Kate O'Keeffe, Julie Steinberg and Suzanne Vranica contributed to this article..Write to Georgia Wells at Georgia.Wells@wsj.com and Yoko Kubota at yoko.kubota@wsj.com

China’s TikTok is here to take on Facebook – The Wall Street Journal

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