TikTok, a short-video app under Chinese tech firm ByteDance, is expected to ride out the global advertising slowdown, with the social media platform likely to double its advertising revenue in 2022, a new report said.
The report, released by GroupM — a media investment company owned by global advertisement and public relations agency WPP — attributed TikTok's success to decreasing demand from advertisers for its rivals like Meta and Snap.
Microsoft, however — which is considered to be less of a direct competitor to TikTok — has not witnessed such a notable drop in ad revenue, it said.
GroupM predicts global ad revenue growth will reach 6.5 percent this year, compared with its June forecast of 8.4 percent, given the downward worldwide economic pressure. The company also expects the ad industry to grow 5.9 percent in 2023.
China's advertising sector is dominated by the internet, the report said, estimating that more policies aimed at boosting the economy are expected going forward and ad revenue growth in China will stand at 6.3 percent next year.
TikTok generated nearly $4 billion in revenue in 2021, mostly from advertising, and its revenue is expected to reach $12 billion this year, according to research firm eMarketer.
Online video ads are expected to generate over $331 billion in 2027, 37 percent of which will belong to just one company — TikTok — data from market consultancy Omdia showed.
"Advertisers are beginning to move away from Meta and YouTube and toward TikTok to reach their vast follower base," said Maria Rua Aguete, senior director in Omdia's media and entertainment practice group.
Ad revenue from TikTok is expected to exceed Facebook's parent company Meta and video streaming platform YouTube's combined video ad revenues by 2027, according to Omdia.
TikTok has overtaken other social media platforms to become the most popular place to watch videos in the United States, Aguete said. "Our research showed TikTok leapfrogged Netflix to become the second most popular app in the U.S., with only YouTube retaining the crown for under 35s viewing."
Omdia said TikTok has gained in popularity among young consumers, a sought-after demographic by advertisers. This market has been traditionally hard to reach via channels such as traditional linear TV and other social networks.
"TikTok's journey has been very interesting and it's clear that their model works. This is a platform which offers a huge audience reach and potential to advertisers which cannot be ignored," Aguete said.
A pullback in advertising spending cramped YouTube's revenue in the third quarter, with Google's video platform notching $7.07 billion in ad sales, a decline of 1.9 percent from a year earlier, representing its first year-on-year drop in at least two years.
After a strong start in 2022, worldwide advertising spending growth slowed significantly in the second half amid global economic uncertainty. Nevertheless, ad revenue is likely to grow by almost 7 percent this year to $795 billion, said global media investment and intelligence company Magna.
Magna said global social media ad revenue will likely grow by just 4 percent to $149 billion in 2022 amid multiple headwinds, such as peaking reach and usage alongside brand safety concerns, a far cry from the growth rates of 20 percent to 35 percent observed in the previous two years.
TikTok is the only social media owner to post advertising growth, while incumbent social networks are suffering flat or declining ad sales, especially in Europe and North America. Meanwhile, Magna expects social media ads to re-accelerate and increase by 7 percent in 2023.
China is the world's second-largest ad market, accounting for 15 percent of global advertising revenue, and ad revenue from China is expected to rise 7 percent on a yearly basis to $128 billion in 2023, Magna said.
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