If you use any social media, it’s impossible not to have come across a TikTok video. Whether it is about gaming, cooking, or financial advice, creators from all niches find it a good platform for building their audience.
With several lockdowns in place during the pandemic, TikTok has raised its downloads among users in North America and Europe. Everyone was staying at home filming challenges, dance routines, and comedy videos.
TikTok is a video-sharing app that was released in 2016 but gained massive popularity quickly. Surpassing the more than 15-year-old social media apps like Facebook and Instagram during the last 2 years, TikTok draw investors’ attention.
ByteDance is a privately owned company that owns TikTok and its Chinese version Douyin. During Trump’s last year in office, there were doubts about the app’s algorithm and its correlation to spyware technologies. This sparked rumors of the USA banning the app and obligating the company to go public with 20% American ownership.
Ultimately, this plan didn’t go through, with ByteDance challenging the decision in court and Biden’s administration taking over. ByteDance is expected to go public eventually, and you can prepare and research if it’s worth it to invest in this company until then.
Who Owns TikTok?
ByteDance is a Beijing-based company founded in 2012 and owned by Zhang Yiming. The company is legally domiciled in the Cayman Islands.
In 2016 they found Douyin, and in 2018 they made the worldwide version of this app- TikTok. Initially, they merged it with the US app Musical.ly, which ByteDance later purchased for $1 billion. In the first quarter of 2021, TikTok reached 800 million daily active users.
ByteDance’s owner is an entrepreneur and the 9th richest person in China today due to the massive success of his company and the portfolio of apps they hold. His net worth is estimated at $35.7 billion. The company’s net worth is estimated at $180 billion, while its value for private-equity investors is around $400 billion.
Last year they got Disney’s executive Kevin Mayer to leave the entertainment mogul and become the new CEO. TikTok was on the fast track to replace Snapchat and Instagram and be the number one app for advertisers reaching millions of people.
The US Ban On TikTok
But the road to success wasn’t and still isn’t smooth for ByteDance. In the summer of 2020, Trump’s administration suggested a ban on TikTok, claiming they were using Chinese spyware software. Their new CEO quit under US pressure. ByteDance sued the federal government.
In September, ByteDance tried to calm the security concerns and made a tentative deal – to make an initial public offering for a US subsidiary called TikTok Global. ByteDance would keep 80% ownership, and Oracle and Walmart would own 20%. Oracle would own 12,5% while Walmart would have owned 7,5%. The board would have been predominantly American, with 1 out of 5 members being the ByteDance founder, Zhang Yiming.
This deal never came to life, primarily because Trump demanded that the US companies have complete control over the app. ByteDance denied that and withdrew themselves from the proposal. With the change in administration after the US elections, the government put the banning process on pause. Under Biden’s administration, TikTok saw a 33% increase by the end of the year after a steady decline.
ByteDance is still not out in the safe, but it gained breathing room and continues to set trends, drive in new users and advertisers.
How To Buy TikTok Stock
As of April 2021, TikTok is still under full ownership of ByteDance, a privately owned company.
Speculations of ByteDance going public soon persist since 2019. Investors are eagerly awaiting an IPO in 2021. The alleged 2020 IPO was valued at $75 billion, which can only mean that the 2021 IPO will be higher.
Will it happen eventually? We can’t be certain. In February, ByteDance denied that they were seeking to go public on the NYSE.
According to the Wall Street Journal, a US trading firm Susquehanna owns 15% of TikTok’s parent firm – ByteDance. In the early beginnings, Susquehanna took on a big bet and invested in two of the most successful startups of ByteDance, the news aggregator Toutiao and the video-sharing app TikTok. Susquehanna joined a $5 million investing round in ByteDance in 2012. They also invested in Musical.ly that ByteDance bought in 2017 and merged with TikTok.
Susquehanna International Group LLP is an options-trading giant operating over 3 decades and avoids public exposure. The essence of their business is using computers to perform rapid-fire trades in different markets. They make thousands of small transactions a day, frequently keeping securities for fractions of a second. With ByteDance, they held their investment for years.
With 15% ownership of ByteDance, Susquehanna is the largest foreign investor. The stake is currently worth over $15 billion.
Is TikTok A Good Investment?
For now, there’s no way of investing in TikTok or its parent company ByteDance. The IPO was put on hold, but until it hits the market there is some analysis to be done.
You can follow the company’s progress and rank among the competition in China. On one hand, it’s an attractive investment as soon as it goes public, but don’t jump at the opportunity.
ByteDance is one of the most valuable startups, but it does face a lot of backlash from governments of leading economies in the world. The case of implementing a nationwide ban on it in the US is still unresolved.
America’s concern was followed by the UK, which was quieted by inviting parliament committees to visit TikTok’s offices to analyze its algorithms. India, the second country with the biggest number of users, banned TikTok completely in June 2020.
All social media platforms gather user data, but concerns over TikTok’s security are most widespread, and it can contribute to price fluctuation once it hits the market.
TikTok is a trending company in popularity, along with the likes of Stripe and Hulu (which doesn’t plan on going public anytime soon).
How Does TikTok Make Money?
The innovative way of advertising, the unique algorithm, and explosive growth are TikTok’s formula for success. And when you add 2 billion users worldwide, it’s the ideal cash cow.
The primary way of monetization is advertisements. There are different types of ads, like In-Feed ads, which appear between videos as the user scrolls; Brand Takeovers- ads that pop up once the user starts the app; Branded Hashtag Challenges that allow brands to create unique hashtags and challenges that appear in the Discovery feed. All the ads require payment.
In June of 2020, ByteDance launched TikTok for Business as a tool for brands to run their ads within the app.
FAQs
What Is TikTok?
TikTok is a video-sharing, lipsynching app where users can record and post videos as long as 60seconds. The platform’s broad spectrum covers everything from talent, comedy, sports, fashion to financial advice and food recipes.
Why Is TikTok So Popular?
TikTok’s popularity is due to the diversity of niches it gathers, the dance and prank challenges, the ability to lipsynch or make a duet of a video preciously uploaded by another user.
How Does Instagram Reels Compare To TikTok?
Instagram introduced a new feature called Reels, essentially a clone of TikTok, at the time of the ban threat. It features the same options as TikTok, plus the well-known Instagram stickers.
Does The Chinese Government Own TikTok?
No, TikTok is fully owned by ByteDance.
Who is the CEO of TikTok?
Vanessa Pappas in the current CEO of TikTok as of August 2020.
Is There A Stock Associated With TikTok?
ByteDance still owns TikTok, and it hasn’t gone public, so there’s no stock associated with it.
How To Buy TikTok Stock When It Goes Public?
If you plan on buying TikTok stock once it goes public, contact a broker, open a brokerage account, and wire funds. Once the IPO occurs, all you will have to do is go online and buy the number of shares you want.
Final Thoughts
Investing in social media startups is very popular, but you must do it with a cold head. We’re witnessing the success of TikTok, Twitter, Facebook, Instagram, and Snapchat, but there are thousands of failed ones along the way. Remember Vine, another video-sharing platform? It was a success, but the owners made a wrong move, sold it to Twitter, thinking it would attract more users and generate more profit. It was an unfortunate combination, advertisers took off, and Twitter shut it down.
Buying stock in an already successful social media outlet is smart but not a safe long-term investment. With security regulations changing and the lack of control over international apps’ algorithms, you need to stay on top of all the news and act fast with your investments.
Investors are not so keen on social media investments because Facebook, as one of the largest platforms, generates a lot of profit without paying any dividends to its shareholders.
Would you consider investing in TikTok once it goes public? Are social media investments your cup of tea?
