TikTok’s Secret to Viral Growth
Robbing Peter to pay Paul. Oh, by the way, TikTok is Paul.
SO, WHAT ABOUT TIKTOK? The app that allows users to create and distribute short form videos has defined the 2020’s cultural zeitgeist. So Why TikTok? Why not Vine? Why not snap? Why not any of the other over-caffeinated SF start ups? Well, I can’t tell you why for sure. But the app definitely did a lot right. In this article, I’ll write about the strategy I found the most interesting; I call it “Viral Brand Equity”.
Let’s start with a little history. In 2016, Bytedance created Douyin. Douyin, a Chinese app, allows users to create and distribute short form video sourced from ammeter content creators. In 2017, Musical.ly, a similar application, built in the US was bought by Bytedance for a $1 billion. Bytedance merged the two applications to create TikTok. Since then, TikTok has seen meteoric growth across the globe. In 2018, TikTok spent $1 billion on marketing for user acquisition. Public relations (PR) and paid advertising are the primary way consumer apps get their initial users. But, while PR and paid Ads pay for initial eyeballs, they don’t buy engagement and retention.
Every consumer technology leverages their current user engagement to create more user engagement. Any message sent, photo posted, or article written creates content from which another user can derive value. The goal is to “leverage a user action on a platform to create more user actions”. This creates retention. The goal is to create “Network Effects”, a fundamental economic principle whereby the value of any “network of users” grows as more users join the network. Also known as Metcalf’s law, the value of a network is proportional to the square of the number of network members. Unfortunately, network effects aren’t possible when an app doesn’t have any users. So how do technologists grow a consumer application without momentum?
TikTok does what all social platforms do.
TikTok leverages its users social capital to create viral brand equity. Viral brand equity is when, with one action, a user shares something to multiple people in their social network. According to Metcalf’s law, the value of viral brand equity should equal the square of the number of social network users. For simplicity’s sake, viral brand equity is word-of-mouth marketing, but at scale. Its customer acquisition on steroids, with an exponential growth curve. When someone posts a story, messages a large group, or, even, snaps a 15 individual friends at once, this is considered this viral brand equity. In theory, the value of distributing that story grew by 225x (15^2) not simply by the value of my 15 friends. This is because those 15 friends are now themselves lending brand equity to TikTok’s platform.
So what does TikTok do differently? — The Share Panel
Let’s compare TikTok’s share panel to Twitter’s (see below). For context, an “out-of-app” share is a share prompt to a location not within the app itself. An “in-app” share is a prompt to a share within the app.
The biggest innovation in the TikTok share panel is the priority of out-of-app shares. In fact, TikTok’s in-app share panel is only 36% the size of Twitter’s in-app share options. And, TikTok has 1.5x the number of out-of-app share options compared to Twitter. Today’s logic dictates that apps create standalone ecosystems. In-app share prompts have become the industry’s best practice.
TikTok has proved an out-of-app share strategy can be more effective.
Why? Well, an in-app share provides an app like Twitter with an excuse to send a notification to its users. In-app and off-site notifications(i.e. an on device push notification) are the most powerful growth lever used by platforms to increase engagement. As it turns out, TikTok doesn’t even send push notifications!! As a practitioner in the field, I can confidently say that few would have predicted that one of the fastest growing consumer apps of all time would hit scale without the use of push notifications.
Instead, TikTok leveraged out-of-app notifications, and each user’s social capital, to goose its viral growth curve.
TikTok prioritizes sharing to out-of-app surfaces. In doing so, the TikTok app leverages its own users’ actions to generate exponentially more users’ actions based on concatenating both networks. In other words:
Out-of-app share impressions provide TikTok with viral brand equity.
The 4 share prompts on TikTok, but missing from Twitter, are Instagram, Facebook, Snapchat and Instagram Stories. The main commonality between these 4 share prompts is when a TikTok user shares to one of the prompts, they share to all their friends (on the other network) at once. Said another way, the cardinality of a user share to the number of friend views is much greater than 1.
