Exclusive: An inside look at how TikTok is cosying up to agencies

TikTok has been aggressively growing its advertising offering this year as it looks to convert its meteoric user growth into revenue. As part of this ambition, in June Campaign Asia-Pacific broke news that TikTok's Lionel Sim had been appointed to lead a new global agency team based in the US. 

The former senior director of global marketing has been tasked with fostering close relationships with those companies that hold the majority of the world's ad dollars, and mitigating any concerns they might have about the social video app and its future prospects.

That job has become a lot more challenging in recent weeks, as TikTok faces mounting threats of country-wide bans and the looming rise of copycat offerings such as Instagram Reels.

In an exclusive interview, Sim, who is currently based in Australia as he awaits approval from the US government, details how TikTok is approaching commercial partnerships and addresses all the biggest questions marketers have for the embattled app.

TikTok, which was launched internationally in 2017, is young in social-media years (similar apps Snapchat and Instagram are nine and 10 years old, respectively) with several of its ad products "still in the infancy stage", Sim admits. This means "there's a lot of education to be done" when it comes to growing TikTok's business offering, with understanding of the platform among agencies and clients low. The common misconception that marketers can pluck content from other social platforms and broadcast it on TikTok prevails, Sim says.

"A lot of the time clients come to us based on the recommendation of a creative agency, and at the same time the media agency will hold the media dollars. So [we're focused on] how do we present a narrative that both sides understand."
—Lionel Sim, TikTok

"The virality of our platform really depends on things like the hashtag, music, and an active call to users to participate in something. Just using content across different platforms won't work." Therefore Sim is focusing on building creative case studies and learning resources to help agencies understand what creative works and what is currently trending. TikTok is also developing a certification programme to train creative planners and digital strategists on the platform.

Sim's agency division forms part of TikTok's fledging marketing arm, which was formalised as TikTok for Business in June. The TikTok for Business portal offers a self-serve advertising platform, access to its slate of ad options and an e-learning centre to help agencies and marketers understand what works on the platform.

Building trust amid brand-safety concerns

Being a young platform makes TikTok more of a risk than other social platforms from a brand-safety and investment perspective, so Sim has the important task of nurturing brand champions.

That's why his immediate priority is to "build trust" with the 'big six' major holding groups (WPP, Omnicom, Publicis Groupe, Interpublic, Dentsu and Havas). As the gatekeepers of advertising dollars and creative decision-making, agencies have "major influence" over whether clients choose to gamble on TikTok or not, Sim notes.

"A lot of the time clients come to us based on the recommendation of a creative agency, and at the same time the media agency will hold the media dollars," he says. "So [we're focused on] how do we present a narrative that both sides understand."

While case studies can drive creative, media agencies need to see evidence of the platform's return-on-investment. This is why TikTok has expanded beyond pure brand metrics such as brand recall, engagement and awareness (which remain key metrics) through the funnel to offer sales conversion metrics and performance-based buys. 

But the distinctiveness of the platform makes it difficult for marketers to draw like-for-like comparisons between the success of a TikTok campaign versus campaigns on other social platforms, impeding the assessment of ROI.

Questions also persist over the reliability of the platform's metrics. Several brands have been reporting billions of views to their TikTok campaigns (Chipotle and Collab’s #Boorito campaign in the US accumulated nearly 4 billion views), raising concerns over whether the platform's metrics hold up to industry standards. Sim tells Campaign that a view on TikTok is counted as three seconds or more and that this has "always" been the case. But it does not follow the MRC standard that most trusted platforms adopt, in which a video ad view is counted when 50% of the ad is in view for 2 seconds or more*. What has worked in TikTok's favour is that videos play on loop, so historically, a "view" was less a measure of how many people saw on ad, and more an indication of the amount of times a group of people saw it. TikTok says it stopped supporting, displaying and charging replays earlier this month. 

In an attempt to give advertisers assurance over their investments, TikTok is in talks to strike third-party measurement partnerships with the likes of Integral Ad Science and Moat**, and plans to hand-pick IAB and MRC standards to align with. But Sim says it will not adopt all industry standards designed for social platforms, because this is not how it defines itself. 

"We are more of a content discovery and interaction platform, so there might be some buckets of metrics that are not applicable to us because the way content is governed is going to be different," Sim says. The platform takes an "open, transparent, and participatory approach" to working with industry organisations and regulators to help define future standards, Sim claims. Importantly, he says the platform complies with all local rules and regulations when it comes to data privacy and storage, for example.

Measurement is just a small part of advertisers' brand-safety concerns with TikTok. More significant is TikTok's content moderation process, as violence, hate speech, bullying, and sexually explicit content have become an issue for the platform; its ability to protect the safety of its young users, as commentators call the app a "breeding ground for sexual predators"; and its history of data privacy violations, which informed a $5.7 million FTC fine in 2019. TikTok was ranked the least responsible platform in a recent audit carried out by IPG Mediabrands.

