The Utility of TikTok Advertising

KLIK Staff

April 19, 2021

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How to Understand the Opportunity of TikTok as a New Channel for Advertisers

TikTok, which has sky-rocketed in popularity, is one of the latest social media platforms advertisers are be curious about. The platform has grown tremendously over the past year with about 689 million monthly users. (1) The explosion of growth parallels the increase in video ad spend year over year. With such large growth, TikTok is attracting millions of users, and advertisers are watching closely to understand how they can reach this audience.

TikTok Ad Offerings

Basic Advertising Information

Before considering whether TikTok would be an effective addition to a brand’s marketing mix, it’s important to understand what exactly the platform offers. When creating ads on TikTok, an advertiser will set a campaign objective, a target audience, a budget, and a bid strategy, similar to many other social apps. Target audiences can be selected using age, gender, location, and interest. The platform also enables a brand to create lookalike and custom audiences.

TikTok Ads Manager allows advertisers to track campaigns with performance metrics such as cost, impressions, clicks, conversions, and more. TikTok uses a tracking pixel to follow the steps taken by a website visitor to better observe ad performance.

Ad Formats

There are five different ad formats offered by TikTok:

  • In-Feed Ads: Five to 15-second long videos that appear throughout the “For You Page” between user videos. Once can use multiple call-to-actions here. These can be skipped by the user pretty quickly, so the ads should be attention-grabbing.
  • Brand Takeover: These ads show up first and are full-screen as soon as the app is opened. This ad placement is exclusive – only one advertiser can take up this spot in each category per day. Although this ad format is more costly, it is one of the more effective formats, given the number of views it receives without other ads competing for a users attention at the same time.
  • Topview: These are ads that show up first on a user’s feed three seconds after opening the app and can last up to 60 seconds.
  • Hashtag Challenge: Allows users to participate in a challenge centered around a campaign with a strong focus on brand awareness. They’re a great way for brands to collaborate with consumers and have fun. It may help to work with influencers to start a hashtag challenge.
  • Branded Effects: Created by TikTok’s in-house team, these effects allow brands to design filters on the app that interact with users.

Platform Growth

Audience Reach

Since the app’s U.S. launch in 2018, TikTok has exploded in popularity with about 689 million monthly active users. Since January 2021, the app has been downloaded over 2 billion times worldwide and continues to grow. (1) As of June 2020, teenagers made up 32.5% of users, while those aged 20 to 29 made up 29.5% of users. (2)

TikTok has exploded in popularity since launching in the United States. The platform has about 689 million monthly active users.

Where TikTok Is Headed

Over the past year, the platform has expanded its reach tremendously a huge win for advertisers. The rise in popularity mirrors the technological shift from desktop to mobile use among users. Alongside this trend, time spent watching videos on mobile is also increasing, whether it be on TikTok or on other apps, like Instagram.

TikTok’s demographic will likely continue to be an important target for advertisers even as its growth slows. TikTok is expected to grow rapidly in the near term and begin to slow down in 2022. A study by eMarketer explains that, within the next few years, the numbers of users on Snapchat and TikTok will be comparable. Although TikTok may not reach Instagram’s user levels, it is still predicted to be used by about 40% of social media users in the US by 2024.

(3)

Video Ad Spend Trends

Mobile video ad spend decreased in 2020 due to the pandemic. However, it is predicted that in-app video advertising in the US will make a comeback in 2021, growing by about 27.6% year over year, primarily driven by social media. (4) The upward trend in video ad spend may ease advertisers’ worries that TikTok will soon fade.

A study by eMarketer shows that most advertisers around the world are spending on both Facebook and Instagram. As pictured in the graph below, only about 34% of marketers are currently using TikTok as part of their spend mix. To capitalize on this opportunity, advertisers should enter the space as soon as possible, especially while competition for attention may be lower.

(5)

Platform Challenges

Over the last year, TikTok has faced challenges involving the collection of personal data and new direct competitors. Before advertising on any new platform, it’s important to understand what’s going on behind the fun – data collection practices and privacy policies can result in lasting changes to the fundamental structure and function of an app.

