Advertisers who typically use Facebook and Google are seeing more revenue when testing TikTok as the platform charges a lower cost per thousand impressions (CPMs).
According to Sensor Tower, the increase in revenue when spending on TikTok has seen advertisers spend more on the platform. TikTok witnessed the highest growth in US ad spending in the third quarter of 2022, as brands opened their wallets. Disney's ad spend on TikTok, for example, increased just under $3 million in the first quarter of 2022 to $17.9 million.
However, even as more brands turn to TikTok, the platform’s low CPMs indicate that there are far fewer brands bidding for a lot of inventory on the platform compared to hundreds of millions of advertiser accounts on Google and Meta.
Michael Sweeney, head of marketing at Clearcode, explains that since TikTok is still a relatively new social media platform, not every brand that advertises on Facebook, Instagram, and Google is promoting yet on TikTok. As a result, there is likely less competition on TikTok than on other well-established social media platforms.
Apple’s App Tracking Transparency also impacts advertisers and a looming global recession, regardless of which social media advertising platform they use. So, the fact that TikTok is now one of the most widely used social media platforms and generally offers lower CPMs than its competitors is an attractive offer for brands looking to get more bang for their buck.
For example, obtaining 1000 impressions on TikTok will cost an advertiser 62% less than what they would pay for Snapchat, 50% less than Instagram and 33% less than Twitter.
“From an advertiser’s perspective, they can reach the same audiences on TikTok pretty much as they would on other social media platforms but can do so at a lower cost. Reaching the same audience at a lower cost helps drive ROI,” Sweeney explains to Campaign Asia-Pacific.
Agreeing, Que Ramli, head of social at Green Park Content, says TikTok’s diverse set of ad-branded advertising options are extremely attractive for the agency and its clients.
“This platform continues to be the testing ground, especially because of its massive growth. It is a huge opportunity for advertisers to tap into a less saturated platform than Meta,” Ramli tells Campaign Asia-Pacific.
Sybil Ng, head of account management for Asia at Quantcast, says innovation success is often heavily reliant on timing.
She explains TikTok is a video platform for engaging in user-generated content. Before their growth, Twitter acquired Periscope for the same purpose as Flickr, which Yahoo acquired and paved the way for Instagram.
“The best companies start innovating years before consumers even know they need a product. TikTok has leveraged recent global events (such as the pandemic) to gain mass adoption at the right time. As a result, the number of TikTok users in APAC surpassed users in North America twofold in 2021,” Ng tells Campaign Asia-Pacific.
“With the deviation from Facebook into the metaverse and the current political climate in Asia, brands may be motivated to increase investment in TikTok ads to reach younger consumers, which has had a knock-on effect in other industries. Take the Philippines market, for example, where telcos offer free mobile data to consumers just to use TikTok.”
However, Ng points out that, like any other user-generated content-centric platform, issues such as control, language and messaging challenges continue to exist, making brand safety a concern for advertisers. That, and focusing on what’s most important, namely measuring the engagement and context of advertising ROI on the platform.
Historically, the world has almost always seen first movers in technology owning and growing their market share to monopolistic levels. While the same cannot be said for the media and advertising industry today, Ng says we are getting there.
“Ad businesses are now fast catching up to Google and Facebook and tapping into a vast (and growing) addressable audience pool of young consumers, accessible through platforms such as TikTok. Shortly, we are likely to see more digitally mature consumers migrate from Facebook, Instagram, Twitter and even YouTube to consume more in-trend content,” explains Ng.
How has TikTok helped advertisers?
With over 1.534 billion users, of which 1 billion are monthly active users, TikTok has captured the short attention span of audiences all over the globe.
Saurabh Madan, vice president and general manager for SEA and ANZ at MoEngage, says if advertisers and brands want the first-mover advantage and drive revenue from consumers, TikTok is the way to go.
He notes that as most of the audience on TikTok is Gen Z, creating quirky ad content that is fun and outside the norm is the best way to go viral.
“TikTok’s inventory empowers brands and advertisers to take more control over the content that appears around their in-feed ads. Having more control allows brands to test which formats work better for their target audiences,” Madan tells Campaign Asia-Pacific.
“With the launch of TikTok Pulse and its qualification guidelines, brands can leverage influencer marketing via content creators that regularly post and have high engagement on their handles. Whether that’s full, standard, or limited inventory, advertisers can optimise the advertising inventory.”
Measuring ad campaign performance and ensuring brand safety are two essential factors advertisers look at when launching ad campaigns. They are easier to achieve when advertising inside a walled garden like TikTok compared to the open web.
Like its top competitors, Facebook and Instagram, TikTok offers brand safety controls and measurement via third-party vendors and provides an exact measure of campaign performance.
The latter is significant for advertisers running campaigns across multiple social media platforms as it allows them to analyse and compare key metrics such as reach, engagement and conversions, says Sweeney.
“However, the importance of the right creative for the environment and proper targeting cannot be overlooked by advertisers. While TikTok is just another social media platform, the content format is slightly different from the content on Facebook and Instagram,” Sweeney explains.
