Marcus Johnson (00:04):

Hey gang. It's Monday, February 23rd. [inaudible 00:00:08] Max, and listeners, welcome to Behind the Numbers: an EMARKETER Video Podcast. I'm Marcus, and joining me for the conversation today, we have one of our analysts living in New York, it's Emmy Liederman.

Emmy Liederman (00:18):

Hello. Thanks for having me.

Marcus Johnson (00:20):

Hello there. Of course, happy to have you. We're also joined by principal social media analyst living in Philly, Max Willens.

Max Willens (00:26):

Yo.

Marcus Johnson (00:27):

Bang, there he is. Today's fact. How old do you think, and how young do you think were the oldest and youngest people to win Olympic medals? Youngest, want to take a guess, take stab at it?

Max Willens (00:47):

I'm going to say 14.

Marcus Johnson (00:48):

Okay. Emmy?

Max Willens (00:49):

It feels like a gymnast's age.

Emmy Liederman (00:51):

Yeah. I think I have to hop on the 14 bandwagon.

Marcus Johnson (00:56):

Okay. That makes it less interesting, but you're both wrong, it's 13. She was 13.

Emmy Liederman (01:02):

I was going to say 13.

Marcus Johnson (01:06):

Well, I think it was 13 and 200 something days. So I think if you round up, you guys are actually spot on. American Springboard diver, Marjorie Gestring won gold. So this is to win gold, I should say. She won gold at just 13 years old at the 1936 Summer Olympics. Oldest to win gold?

Emmy Liederman (01:25):

How do you think she's doing today?

Marcus Johnson (01:29):

Probably good. I don't know her personally.

Emmy Liederman (01:35):

Okay.

Marcus Johnson (01:35):

This is just research.

Emmy Liederman (01:35):

Oh, okay.

Marcus Johnson (01:35):

I'm sure she's doing well. Yeah, she could be around.

Max Willens (01:36):

Marcus opens the door behind him, yells, "Hey."

Emmy Liederman (01:40):

Yeah.

Max Willens (01:40):

"You good?"

Marcus Johnson (01:40):

"Marjorie, you good?"

Emmy Liederman (01:40):

I figured she was involved in this fun fact somehow.

Marcus Johnson (01:47):

She still wearing a medal. I'd never take it off.

Max Willens (01:50):

Neither would I.

Marcus Johnson (01:51):

Oldest, how old, to win gold?

Emmy Liederman (01:57):

45.

Marcus Johnson (01:57):

If you'd said 50, I'd have lost it, Emmy. 64.

Emmy Liederman (02:02):

Wow.

Marcus Johnson (02:03):

Swedish Oscar Swahn won gold at 64 years old in 1912 Stockholm games, and then won a silver at 72 years old in the 1920 Antwerp games, the oldest medalist in Olympic history. He won it for a sport called, which is no longer with us, thank goodness, running, although they think it was plastic, they weren't real, but running deer shooting, which at first I thought meant that you ran whilst you shot the gun, but the plastic thing, the plastic deer is moving.

Max Willens (02:41):

So it's like the carnival game where the thing is hopping and you shoot it with a water gun except you win an Olympic gold medal for it?

Marcus Johnson (02:49):

Well, they also give you a giant teddy bear with your...

Emmy Liederman (02:51):

I feel like that's not good enough. That's not hard enough to be in the Olympics.

Marcus Johnson (02:55):

Oh my goodness. You don't know how far away... Emmy? Emmy's like, "Easy."

Max Willens (03:02):

I'm going to echo what she's saying, only to say that any athletic pursuit that can be won by someone who is in their seventies is I think not an appropriate Olympic sport.

Marcus Johnson (03:17):

Oh, God, Oscar.

Max Willens (03:17):

And I say that as someone who is...

Marcus Johnson (03:19):

So sorry.

Max Willens (03:20):

... Old and getting older, and my best chance at an Olympic gold is probably in running deer shooting or competitive leg crossing. So I say this with a heavy heart.

Marcus Johnson (03:34):

That does feel like an Olympic sport for me.