In plain English, TikTok builds its user base on the back of its competitor’s platforms. Other networks’ substantial investment in their ecosystem is leveraged by TikTok for free brand equity.
For example, if I share a TikTok video to my Instagram story, I get roughly 200 users to watch that story. Because my followers are my friends, they are likely in a similar demographic to me. Rough industry estimates would value 1k ad impressions (CPM cost) to my (coastal, city-dwelling, millennial) friends at about $10 to $15 dollars. So, the 200 friends viewing my Instagram story will create about $2 to $2.50 of free advertising value for TikTok.
Multiply every TikTok out-of-app share impression by the other network’s actual on-app impression ad value, and you get the monetary value of viral brand equity in terms of ad dollars. This amount means that the $1 billion TikTok spent in advertising into acquire users in 2018 is worth much more. To illustrate the point, I created a model (click to see details) to demonstrate the efficacy of an out-of-app share strategy.
Using the models assumptions, after 12 months, TikTok acquires 6.4 additional customers for every customer acquired through paid ads and gets $0.20 of additional ad dollars for every dollar spent on paid ads. A pretty good deal for internal product changes.
Think of it this way. TikTok’s out-of-app share has the same effect as if TikTok paid for advertising on another platform. Moreover, since a user can share to any channel with INCREDIBLY well targeted content, TikTok’s users (like me) help them precisely target more similar users. If I like TikTok, then they used me to get more users, like me, who will like TikTok too. Not only could TikTok monetize me on their platform. But they could monetize me through free “customer acquisition ads” on other platforms.
As with all viral social networks, TikTok used my social capital to achieve exponential growth. However, unlike others, TikTok also used many billions of customer-acquisition dollars spent previously by Instagram, Facebook, Twitter and Snapchat in year’s past. But by prioritizing out-of-app sharing, they got double duty exponential growth. My “come over to TikTok” ad was posted on Instagram for free. And it was precisely targeted to attract another likely customer for TikTok. Unlike others that came before it, TikTok exploited other share platforms for their own benefit.
TikTok creates a watermark on all of the assets shared out-of-app.
This seemingly small feature is the key to making these share prompts so effective at creating viral brand equity.
Before diving deep, it’s worth discussing some technology industry history. After sharing this article, I was introduced to the concept of “ingredient branding”. Back in the 1980s, Phoenix Technologies invented that concept. For those unfamiliar, Phoenix made a ROM BIOS. A ROM BIOS turns a computer’s hardware into PC-compatible computer hardware.On the original IBM-compatible PCs, the startup screen would display “The Phoenix Company” for 15 seconds while a computer booted. Phoenix Technologies controlled the (then very slow) PC boot up process. When other potential PC makers would see the Phoenix Technologies name, they would make Phoenix Technologies synonymous with ROM BIOS. Because of this, IBM-compatible PC architecture went “viral”.
E-Color technologies then adapted the concept of “ingredient branding” to PostScript-compatible printing on Phoenix machines. Whenever a customer booted up a laser printer with the software, it would print a startup page called the “PhoenixPage”.
The idea was adopted across the industry. Within weeks of the introduction of the “PhoenixPage” at trade shows, Adobe, also, came up with a PostScript logo. And a few months later, Intel launched the “Intel Inside”. “Intel Inside” is still used on PC computers today. The TikTok water mark is modern adaptation of ingredient branding.
Much like “Intel Inside”, the TikTok watermark turns every TikTok out-of-app share into an ad for TikTok. No matter where a user shares a video, the TikTok logo is embedded into the video in perpetuity. These video logos create billions of additional logo impressions per day.
Whether it’s a Facebook Ad, Push notification, Billboard, or even a text from a friend, triggers remind users to open an application. TikTok leverages users social capital to productize word of mouth. Technologists can learn from TikTok and achieve viral brand equity by prioritizing an effective share strategy. This creates viral brand equity.
