TikTok wants more ad dollars, and it has a new plan to get them

TikTok has an advertising problem. On Tuesday, the company rolled out a new plan to help deal with it.

For years, homemade videos that function more or less like commercials have received hundreds of millions of views on the app — and in many of those cases, TikTok has not earned a dime.

In June, the singer Walker Hayes posted a video of himself dancing with his daughter to “Fancy Like,” his country-pop song that prominently name-checks the restaurant chain Applebee’s. The clip inspired copycat videos and led to an Applebee’s television campaign featuring the song.

Last year, Nathan Apodaca, a TikTok user who posts as 420doggface208, went viral with a clip showing him riding a skateboard while swigging Ocean Spray Cran-Raspberry juice to the strains of Fleetwood Mac’s “Dreams.” That video racked up more than 80 million views, and Ocean Spray showed its gratitude by sending Apodaca a cranberry-red pickup truck filled with jugs of Ocean Spray.

TikTok executives announced new initiatives meant to persuade companies and ad agencies to buy space on the app during its first-ever.

TikTok World event on Tuesday, a virtual presentation aimed at the marketing industry. The company said it was introducing an automated system to act as a kind of matchmaker, bringing together advertisers and content creators, giving TikTok a better opportunity to catch up with other social media companies that have generated greater ad revenue.

TikTok officially opened itself to paid ads more than a year ago, but many companies have remained wary of it. TikTok is the least trusted major social media platform, behind Instagram, YouTube, Google and Facebook, although trust is growing, according to a survey of more than 900 marketing professionals conducted by the research firm Kantar.

There are concerns about TikTok driving young viewers to dangerous content, as well as lingering wariness over the company’s record on privacy. While the app has sparked wholesome crazes involving sorority fashion, it has also set off vandalism sprees and food fads with negative side effects.

Half of major brands, including Nestle and Audi, have no TikTok presence, according to a recent review of 300 companies by the research group WARC. Some companies cite a hangover from TikTok’s tussle with the Trump administration in late 2020 over security and censorship concerns involving its owner, the Chinese company ByteDance. Others say they worry that the Chinese government could start cracking down on the app, just as it recently imposed limits on video games.

At Tuesday’s event, TikTok executives and content creators discussed how the company plans to make its growing ad platform safer, smoother and more expansive. In response to one of the advertising industry’s biggest fears — ads appearing next to unsavoury content — TikTok will start analyzing videos, audio clips and text for risk, executives said, using technology and content moderators.

TikTok will also introduce features that companies can use to control whom they target with ads and how often those users see the ads. The new tools will also give ad executives a better idea of how many people are likely to see their ads, allowing them to better gauge how far their budgets will go on TikTok, said Jiayi Cao, who heads TikTok’s product strategy.

“It’s an old technology on a new medium, and it’ll be interesting for the traditional agencies of the world to embrace,” he said.

TikTok has been popular in the United States for less than five years, but it has spawned a cultural economy that includes coalitions of influencers, marketing agencies dedicated solely to the platform and, the company said this week, more than a billion monthly users around the world.

Without the app, the musician Lil Nas X would probably not be a Grammy winner ascending the Met Gala steps in golden armour. Leggings would not be flying off the shelves, and trend-watchers would not struggle to decode what the “cheugy” aesthetic really means.

“A lot of this virality is coming from users sharing with other users,” said Jeremy Yang, an assistant professor at Harvard Business School who researched TikTok while a doctoral candidate at the Massachusetts Institute of Technology. “You’re more likely to share posts from an influencer with a friend than an ad posted by a company.”

Some companies are still figuring out how to appear on TikTok, said Jordan Fox, the head of the Laundry Service ad agency.

“Although the tools are much better now than they were 12 months ago, they are still evolving, and the same is probably true for reporting and data,” he said. “That’s not a reason to not be present on that platform, but it’s a reason to be thoughtful about budget allocation on that platform versus others.”

When Blake Chandlee, TikTok’s president of global business solutions, joined the company in 2019 after more than a decade at Facebook, the app had only a few dozen advertisers. Partway through the pandemic, TikTok became a serious competitor to television and other platforms, he said. Now it has hundreds of thousands of advertisers, he said.

Advertising is responsible for the “lion’s share” of TikTok’s revenue, Chandlee said, adding that the company is also testing subscriptions and tipping. And yet TikTok draws less than $1.3 billion in annual ad sales in the United States, compared with $2.2 billion for Twitter, $2.6 billion for LinkedIn and $48 billion for Facebook and Instagram, according to the research firm eMarketer.

This year, the share of people who were exposed to ads on TikTok nearly doubled, to 37 percent from 19 percent last year, according Kantar, which surveyed more than 14,500 people in 23 regions.

The platform was considered to have the most entertaining ads — but more people complained that they were encountering too many of them on the app. As it tries to lure more paid ads, the company seems aware of the danger of breaking the social media flow.

“We don’t want to interrupt the experience,” Chandlee said. “We want users to look at an ad and go, ‘That was amazing,’ not, ‘I watched that because it was in my feed.’”

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