Emmy Liederman (03:36):

I feel like this episode is sponsored by a healthy dose of ageism, not too much.

Marcus Johnson (03:42):

Anyway, today's real topic, the big three questions surrounding TikTok. All right, so let's catch you up on what's happening with TikTok. A little more than a week ago, TikTok stepped onto US shores as a naturalized citizen, ever since the video app has been fighting for its life, writes Blake Montgomery of the Guardian. Marissa Jones explains that the short form video leader has now transitioned into a majority American entity helmed by TikTok, USDS Joint Venture LLC. Ownership looks like this, 19.9% ByteDance, 15 for software and cloud giant Oracle acting as managing investor and data secure, a private equity firm Silver Lake has 15%, UAE state-owned investment firm MGX has 15%, and then the leftover is 35.1 for the other partners.

(04:35):

Marissa Jones, our Marissa Jones notes also that TikTok's first days of US ownership were marked by widespread errors and new data collection practices, raising questions about how new ownership will impact users and marketers. Users were encountering upload issues, and many said TikTok's famous for you algorithm had completely reset following the ownership change. Estimates from similar web found that TikTok usage in the US fell from 92 million people, daily active users, to around 88, before bouncing back up a little to 90. So that's just to catch you up with what's going on with TikTok. We're talking today about the three big questions for them. I've talked enough, so I'm going to start with Max. Max, what do you think is one of the main questions for TikTok at the moment?

Max Willens (05:17):

So I have been going back and forth about how to phrase this question precisely, but maybe the three of us together can settle on the optimal version of it. But the thing that I've been fiddling with is the question of is TikTok going to spend this year dealing with perceptions of bias in its platform? So in addition to all of the technical problems that Marissa laid out in her coverage of the switch over to a US company, there were a ton of accusations lobbed at TikTok at the end of January into February that its system was artificially suppressing the reach of posts that were critical of Donald Trump that dealt with the murder of Alex Preddy in Minneapolis. And there are people that complain about getting shadow-banned or suppressed by social platforms all the time. But in this case, a lot of the people lobbying those accusations were quite famous. They ranged from hit singer Billie Eilish to California Governor Gavin Newsom who said at the end of January, that he was going to open a formal inquiry into whether posts critical of Trump had been artificially suppressed on TikTok.

(06:41):

And the thing about the way an algorithm is tuned is that it's very difficult to prove, or at least social networks have proven pretty disinclined to prove that their algorithms are unbiased or that they are equally weighting content of different political persuasions. But the reality is that if a critical mass of American users start to develop the idea that TikTok has turned into some kind of mouthpiece or organ of the United States government, that's a potentially huge problem for its cultural standing, for its popularity among its youngest users. And here again, you and I, and the three of us can figure out the right way to phrase this because I think it's not so much a question of are they going to be dealing with the problem of bias, but to me the perception is almost more important than the reality. And so that to me is the one that sprang to mind first.

Marcus Johnson (07:54):

I like this one. I phrased it as can TikTok convince users it's the same old app they used to love, which is another way of putting exactly what you just said.

Max Willens (08:03):

Yeah.

Marcus Johnson (08:04):

But yeah, I think they could have a big perception issue on their hands. I think that can shift after an ownership change, because Emmett Linda of New York Times noting that billionaire Elon Musk drastically loosened restrictions on the types of content the users could post on X, which he bought in 2022 when it was Twitter. And so pointing that example.

Max Willens (08:24):

Here again, the issue of perception is probably more important than reality when it comes to the minds of advertisers. TikTok has certainly become a very, very important investment place for lots and lots of brands, but I don't know that you could say that it has climbed into the non-negotiable, we must spend money and keep spending more money in this platform yet for lots of brands. And so if it becomes this pervasive question of is TikTok just an organ of the presidential administration's viewpoints on all kinds of things, there's a not insignificant number of brands that's going to respond to that by saying, "This is probably not a great place for us to be really, really visible."

Marcus Johnson (09:20):

Yeah.

Max Willens (09:22):

It doesn't apply to all of them, but it's a non-zero number of them for sure.