"Brand safety is a bigger issue that’s affecting all the different platforms, and will still stay for many, many years to come. We are increasing a lot of our efforts in terms of trust and safety, data privacy and measurement."
—Lionel Sim, TikTok

With this in mind, agencies are more concerned about brand safety on TikTok than they are with the current political battle the app has been swept up in, Sim claims.

"Brand safety is a bigger issue that’s affecting all the different platforms, and will still stay for many, many years to come," Sim says. "We are increasing a lot of our efforts in terms of trust and safety, data privacy and measurement."

Data privacy is at the heart of government concerns about TikTok, owned by China's ByteDance. Government officials from the US, India, Pakistan and Australia have all raised concerns that being owned by a Chinese firm means TikTok could share user data with Beijing if requested to do so, posing a national security threat. TikTok has repeatedly said it has "never provided TikTok user data to the Chinese government, nor would we do so if asked". But that wasn't enough to stop India from banning the app, and it is facing an uncertain future in other major markets such as the US.

Asked how imposed and proposed bans have affected conversations with agencies, Sim says: "We are having very strong support from agencies particularly, and this is purely because we are very open and transparent as to what we can share with them. This has really given us a lot of confidence in dealing and engaging with them." He would not be drawn on whether the app is offering refunds to advertisers in markets such as Australia for ad campaigns that would be unable to run should it be banned, as it is said to be doing in the US.

But what do agencies say?

A Singapore-based leader of a social digital agency, speaking on the condition of anonymity, tells Campaign Asia-Pacific that TikTok's government challenges "haven't come up in a single conversation with clients in Asia-Pacific". Despite TikTok being banned in India and facing potential bans in Australia and Pakistan, these issues are seen as "more of an American concern", the executive says.

That sentiment is echoed by the managing partner of VMLY&R Sydney, Josh Peacock, who says the agency is "still seeing strong demand from advertisers on TikTok", and that the constant news cycle "has only fuelled interest".

But he adds that advertisers that have jumped on board "have certainly been cautious, and we’ve discussed contingency plans given several factors that might play out". 

"Brands are exhausted. Between the pandemic, the economic downturn, and the protests, do they really want to deal with another headache? I suspect not, and that will be the biggest issue for TikTok."
—Bharad Ramesh, freelance media consultant

It's a very different picture in the US. Bharad Ramesh, the former head of digital activation for PHD in the US and now a freelance consultant, suspects TikTok's mounting issues in the market means brands will "just stay away".

"The political uncertainty is the biggest fear, followed by the fear of how the app is using/misusing the data on its platforms," Ramesh says. "It’s also an app very popular with teens, which brings its own set of concerns for brands. Also brands are exhausted. Between the pandemic, the economic downturn, and the protests, do they really want to deal with another headache? I suspect not, and that will be the biggest issue for TikTok."

Humphrey Ho, the managing director of Hylink USA, says most brands stopped their ads on TikTok in the country when President Trump gave the platform a 45-day deadline, and suggests this budget will soon be reallocated to other platforms.

"Even if TikTok can survive in the US, its ad distribution for this season, including holidays and upcoming Thanksgiving and Christmas, will fall dramatically," Ho says.

But others have cautioned advertisers against unfairly punishing TikTok.

"All information supplied by the company indicates they take similar measures to gather and protect data as more ‘traditional’ social platforms like Facebook and Instagram do," says Brie Stewart, the creative director of content at Wunderman Thompson Melbourne. The fact the company stores data in the US and Singapore means TikTok's Chinese ownership should not be a concern, Stewart suggests.

"TikTok users are supporting this platform, and consumer sentiment to the TikTok brand is still positive. As long as consumers stay, advertisers will follow."
—Xiaofeng Wang, Forrester

Xiaofeng Wang, a senior analyst at Forrester in Singapore, suggests advertisers should carefully review the data-privacy policies of social platforms and evaluate previous cases of any misuse of consumer data "rather than make a call by who owns the company".

"Most consumers and advertisers would understand it’s a geopolitical issue rather than a real data privacy scandal like Facebook-Cambridge Analytica incident," Wang says. "As we know, TikTok users are supporting this platform, and consumer sentiment to the TikTok brand is still positive. As long as consumers stay, advertisers will follow."

Consumer sentiment towards TikTok has taken a hit since the US and other governments have waged war on the app. According to data supplied by YouGov, TikTok's BrandIndex Buzz score has fallen into negative territory in Singapore, dropping from +8.8 at the beginning of May to -4.5 in August. Its score has also declined in Indonesia.

'TikTok is not for everyone'

While Sim has the tricky role of convincing agency partners to take a bet on a platform that is still finding its feet, in conversations with agencies he talks up TikTok's relative newness as an advantage, as it allows those businesses the opportunity to design new products that directly answer their clients' needs.

"Global agencies find TikTok to be vibrant and exciting because they are able to partake in really building up products together with us," he says. He's eyeing integrated partnerships that go beyond just million-dollar deals, hoping to work collaboratively with agencies across three key areas: product innovation, digital excellence and thought leadership.