Competitors

Instagram Reels is the closest platform to TikTok. Reels were added to Instagram after TikTok launched, and both platforms feature user-created short videos. At the moment, Reels does not offer any ad formats. Influencers can post sponsored, user-generated content, but brands cannot create campaigns and ads nor boost their content. There may be plans in the future for Reels to offer official advertising to brands. TikTok has deemed Reels a direct competitor.

For now, TikTok is unique in the space, dominating market share. If Reels releases an advertising option, it will be interesting to monitor whether there’s a shift from TikTok advertising to Reels, as Instagram has a larger user base. Keeping up to date on Reels will help advertisers remain proactive in where their dollars are best spent.

Legal Battles

In 2020, TikTok faced several lawsuits alleging that the app stored personal data from its users without consent and shared it with third-parties. Even information from facial recognition technology was claimed to have been collected. In early 2021, TikTok agreed to pay $92 million to settle these lawsuits. Under the proposed terms of the settlement, TikTok also agreed to stop collecting data based on a person’s physical features and location. It was also agreed upon that the app would not send personal data overseas to third-parties. As privacy becomes a global and widespread concern, advertisers on social media should plan to stay closely connected and ensure they understand how a customer’s data is used for each platform.

Advertising Success Stories

Guess #InMyDenim Hashtag Challenge

Guess, the clothing brand, used a Hashtag Challenge and Brand Takeover to market a new denim collection to drive awareness and increase brand recognition. Guess launched the #InMyDenim Hashtag Challenge to encourage users to style their denim in a video. On the first day of the launch, Guess also did a Brand Takeover ad to increase awareness of their Hashtag Challenge. Guess worked with influencers on the platform to promote the Hashtag Challenge. As a result, the #InMyDenim challenge produced 5,550 user-generated videos and a 14.3% engagement rate, and the Brand Takeover saw a CTR of 16.5%. (6)

Thoughts

Before leaping to TikTok advertising, a brand must consider its objective. TikTok advertising is proving to be very successful for brands trying to increase awareness and recognition, but there aren’t as many campaign success stories in driving lead generation or increased revenue. Large brands have also entered the space with more ease, due to their larger budgets. Larger brands may experience more success at the moment, but any brand has the opportunity to test and learn.

TikTok advertising is proving to be very successful for brands trying to increase awareness and recognition, but there aren’t as many campaign success stories in driving lead generation or increased revenue just yet.

Tips for TikTok Advertising

It’s no doubt this platform has the potential to increase brand awareness and recognition the question is whether it’s right for a certain brand. KLIK put together a few tips for brands and advertisers considering entering the space:

  • Consider the objective. Brands looking to increase awareness and recognition are likely going to be in the best position to reach their goals.
  • Narrow your audience. Since 62% of users are under age 29, brands will have more success if their customer-base is in the Gen Z age range.
  • Look at trending content on the Discover Page. This can help a brand create ads that stay relevant and keep users engaged.
  • Create video content as if it were a TikTok. Advertising on this platform should not be like a regular commercial ad. Make it fun and engaging to match TikTok’s feel.
  • Start small with in-feed ads, especially if you’re limited on budget. In-feed is the most cost-effective option, and it should still drive results.
  • Brand Takeover ads are a great choice for brands with a higher budget. These offer exclusivity on an entire category within the platform. The Hashtag Challenge is also a great option to get users interacting with the brand.
  • Work with influencers to help a brand’s campaign take off quicker than it normally would. Users tend to take the word of influencers as if they were a friend.
  • Add music. This makes the video more attractive to the user and will help it blend in with organic content.
  • Use a call-to-action so users can easily navigate to a website or an app.
  • Ensure the first few seconds of the ad are attention-grabbing. TikTok ads come up in a very organic way. Users may not even notice an ad has come up right away.
  • Continue to diversify your spend mix. The platform is still relatively new with advertising, so it’s best to keep other avenues open.

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