Emmy Liederman (09:25):

Just to add to that, we covered a study in January from Collabstr that said that TikTok heavy campaigns fell 48% year over year while platform-agnostic content campaigns surged 133% year over year. This is one study, but this was before even all of the current content moderation conversations were happening. I think people just had a general discomfort, advertisers had general discomfort towards what was happening with TikTok. So I can only imagine that this is going to add to that fire and make people say, "Why would I put all my eggs in one basket and just invest in this platform when it has a slew of controversies?" So I think the question for TikTok is how are you going to stay competitive if you have all of this working against you?

Max Willens (10:21):

Yeah, what's so interesting about this too is in light of, I don't know if the Collabstr research touched on what motivated those changes, but one of the things that we saw throughout last year when this deal was still getting ironed out between ByteDance and the US government was a lot of brands did either pause their spending or at least hold the amount of spending they were doing rather than continuing to ramp it up. And in the process, what that led to was a lot of advertisers having to reassess their investment in this platform. Some of it was pragmatic because they weren't sure if it was just going to get wiped off of the US map, but some of it too did crack open this door of brands maybe thinking, okay, can I live without this or not? And the question of bias versus whether something is literally accessible or not are very different. But if the answer in both cases to an advertiser's questions is, "I can reach this audience somewhere else or via some other means," then that is a meaningful problem for them that they're going to have to solve.

Marcus Johnson (11:35):

Yeah. I'm just looking at the TikTok ad revenues, 2024, 41%, last year, a lot of question marks, 16% growth in the US, and then we're expecting it to go up this year 28%, but this forecast is from December. So we had an idea of who was going to buy it, but it doesn't fully take that, the ownership into account. Also, it's predicated on there being users there. And US TikTok users growth was already quite anemic, which surprised me. According to our forecast team, the share of internet users in America who use TikTok will only go from 39% to 42% in the next three years.

Emmy Liederman (12:17):

Yeah. Well, I think it's a badge of honor to be one of those that never downloaded TikTok. I know the people that are...

Marcus Johnson (12:26):

Manged to resist.

Emmy Liederman (12:27):

... Millennials that are like, "I never let myself go down that rabbit hole that is the TikTok universe." So I just feel like the people that you have, try to hold onto them. But beyond that, I really don't see much growth with new consumers.

Marcus Johnson (12:45):

Yeah. So Oracle said that temporary weather related power outage impacted TikTok users and advertisers. But Blake Montgomery, again, of the Guardian was noting that it's uncommon for a physical event like a storm to affect TikTok. As such, popular apps often have backups to their backups, but it can happen. So if this happens again, I think it could be a much bigger deal than ownership changing and them trying to work things out. However, the Economist was noting, "In Oracle, TikTok will have a steward whose owner, Larry Ellison is friendly with the president, and has already overseen Trumpy changes at CBS News, which his family controls." So yes, lots of ways to phrase it. Marissa writing, "New conservative ownership could eventually alienate TikTok's majority left leaning user base because of content moderation concerns." So a lot of different ways to phrase the question that we're guessing at here, but I like this one, Max. Emmy, questions you think TikTok has in their mind at the moment.

Emmy Liederman (13:41):

The other thing that I saw that they just released was a local feed. So when you open up TikTok, you can look at the people that you're following, you can look at your for you page, which is what TikTok is most known for, the main feed. And you can also have a feed where you click on it, you opt in to share your precise location data, and you can see people posting in your neighborhood. To me, this feels like TikTok knowing that it is being perceived in a very negative big brother type light and just saying, "I want to do something that feels more community oriented, and maybe feed you content of the woman baking scones down the street to distract you from knowing all the stuff that we might be doing behind the scenes." But I would love to ask TikTok about that choice, and also how they knew that consumers would respond well to this given that would require consumers to give up a lot of their data.

Marcus Johnson (14:47):

Do we think PR move, or do we think there's some real expectations behind this then, Max?

