Brief:

• TikTok, the social video app run by China's ByteDance, boosted its in-app sales 500% to $9 million worldwide in May from a year earlier, according to app analytics firm Sensor Tower. 
• iOS users in China were responsible for most of the spending at $5.9 million, or 65% of the total measured by Sensor Tower. U.S. customers of the App Store and Google Play spent $2 million in the video-sharing app, while Indian customers who make up most of TikTok’s user base spent only $45,000. TikTok users buy virtual currency to pay tips to support the creative work of others.​
• TikTok was downloaded 56 million times worldwide in May, a 27% gain from the prior month, but 21% less than the 70.8 million downloads seen in January. Sensor Tower estimated that TikTok has been downloaded a total of 1.2 billion times, and that in-app purchases have reached $97.4 million.

Insight:

While TikTok is forecast to exceed $100 million in in-app spending, the bigger opportunity will be in selling ad placements to mass marketers that want to reach the social network's massive user base. TikTok last year was one of the few apps not owned by Facebook or Google that topped the rankings of non-game downloads worldwide, per a separate Sensor Tower report. TikTok is being more aggressive in its marketing push this year as it will make its first-ever appearance at Cannes Lions festival, where U.S. brand director Stefan Heinrich will speak at several invitation-only roundtables, the Financial Times reported.

TikTok also has ramped up hiring to gain greater ad-sales expertise in growth regions. Its key hires this year include Facebook's former VP of global partnerships Blake Chandlee as VP of business strategy in the Americas and Europe, the Middle East and Asia, and Vanessa Pappas, YouTube's former global head of creative insights, as the first general manager in the United States. TikTok will need their expertise in building out a self-serve ad platform to automate ad placements and reduce the reliance on TikTok's sales force.

TikTok's focus on video may give the app an advantage as video ads drive media spending. U.S. mobile advertising grew 40% to $69.9 billion last year, making up 65% of total digital ad revenue, per an annual report by the Interactive Advertising Bureau and PwC.

TikTok has found marketing power from its viral content, as brands like Chipotle Mexican Grill and Marc Anthony True Professional have discovered. Chipotle partnered with a social influencer to run a video challenge that went viral, generating 110,00 video submissions and 104 million video starts in its first six days. Beauty brand Marc Anthony saw a 60% jump in sales as TikTok users started to share viral videos of themselves using its products in mock commercials.

A key challenge for TikTok will be monetizing an audience that mostly consists of teenagers. While teens may influence the purchase decisions of their parents, they also have notoriously fickle tastes. Musical.ly, which TikTok acquired in 2017 and rebranded, also was a huge hit among U.S. teens but gained little traction among advertisers as a new, untested platform. Other monetization strategies include the addition of shopping features like the ones found in Douyin, the version of TikTok for the Chinese mainland. Advertisers still aren't sure about brand safety on the TikTok platform, as the app has landed in headlines for violating childrens' privacy and showing "objectionable" content. TikTok now restricts downloads for kids under 13 as part of a settlement with the U.S. Federal Trade Commission.