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What if TikTok really just wants to sell you stuff?

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Once again, very serious people are talking very seriously about the geopolitical threat posed by dance skits.

Washington is moving towards the TikTok ban first attempted by then-president Donald Trump in 2020, with Marco Rubio among the sponsors of a new bill. The Senate this week voted unanimously to ban federal employees from using the video sharing app. And FBI director Christopher Ray has been popping up everywhere recently to warn about American eyeballs being captured by a Chinese government “that doesn’t share our values.”

For the moment, the threat can look hypothetical. There’s lots to read out there already about TikTok’s data hygiene, security and political leanings — nearly all of which points to it being an app built to share and view silly little videos. The FT’s Richard Waters sketches the scene:

On the one hand, it has been easy to dismiss the information TikTok collects as beneath the interest of a foreign government: After all, who cares if Beijing knows you’ve been watching videos of dancing teenagers? Also, a lack of federal privacy rules in the US means that plenty of personal information about US citizens is already widely available through data brokers, who are perfectly free to sell to foreign buyers.

Yet TikTok still has a vast trove of potentially valuable information, including location and device data. Its growing influence will only add to the amount of information it collects in future. The company has proposed ways of walling off this data in facilities that can only be accessed by employees in the US, in order to prevent it leaking to China. But it will be hard to convince US politicians that the company’s Chinese ownership will not leave it exposed to pressure from Beijing that overrides any deal with Washington.

A second concern surrounds the potential for TikTok’s recommendation algorithm to be used to manipulate content being shown to Americans — making it, as FBI director Wray put it, a potential tool of foreign influence operations.

Often missing from the debate is Douyin, which is what owner ByteDance calls TikTok in its domestic market. Douyin and TikTok are pretty much identical in terms of mechanic and audience (predominantly young, female by a narrow majority, and relatively affluent).

Where the apps look very different is around shopping. Since launching a native store in May 2018 Douyin has grown to become China’s fourth-biggest ecommerce company by gross merchandise value or GMV; only Alibaba, JD.com and Pinduoduo owner PDD are bigger:

Short-form video bombardment has been particularly good for selling stuff the viewer didn’t previously think to want, a strategy known in China as “zhongcao” or planting grass. Of every 100 videos Douyin delivers, roughly 5 to 10 will have a “buy this!” link in the corner that nearly always takes the viewer to an in-app shopfront.

Instagram, Twitter, Snapchat and YouTube all have been adding very similar shopping features in their efforts to be more TikTok. But advertisers proved hard to convince and power users were hostile, which showed through in some weak Q3 results from the US internet stocks.

Low conversion rates on adverts have been blamed on KYC algorithms that aren’t as refined and/or invasive as those used by TikTok, whose owner doesn’t make money either. These industry-wide struggles in combination with ByteDance’s apparently reckless cash burn have helped foment the idea that China’s global promotion of short-form video must have an ulterior motive.

But there’s something else going on too. What’s not widely understood outside China is that Douyin doesn’t push adverts, it pushes adverts for adverts.

China’s ecommerce boom in the pandemic years has been built on infomercials, not blipverts. Taobao was the pioneer, launching shopping-channel style livestreaming in 2016, but all its main competitors were copying and refining the idea when lockdowns arrived. Barclays tries to explain the appeal:

Compared to web-based ecommerce which lacks personalised experiences, livestreaming ecommerce fosters more interactivity and thus humanises and even gamifies the shopping experience. During a typical livestreaming session, retailers, influencers, or celebrities would promote and sell products with some try-on demonstrations while viewers chat with each other as well as the hosts in real time. Further, these livestreaming sessions often feature professional filming, bombastic sound effects, frantic countdowns, and limited flash sales — all hosted by fast-talking and charismatic hosts creating a sense of urgency among those watching to click the button and make purchases. As a result, online shoppers who grew tired of simply scrolling and clicking on websites are attracted by this immersive and entertaining way of shopping.

Very short videos proved ideal as bait for very long adverts that delivered much higher purchase conversion rates. Douyin grew almost overnight into China’s biggest livestream marketeer:

That’s what makes it a big deal domestically. Roughly 18 per cent of China’s retail ecommerce sales in 2021 happened via livestreams, or about CNY2.4tn by gross merchandise value, according to Qianzhan Industrial Research Institute data. Statista estimates that about two-thirds of Chinese internet users, 700mn people, were by the end of 2021 spending part of their days watching long-form ads.

Bloomberg filmed a sanitised look at the livestream industry in 2021, though the reality on the ground seems rather sparkier — at least judging by the 18 point code of conduct Beijing introduced in June. It requests anchors have a “correct political direction” and “outlook on life”, and that they “consciously reject vulgarity, kitsch and other low-level tastes, deformed aesthetics, fandom chaos, money worship and other undesirable phenomena.” Bling, self harm and vomiting are banned specifically, alongside blanket warnings about anything that might deny, outrage or belittle socialist ideals.

Tighter regulation is one threat to industry growth, albeit one not yet visible in the numbers. Barclays again:

As of June 2022, nearly 90% of Douyin’s users have watched livestreaming content, on average spending roughly 20 minutes on ecommerce related content (~40 minutes on livestreaming) every day. [ . . .] Although Douyin didn’t disclose a specific GMV figure, Wei Wenwen, President of Douyin e-commerce, announced that the platform’s GMV surged +320% yoy, and that more than 10 billion products were sold in the year ending in April 2022 (1 year after the concept of interest-based ecommerce was first introduced). Compared to April 2021, the cumulative number of short-form videos with shopping links increased by +31% yoy, and the number of orders placed during livestreaming e-commerce sessions increased by +112% yoy.

But since sitting at home watching advertorials is typical lockdown behaviour, China’s recent experience might not be replicable elsewhere. It’s worth noting, for example, that one of the biggest livestream marketing stars is the singer Liu Genghong, who has sold millions of yoga mats and dumbbells off the back of nightly exercise routines with his wife. Google Trends data for the UK’s equivalent pandemic keep-fit celebrity, Joe Wicks, tells a cautionary tale in terms of the durability of the business:

Nonetheless, a recent hiring spree suggests ByteDance is confident that livestream shopping can be rolled out in some form to reach TikTok’s 1bn monthly active users. In-app shopfronts have already been piloted in the UK (unsuccessfully) and South-East Asia. US and Brazil will be added to the experiment within the next few months, according to reports, with trials already running for selected retailers.

So does TikTok deserve its reputation as a Trojan horse app? Probably. But to what end? Has the app been rolled out worldwide to create a clandestine state-subsidised global propaganda and surveillance network? Or is its ultimate aim to digitise and globalise the home shopping channel? Disappointingly for fans of statecraft, most of the evidence right now seems to point to the latter.

It’s normal for companies with saturated home markets and weaker revenue tailwinds to hunt for growth by replicating internationally what works at home. In that context, everything that ByteDance has been doing looks normal. But to lawmakers in the US, the birthplace of the infomercial and the spiritual home of home shopping, ByteDance never seems able to be considered normal.

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