A new report by Wall Street research firm Cowen & Co. finds TikTok’s most avid users frequent it far more than they do any other social media platform, but Microsoft’s “likely” takeover brings a host of complications.
The firm’s veteran internet analyst, John Blackledge, was the lead author of the report, which tapped monthly survey data of 2,500 U.S. consumers as well as insights from Cowen’s Washington Research Group. One caveat is that the survey did not include any respondents under the age of 18, a notable gap given the phenomenon of TikTok was initially propelled by teenagers.
Nevertheless, Cowen found that TikTok users aged 18 to 24 spend an average of 58 minutes a day on the platform, far more than the tally for any other social media outlet. Instagram and Snapchat, the rivals most often compared with TikTok, clock in at 44 minutes and 36 minutes, respectively. Instagram has acknowledged the ground it needs to make up by testing Reels, a short-form video offering. (TikTok CEO Kevin Mayer last month dismissed it as a “copycat” offering.)
TikTok’s rise has implications for YouTube, Blackledge wrote. About 39% of survey respondents are monthly active users of both TikTok and YouTube. “The emergence of TikTok as an alternative could weigh on YouTube’s ability to increase engagement among this cohort especially give how much time these younger users spend on TikTok each day,” the analyst wrote.
On the advertising front, TikTok is still a small player. Its parent, ByteDance, is privately held, meaning official numbers are scarce, but a recent Wall Street Journal report pegged its ad revenue at $1 billion in 2020, surging to $6 billion next year. Snap is closing in on $3 billion in annual ad sales, while Instagram is at $25 billion and Facebook $76 billion, Cowen estimates.
The bright spotlight on TikTok in recent days has been due to its tangles with President Donald Trump and his administration, which has threatened to ban the platform because of its China ties. India banned TikTok earlier this summer as speculation has mounted about the potential for the social platform to be used for spying — a scenario rejected by TikTok and ByteDance.
The acquisition of TikTok by Microsoft, an arrangement favored by Trump, is “likely a done deal,” Blackledge wrote. But Microsoft is “buying itself serious new Washington scrutiny,” he warned.
The Redmond, WA-based tech giant “is viewed in Washington as a American champion company — which is why we think Trump allowed the sale to Microsoft rather than VCs/private equity,” the report explained. “But TikTok’s competitive edge is its engineer-controlled algorithm. So when TikTok comes in for political bias or other criticism — which it certainly will — it could pack even more punch than Facebook because TikTok employees exert greater control of TikTok’s content flow than Facebook/Google employees do over their platforms’ content.”
Cowen also sees the likely transaction as a “modest antitrust boost for Facebook,” which has been in the government’s cross-hairs in recent months over a host of issues. “At the margins, Microsoft owning TikTok might help Facebook defend itself in the antitrust arena,” the report said. “Facebook probably has a credible argument that TikTok is an even stronger competitor backed by Microsoft’s resources and expertise.”
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