"There isn't a playbook, so brands who want to see everything proven before they try it are not really open to TikTok."
—Anonymous social agency leader

This also informs the skill sets Sim is looking to hire to build up the agency team. While he would not share how many people he plans to hire, he said he is looking for staffers in three specialities: training and education, product integration (which covers data partnerships and business intelligence), and trading and investment. The agency team will be split into three hubs: global (based out of New York), a media hub (based in London) and an Asia-Pacific hub in Singapore. 

There's also the "first mover advantage" of course, which every new platform claims gives brands a leg-up on their competitors. But TikTok doesn't offer free trials or favourable rates to entice new clients, because "TikTok is not for everyone", Sim notes.

"We do not give away stuff because we expect a commitment back," he adds. "What we're looking for is investment from a resource and time perspective."

The anonymous digital agency head we spoke to says some brands see TikTok's limited client portfolio as an opportunity to get ahead of the curve and command a greater share of voice, while others require greater evidence of success. "There isn't a playbook, so brands who want to see everything proven before they try it are not really open to TikTok," our source says.

What's the allure for advertisers?

TikTok has enjoyed explosive growth in 2020: It accumulated the most downloads for any app ever in a quarter between January and March, helping it to surpass 2 billion downloads on the App Store and Google Play, according to Sensor Tower.

Time spent on the platform has also skyrocketed during the Covid-19 pandemic, especially among kids. A report by digital safety app maker Qustodio found that from May 2019 through February 2020, the average minutes per day kids (aged between four and 15) spent on TikTok increased by 116% in the US to reach 82 minutes, by 97% in the UK to reach 69 minutes and by 150% in Spain to reach 60 minutes.

"The allure of the platform to marketers relies on its popularity among young consumers, especially teenagers, as well as higher engagement rates compared to other platforms," says Forrester's Wang.

As user growth and time spent in TikTok has surged, the number of advertisers has not. This had led to a supply and demand imbalance, according to the anonymous agency leader, which means the platform is currently offering "really effective CPMs".

"There's major pricing efficiencies available on TikTok in the auction at the moment," the agency leader says.

While TikTok's young demographic (nearly half of its users are aged between 18 and 24) is what makes it attractive to advertisers, Covid-19 has triggered an aging of TikTok's users, according to Sim, opening up a new cohort of audience targeting. Sim says lockdowns across the world induced a diversification of TikTok content into areas such as life hacks, cooking and dalgona coffee, with it attracting an older demographic made up mostly of passive viewers rather than active creators.

Growing competition from Instagram Reels and Triller

Beyond bans, TikTok is facing another threat—that of deep-pocketed Instagram and its recent TikTok-esque Reels product, plus looming rivals like Triller. The latter, a short-video app backed by music celebrities such as Snoop Dog and Lil Wayne, precedes TikTok (it was launched in 2015) but has piggybacked on its recent US troubles. It claimed to witness a surge of 35 million new downloads in the days following Trump's executive order against TikTok, although some firms have questioned the accuracy of this.

"We welcome competition, it can help us to become better, innovate faster," says Sim. He adds that competition is catalysing TikTok to double-down on creative tools.

"Businesses have just become comfortable with advertising and embracing Instagram, and while they may be intrigued by TikTok, should Reels create the same opportunity and audience reach, then there will be no need to further divest their attention and media spends."
—Brie Stewart, Wunderman Thompson

"Obviously there's a lot more choice for users. But bearing in mind the nature of our platform is very different to other platforms, and that's where we want to really focus on harnessing a lot more of the creative aspects of our platform."

Instagram Reels, which was rolled out in early August, is too new to be making a significant impact on advertiser sentiment towards TikTok. But agencies predict that could soon change.

"TikTok's biggest concern isn’t necessarily its data and privacy (especially if this is all above board as they say)—it is the impact of Instagram launching Reels," says Wunderman Thompson's Stewart. "Businesses have just become comfortable with advertising and embracing Instagram, and while they may be intrigued by TikTok, should Reels create the same opportunity and audience reach, then there will be no need to further divest their attention and media spends."

This has impacted the likes of Twitter and Snapchat, she says, which gained initial traction in markets across Asia-Pacific "but then lost users when Instagram and Facebook evolved to squeeze out the competition".

The anonymous digital agency leader says Instagram offers an easier, trusted environment for advertisers—and when budgets are under strain and the appetite for risk-taking is diminished, this may be enough to override TikTok. "Instagram is a proven platform, so it's a natural that advertisers are going to feel more comfortable there, and from a media-buyer perspective it's easier if you have fewer platforms to plan across," the executive says.

Forrester's Wang agrees: "Advertisers are already investing on Instagram, and it may be easier to convince them to try out a new ad format on a familiar platform than try out on a completely new platform."

*Campaign had previously stated that TikTok follows the MRC standard for a video view. A TikTok spokesperson said the company is in ongoing discussions with MRC over adopting this standard but it has not been confirmed.

**Campaign had previously stated that TikTok had struck third-party measurement partnerships with the likes of Integral Ad Science and Moat. A TikTok spokesperson said the company has not actually aligned with any third-party measurement metrics so far though discussions are ongoing.