Max Willens (14:53):

Oh, when I saw them release this, to me, it just instantly read as a way to keep pouring gas on their efforts to build more of an advertising base of SMBs. So it's one way to ensure or continue to boost the efficacy of local advertisers is to put their content in a space that feels even more contextually relevant. So if I'm just scrolling through my for you page and I get an ad for a local bakery or a local car dealership, it's probably going to resonate with me a fair amount. They've done a fine job of building up an ad platform that's good at targeting people with relevant advertising. But if you can have that same experience happen inside of the Philly specific area of the app, then it's likely to resonate with me even more. So that to me was what I took away from them launching it. It also builds on a question that I had put in my chamber, which is like what is going to happen to TikTok's search platform or its status as a search player potentially?

(16:15):

It's funny to think about this because it was so long ago, but that viral post, I don't Google, I TikTok, was arguably the most important post of the media year in 2023. And since then, TikTok's done a lot to build itself out as a place where you can spend, or rather treat it like a search engine. It's not completely analogous to spending in Google for example, but they have really been quite focused on and quite diligent about thinking about the way that they can make their platform works for brands that want to treat it like a search play. And one of the very best ways to do that is to build out a local dimension to the offering, so that way if you're really looking to reach people within a certain metropolitan area, for example, this both makes it easier for people to gather that information up, but it also creates an even more brand suitable environment for the ads that get served that way. And so that to me feels like a big reason why they've debuted this component of the app.

Marcus Johnson (17:22):

Yeah. Before the last year or two, there's been a lot of conversation about where people are going to search and younger people moving their search to social. Some people, depending on what the search is, obviously if you are searching for a product, it could be on Amazon, if you're searching for a question about something and maybe it's going to be Google, etc, etc, maybe news is on social. But how much do you think TikTokers has lost out in terms of being the search destination for people in the last year or so, because obviously it's been a lot of question marks around TikTok, and at that same time, here comes OpenAI, here comes Google with Gemini, here come these AI models that are saying, "Actually, this is going to be the new way to search for things." Where is TikTok in that race in your mind?

Max Willens (18:09):

It's funny you asked this question because it dovetails with the other big question that I had about them, which is about TikTok shop.

Marcus Johnson (18:19):

Oh, yes.

Max Willens (18:20):

So as we've pointed out, there's lot of, when we say search, we're actually talking about a lot of different behaviors at the same time. There's news-gathering, which as you say is distributed by varying degrees between Google and maybe certain social networks. There's searching for local information, which is I think a play that lots of social platforms are trying to capitalize on more. You see that with Snap Maps and Snapchat. You see that with this local play that TikTok is making, but you also search for stuff to buy. And a great example of how much people are turning to TikTok shop as a place to buy stuff is the fact that we think that TikTok shop is going to be the eighth-largest retail e-commerce player in the United States in 2026. And considering the fact-

Marcus Johnson (19:14):

That's shocking. It's going to overtake Target in terms of e-commerce sales this year?

Max Willens (19:20):

That's right. And so that to me, if you're asking did TikTok lose out on any search ground, to me that number says not so much. They are quite comfortably established as a place that people know they can go for a certain kind of product. And you see in the kinds of brands that have started to test out TikTok shop as a way to merchandise things or trial balloon new products, or even just market themselves to a certain kind of consumer in a cost-effective way, the definition of what you can find on TikTok Shop and buy on TikTok Shop is expanding. And that to me is a testament to how well they've grown that service. But the question that I had really was how much bigger can TikTok shop get?

(20:15):

So we obviously have a number which is embedded in our forecast, but anybody that follows this space understands that the things that shape those rankings and those numbers are manifold. Consumer confidence is a big one, just changing cultural mores and tastes is another, even just more large brands deciding to come aboard. And that also again, ties into what we were talking about earlier. I want to stress that what I'm describing is like a hyperbolic extreme edge outcome, but if all of a sudden in 10 months time the sort of general cultural perception is that TikTok is this mega mouthpiece place for Groypers, a lot of brands are going to go, "Maybe we don't sell all of our stuff in TikTok Shop now, or maybe we step back from this a teensy bit." And that has real ramifications for their upside as an econ player. Now again, that's an extreme cartoonish version of one outcome, but all of this stuff is up in the air when we think about the role that we think TikTok Shop could wind up playing for US consumers.

