17 Oct

TikTok and Facebook: Rivalry Continues to Escalate

WRITTEN BY Ruchi Gupta

TikTok is poaching Facebook’s (FB) employees, according to a CNBC report. As a result, the rivalry between the two social media businesses continues to escalate. TikTok, owned by Chinese company ByteDance, operates a platform for sharing mainly song-based video clips designed to humor viewers.

TikTok offers fatter paychecks

The CNBC report stated that TikTok has hired more than two dozen former Facebook employees since 2018. The company lures Facebook’s employees with fatter paychecks. Facebook relies on its employees to power its innovation, which helps it stay competitive in the constantly changing technology market. Therefore, we think that losing employees, especially to a fierce rival like TikTok, isn’t a great development for the platform. Also, the talent drain comes at a time when Facebook is struggling to attract top employees. Graduates from the top US universities have been shunning Facebook’s job offers. Read Why Is Facebook Struggling to Attract New Talent? to learn more.

TikTok’s app downloads have been surging. The company has become a huge threat to Facebook and Google. Facebook CEO Mark Zuckerberg admitted to employees during an internal meeting in July that the social media video app is doing well. He stated that the video app might be bigger than Facebook’s Instagram in India—a key international market for technology companies.

Facebook and Google want to counter TikTok

Like Facebook and Google (GOOGL), TikTok also monetizes its audience through advertising. Advertising is Facebook and Google’s main revenue source. To learn more, read Warren and Biden Attack Facebook’s Most Successful Business. Notably, advertising contributed 99% of Facebook’s total revenues in the second quarter. Advertising sales accounted for 84% of Google parent Alphabet’s total revenues in the second quarter.

To counter the threat, Google might acquire Firework, which operates a video app similar to TikTok.

Facebook has drawn a multipronged response to the video app threat. First, the company thinks that its Explore tab on Instagram can compete with TikTok. Facebook created a more direct competitor to the app called “Lasso,” which it launched about a year ago.

During Facebook’s internal meeting in July, Zuckerberg also laid out the company’s strategy to counter TikTok. Facebook will first launch its TikTok competitors in a market where TikTok isn’t big. Then, Facebook plans to compete with TikTok in markets where it’s already big.

TikTok will run out of steam sooner or later

Although TikTok is growing rapidly, Facebook thinks that the company’s current success is mainly backed by heavy advertising. Zuckerberg told Facebook employees that ByteDance is spending a huge amount of money to promote TikTok. As a result, Facebook thinks that TikTok’s rapid growth will fizzle out when ByteDance stops promoting the product aggressively. Early this year, ByteDance raised $3.0 billion to fund its development, which we think includes investing in products like TikTok.

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