With this piece, we’ll try to decode what makes TikTok worth more than 20 Bn dollars. Essentially try to understand the TikTok algorithm… TikTok algorithm, TikTok algorithm, TikTok algorithm
TikTok is a phenomenon that has taken the world by storm – be it for all the right and wrong reasons. But have you ever wondered what makes ByteDance’s short-form video app such a runaway success? With this piece, we’ll try to decode the two main elements that make TikTok worth more than 20 Bn dollars (as estimated by a Bloomberg Report). The app has a near 800Mn monthly active users worldwide. And if it weren’t for the ban in India, this number would’ve only exploded further.
The “content” network effect
We have all heard the term “network effect” in some or the other context. For those of you for whom the term is new – a network effect or network externalities, refers to the additional value that every new user creates for the existing network users. Would you have joined Facebook if none of your friends were already on the platform? The more friends that you have on Facebook, the more valuable is the network to you. The strength of this network for you depends on the number of connections, the strength of these connections, and the combined resources controlled by these relationships.
However, TikTok relies on what Techcrunch’s Josh Constine calls the “content” network effect. Since TikTok’s competitive strategy is largely dependent on the power of remixing existing trending videos to create new hits, every new video added to the platform makes the next video even more valuable. This combination and recombination of videos has not only created a “bottomless well” of content on the platform. But also, the added benefit of sharing TikTok watermarked videos on other social media platforms has created an all-pervasive new bite-sized video market.
The decision making Tiktok algorithm
To quote Zhang Yimimg, the billionaire founder of TikTok. TikTok’s mission was to “combine the power of AI with the growth of mobile internet to revolutionize the way people consume and receive information.”
Unlike other social media platforms that recommend content relevant to a user, based on previous preferences… TikTok’s AI algorithm takes over the decision-making process for the user through the “For You” feed. The algorithm is built based on data collected from the numerous new-age apps in ByteDance’s portfolio. By dictating content that a user views, the algorithm further customizes content by collecting every reaction, comment, new influencer followed. And finally, also the speed at which a user swipes a video away!
AI controls not only the demand side user group but also the supply side user group. All the content on TikTok is enhanced by AI. The algorithm simplifies video editing, suggests trending music, hashtags, filters, and other proven popular add-ons.
The combination of a strong content network locking in an ever-expanding userbase backed by an AI algorithm to keep users hooked are the two driving factors behind what keeps millennials with low attention spans hooked to this new style of content. And so, given the complexity that Tiktok developed, It will be some time before imitators such as Lasso, Shots, Reels are able to beat this twin-pronged formula of competitive advantage.
Owing to the short attention span of the users, the short-video platforms have come a long way. If you’re looking to read the rise of this industry, head to this link.
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