Marcus Johnson (21:30):

Yeah.

Emmy Liederman (21:30):

And I feel like when you look at TikTok now, it reads so much like Amazon. But I would say the big difference between TikTok and Amazon is that trust element and also the efficiency, and just feeling confident that you're actually going to get the thing that you ordered.

Marcus Johnson (21:49):

Yeah, which Amazon struggled with in the early days too. Takes time.

Emmy Liederman (21:50):

Yes, exactly. So it's really following this Amazon trajectory, I think, especially now that we see these huge brands opening up storefronts. I feel like that's the ultimate case study that it is progressing and maturing. So yeah, I'm curious what's going to happen this year.

Marcus Johnson (22:10):

Yeah. All right, gang, we've got four questions right now. Any others you want to throw into the ring?

Max Willens (22:15):

It's not confined to TikTok, so that was why I didn't lead with it, but it's still a big question, which is just how much of a distraction or an issue are all of these lawsuits going to be for them? So as anybody following media knows, there has been this really big storm of lawsuits that are going to trial this year related to things like social media's role in teens mental health and things like that. And TikTok has been named as a party in a lot of those, or a defendant in a lot of those lawsuits. And the time horizon over which those things get played out and the extent to which any of them even reach verdicts versus settlements is an open question. But this is a big enough issue that Meta's leadership disclosed on their most recent quarterly earnings that the results of those lawsuits could materially affect their business.

(23:21):

Now, some of that is, again, just them coloring the lines with the FTC and disclosing that lawsuits could adversely affect their business, but anything that potentially is a big problem for Meta, for example, is going to potentially be a big problem for TikTok. And you saw earlier this year that they're already taking steps to minimize their exposure on these fronts. There was one suit that at the 11th hour, TikTok settled with the defendants, get themselves out of it. And I think that it's fair to ask whether this is something that's going to be a pain in the butt for them all year because these have turned into very, very visible trials, and I think that it's worth asking whether it's going to be something that they have to deal with all the time.

Marcus Johnson (24:11):

Emmy, anything to add?

Emmy Liederman (24:15):

Yeah, I think going off of that, the impact of the lawsuits is definitely on my mind, and also more generally when you think about all of the negative PR that TikTok has had lately and the alleged censorship, whether or not it's true, but we said at the top of the episode, it matters more what the perception is than the reality. TikTok is investing so much in AI search. How are they going to make sure that people actually trust them as a search engine, also giving that consumers are only starting to trust the concept of AI search in general?

Marcus Johnson (24:50):

Yeah. The perception of [inaudible 00:24:54] thing is so interesting that the deal's values the company at $14 billion. Analysts had said it could be worth at least 40, 4-0, maybe as much as a hundred billion dollars. And the Economist was writing, "The main problem here, simply the fact that it was facing the ban. Tiktok's Chinese owner has few options." "It's like saying I'm going to buy a house, and if you don't sell me the house, I'm going to burn it down," according to one advisor to the American buyers. So yeah, this perception that TikTok was worth or could be worth all this, the reality actually given everything that's happened and this swirl of concerns, anxieties around the company at the moment is, yeah, much different.

(25:34):

The only one I had, other one was will the new algorithm be as good, underpins a lot of what we're talking about because whether it's the users, the advertisers, will people leave, Liv McMahon of the BBC writing, "The content recommendation algorithm at the heart of TikTok determining which videos show up and the apps for you feed will be licensed to us TikTok from ByteDance, the original owners, and be retrained on American users' data, leading to concerns about the effectiveness of the new algorithm."

Emmy Liederman (26:05):

Yeah. I think that again speaks to the perception thing because people really romanticize this algorithm that they perceive that they've had since peak Renegade 2020 TikTok. So even the perception that they're starting over, I think is notable considering how connected people feel to their TikTok algorithm.

