Will TikTok Ad Revenue Catch Up to YouTube in 2024? [Next.Jjin]

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] "TikTok's explosive growth in advertising revenue will catch up with YouTube in 2024 and then target Facebook next."

This sentence expresses the rapid growth of TikTok, which has captured the hearts of Generation Z in the social networking service (SNS) market. It was the headline of an article released on the 4th (local time) by the U.S. economic media Business Insider. Looking at last year's advertising revenue, TikTok recorded $3.88 billion (about 4.9 trillion KRW), showing a significant gap not only with Facebook ($115 billion) but also with YouTube ($29 billion). What does this mean?

Business Insider's research organization Insider Intelligence predicted on the 13th of last month that TikTok's advertising revenue will triple this year to $11.64 billion. If this happens, it will surpass the combined advertising revenue of Twitter and Snapchat this year. Following steady growth, TikTok's advertising revenue is expected to reach $23.58 billion in 2024. This means it will catch up with YouTube's advertising revenue and chase after Facebook.

(Source=Insider Intelligence)

Business Insider stated, "TikTok is the fastest-growing SNS," adding, "As advertisers flock to TikTok, it threatens all channels including Meta, Snap, and YouTube." Industry insiders say it has been a long time since another platform has received this much attention since Facebook emerged. Considering that the White House even briefed TikTok stars in March after Russia's invasion of Ukraine, its influence has grown tremendously, making it inevitable for advertisers to flock to it.

Expanding Age Groups by Partnering with Creators

To maintain this momentum, TikTok launched a new advertising program called 'TikTok Pulse' on the same day. The core of the program is to directly give 50% of the advertising revenue to creators with over 100,000 followers and allow the brand to be displayed on videos containing ads. Until now, creators were not given revenue shares, but this is the first time TikTok has decided to share profits. At the event, TikTok also expressed its intention to strengthen relationships with creators and advertisers.

With the launch of TikTok Pulse, TikTok addressed shortcomings that other SNS companies had. In particular, considering that advertisers had difficulties due to ads being mixed with content containing hate speech or misinformation on other SNS platforms, TikTok emphasized the suitability of creators' content. The goal is to create an environment where brands can be protected more safely. TikTok stated, "Through a proprietary filter, TikTok Pulse ads will be executed on content that meets brand suitability."

Additionally, TikTok is gradually expanding its main user base beyond Generation Z. Last year, it added a Stories feature that allows posting videos that disappear after 24 hours, similar to Instagram Reels, and extended the maximum video length from 3 minutes to 10 minutes. This will enable TikTok to attract users of various age groups, naturally increasing advertisers as well. There are even cases where office workers in their late 30s learn about investing through TikTok, indicating that TikTok's strategy is working well.

'Reels and Shorts' Shielded by Meta and YouTube

Competitors like Meta and YouTube are feeling threatened by TikTok's rapid growth and are actively responding. Meta experienced a stock plunge in January due to a decline in users. At that time, CEO Mark Zuckerberg named TikTok as a rival and instructed the development of a short video service. Recently, amid disappointing advertising revenue, Google executives mentioned TikTok as one of the threats to YouTube during discussions at the end of last month, according to Bloomberg News.

[Image source=Reuters Yonhap News]

The cards Meta and YouTube have played against TikTok's challenge are short video services, Reels and Shorts. YouTube introduced Shorts in 2020 but had not included ads until recently. They revealed internally to investors that they are testing ads on Shorts and gathering feedback from advertisers. Meta is also improving the service to increase Reels' profitability and adjusting revenue-sharing programs with creators.

Competition among SNS companies over the advertising market is intensifying. TikTok's presence not only keeps the industry on edge but also shakes the stock prices of major big tech companies, drawing attention from the stock market. TikTok, created in 2012, celebrates its 10th anniversary this year. We will watch closely what activities it undertakes to surpass other SNS platforms and what market changes will result.

Editor's Note[Next.Jjin] is a section that conveys news about major companies' preparations for the future, meaning 'looking ahead to the real next of business.' We will uncover and explain both major visible issues and small but important hidden issues in an easy-to-understand way.