“Advertisers should adjust the creatives to match the given social media platform rather than run the same creative across all. They should also compare hard metrics like engagement and conversions rather than the number of impressions. Comparing engagement and conversions will give them a better understanding of how their creatives and campaigns performed across the different platforms.”
Agreeing, Madan says TikTok understands that not all content can resonate with its audience. To ensure brand safety, TikTok wants advertisers to be able to identify, segment, and accurately reach/engage audiences. To enable this, agencies and advertisers can leverage Tiktok’s inventory filter.
“Giving three tiers and layers of videos, the platform gives brands the comfort to deliver the right content, depending on the affinity and preferences of their targeted audience. In addition, TikTok has ensured that the new premium inventory filter complies with Global Alliance for Responsible Media and internally vetted processes and policies to ensure brand safety,” explains Madan.
How are advertisers using TikTok’s inventory filter?
While advertisers and brands are looking to use TikTok’s inventory filter, there is still a gap in the approach and strategy to envision and execute accurate segmentation.
To excel at this, Madan says brands need to adopt an insights-led approach to engagement to fine-tune their positioning and targeting. Couple the inventory filter with the right customer engagement platform, and brands potentially have the perfect weapons to take their brand engagement and retention on TikTok to the next level.
“While only a few brands have been able to capture the minds of the average TikTok user, a few have done a terrific job with their campaigns. Some notable examples are Gymshark, the NBA and Chipotle,” shares Madan.
“When you look at these brands and their approach to TikTok, they were early to use TikTok as one of their channels to keep their audience engaged, and they explored and experimented with the video inventory available, keeping what works and replacing what does not. In addition, they used social media influencers from their industry to amplify engagement and used relevant content that is relatable to their audience.”
Ramli points out that these inventory filters also give advertisers more control over where their ads appear on the platform to ensure safer ad placements. Having more authority creates a safe environment for advertisers and effectively allows them to mitigate potential reputational risk at scale.
For example, she explains there is full inventory, which is more for smaller businesses, allowing the highest available audience to see them. Brands that go for standard inventory are those moderately concerned about brand safety with moderate audience levels. Conversely, brands with high brand safety requirements usually reach the lowest available audience under limited inventory.
What’s next for TikTok?
TikTok is building up its adtech stack as it was previously limited in the data it can share with advertisers. For example, last-click measurement and a one-day attribution window on ad views were only previously available to brands.
However, TikTok has since released its new Attribution Manager tool, which enables advertisers to set custom attribution windows within TikTok campaigns. The tool allows advertisers to measure the results of their TikTok promotions with greater flexibility by linking data to actions taken over a specific time frame after ad exposure, allowing them to optimise each campaign’s parameters.
TikTok’s default attribution will display 7-day click and 1-day view data using TikTok Pixel and Events API. In addition, the platform’s default attribution provides more accurate information on how users respond to ads within the app. However, limitations may exist due to in-app tracking, as Apple’s ATT update allows users to opt out of in-app tracking tools.
TikTok is also improving tracking, such as adding first-party cookies to its site conversion pixel, enabling advertisers to track website activity and attribute ads across browsers. Additionally, TikTok removed the option for users to opt out of targeted ads.
While half of TikTok’s ad platform focuses on targeting and audience tools, TikTok has the potential to catch up quickly to competitors such as Google or Meta. For example, advertisers have long requested Meta to allow targeting by hashtag on Instagram, but TikTok already implemented this feature in 2021.
TikTok’s search-based campaigns have an advantage in that advertisers can see which specific search terms or phrases led to sales on the platform. Unlike Meta, TikTok can provide this level of detail because it has a high rate of on-platform or last-click shopping among its users.
Providing a high level of detail allows TikTok to show which search terms prompted a purchase, unlike Meta, which cannot connect on-platform searches to sales.
Some would argue TikTok is also more accommodating in its approach to working with advertisers and is willing to make concessions to accommodate them. One such example is its flexible payment options for brands that closely relate to the platform or are part of its partner program.
Unlike Meta or Google, TikTok will provide funding for a campaign and give the agency 30 days after serving the final ad to pay it back, rather than requiring immediate payment linked to a bank account or credit card.
Finally, another of TikTok’s strengths, giving it a competitive edge, is its focus on shopping and ecommerce. For example, advertisers can easily link their Shopify accounts to TikTok or direct users to in-app shopping pages, allowing seamless and easy purchases.
TikTok introduced its native shopping service in the UK and Europe in 2021 and rolled out in the US in 2022. While Facebook and Instagram also have shopping products, they have not gained as much popularity as TikTok.
TikTok’s shopping program also allows influencers to participate in affiliate programs with links and discounts, which is impossible on Instagram.
Additionally, TikTok allows users to quickly leave the app and link directly to an outside browser, unlike Facebook, which forces users to use its in-app browser. Allowing users to leave quickly has led to TikTok becoming a popular destination for commerce-related searches, especially among younger audiences.