Marcus Johnson (26:31):

The questions we have, six of them. We've got to shortlist it to three, so I'll get you to pick one each. We've got will TikTok spend the year fighting perceptions of bias? Number one. Number two, why did they decide to launch a local feed, and how do you know consumers will appreciate it? Number three, what happens to TikTok as a search destination? Number four, how much bigger can TikTok Shop get? Addictive social media lawsuits is five, and will the new algorithm be as good, number six. Max, will start with you. What are you keeping?

Max Willens (27:00):

Well, I'm going to be, not selfish-

Marcus Johnson (27:06):

A pain, and add a seventh?

Max Willens (27:08):

No, that, I'm not going to do. But I'm going to pick my own, be a little bit cheap, and basically say how are they going to deal with perceptions of bias? That to me is the most important one.

Marcus Johnson (27:21):

Yeah. Yeah, and we all had variations of that. So yeah, I think that's a great one to pick. Emmy?

Emmy Liederman (27:26):

Yeah, I feel like they all relate to that. But from a personal level as well, I'm just curious, will the new algorithm be as good, or at least will people be able to spot a difference even if there's no real difference, I think is at the heart of TikTok, so that'll be interesting to see.

Marcus Johnson (27:49):

I'm going to pick how much bigger can TikTok Shop get? Yeah, I think that one. What happens to TikTok as a search destination, I think will play itself out in the next year or two potentially. So I think that is a big question. But for a question as of right now with the rebrand, how much will that turn people off? Whether that's retailers or consumers, advertisers from TikTok Shop.

Emmy Liederman (28:15):

Yeah.

Marcus Johnson (28:15):

So yeah, I think it's a solid top three. Will TikTok spend this year fighting perceptions of bias, will the new algorithm be as good, and how much bigger can TikTok shop get? I'll end with this because I thought this was really interesting. This is from The Economist. It's basically saying there's a lot of talk about TikTok and ByteDance having to sell TikTok, but they wrote this a good article talking about ByteDance ironically is better off without US TikTok.

(28:39):

So he was explaining that letting go of us TikTok removes a distraction from its 330 billion parents low-key global conquests, since US TikTok is a small and not particularly profitable piece of its overall business. TikTok has over 1 billion monthly active users outside the US, not including India, where it's banned. Its [inaudible 00:29:04] app has an additional 800 million or so and is making real money, likely responsible for most of its 33 billion in net profit ByteDance generated last year on global revenues of 155 billion. And it ends with ByteDance is a over 50 billion a year ad company, the third-largest online shopping platform in China by value of goods changing hands, fourth-largest online mover of clothes according to Morgan Stanley, and China's top AI app since ByteDance has been a machine learning company since its inception in 2012. So ByteDance is doing pretty well, and it seems like it's maybe quite happy to wash its hands of this, still have a stake, and move on with its life.

Emmy Liederman (29:41):

Yeah, I think that's a good humbling perspective for us to leave with.

Marcus Johnson (29:45):

Yeah. That's all we have time for. Thank you so much to my guests for hanging out with me today. Thank you first to Emmy.

Emmy Liederman (29:51):

Thank you. I had fun.

Marcus Johnson (29:53):

Yes indeed. And [inaudible 00:29:54] shocked by that, please. Unbelievable. [inaudible 00:29:57], Marcus. Max, thanks for coming.

Max Willens (29:59):

Always a pleasure, Marcus. Thank you.

Marcus Johnson (30:01):

Much better. Emmy, unbelievable.

Emmy Liederman (30:03):

Wait, you didn't think I was being serious?

Marcus Johnson (30:06):

No, no, I thought the way you said it actually, you seem surprised that you'd enjoyed yourself, which is fair.

Emmy Liederman (30:13):

Well, I was [inaudible 00:30:14].

Marcus Johnson (30:13):

Because I make them do this.

Emmy Liederman (30:14):

I was [inaudible 00:30:15].

Marcus Johnson (30:15):

But thank you both of being here. Thanks to the production crew, Lance, helping us out in the background with this one, and thanks to everyone for listening in to Behind the Numbers: an EMARKETER Video Podcast. On Wednesday, Suzy will be here discussing our unofficial monthly retailer awards for February.