How TikTok Is Conquering Social Media Through AI and Psychology
TikTok is a social media app that disrupted the world of social media over the past five years, experiencing aggressive growth and immense platform potential using an addictive AI algorithm. TikTok’s experience is driven by AI. AI is not just part of the software. It drives the whole user experience, almost attempting to eradicate free will from the user browsing through the app.
Artificial intelligence is a powerful competitive advantage for ByteDance (TikTok’s parent company). Such a competitive advantage—if properly exploited—opens the doors to vertical growth potential in other tech markets, making TikTok a worthy rival of other social media giants like Facebook. The rise of Web3 and a new era for the digital paradigm are valuable opportunities for the tech colossus to expand its reach and shape the digital world as we know it.
Understanding the current power and future potential of TikTok requires stepping back and comprehending the socioeconomic forces shaping social media platforms and the companies behind them: the network effect and zero marginal cost. Digital network effects are what social media platforms and SAAS software have been leveraging for impressive growth over the past decade. A network effect is a psychosocial phenomenon for which when a user begins using an app (e.g., TikTok), he/she becomes a “champion” for it, promoting it to his/her circles of friends and families, and hence producing an exponential cascading effect.
Zero marginal cost refers to the lack of costs in acquiring new users. Software is scalable with zero marginal cost. TikTok’s fundamental costs don’t vary whether they have 1,000 or 1,000,000 users. The fundamental software, if properly and scalable, remains the same.
TikTok gains users through network effects and pioneering societal trends. The firm has zero marginal costs because it is based on software and AI. Acquiring new users doesn’t cost anything. Network effects are driven by society. You are part of a society and multiple groups nested within that society. You are a component of the network effect.
Any user can be a creator on TikTok. Creators pioneer trends and diffuse them. In the app’s home feed, videos play automatically, and their duration is a maximum of 60 seconds (this is changing now). The app also has a “Discover” section where the AI algorithm suggests content and creators like the ones you already follow. Videos are played automatically, leaving little control over what to watch and at what pace.
Advertisements are the main source of revenue for TikTok. They are placed in between videos and targeted accurately thanks to the very advanced AI algorithm. By collecting and employing user behavior to suggest content and targeted ads, TikTok has access to a wide pool of users’ data. This is only one of the main competitive advantages of TikTok in the social media and tech ecosystems. Other competitive advantages include:
AI is not just part of the experience in the app. It is the fundamental component of it. While competitors such as YouTube, Facebook, Instagram, Netflix make use of AI to recommend content to consume, TikTok unleashes the power of AI to leave no choice to the user but to consume the recommended content—or skip through it.
TikTok is the place where trends concerning GEN-Z and younger generations are born and spread thanks to the huge network effect.
TikTok does not leave a choice of consumption to users (to some extent—users can skip through videos, but doing so provides hints to the algorithm, hence closing the gap until arriving at an almost perfect match between your interests and what you are recommended). No choice means more time spent on the app, more data collected, and more ads shown to the user.
Those competitive advantages make TikTok uniquely placed in the social media space. TikTok has fundamentally set up a more powerful, accurate AI algorithm, which represents an incremental—but significant—improvement in technology. Some could argue that TikTok is a transformational disruption in the way of doing digital business. To explore such an argument, we first need to define “disruption” philosophically and practically. According to Schumpeter, creative destruction describes the "process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one."
In digital technology, “disruption” can be defined as the introduction of a novel, unprecedented technology that changes the order of things. Unprecedented technology is one that had never been used before by any other digital platform. The introduction of Facebook was a disruptive technology. It pioneered the use of AI and machine learning algorithms to foster network effects. The “order of things” is the status quo of performing an activity. In the introduction of Facebook, social connections and interactions were disrupted through the use of new technology—the internet—to shape the way we would interact, from any part of the world, for free.
TikTok is an incremental disruption because it did not reinvent the wheels, to a fundamental extent. The format of the content on TikTok is video, similar to YouTube. The AI algorithm suggests content similar to the one you consume, a feature pioneered by YouTube, Facebook, or Instagram. But the intensity and use of such AI algorithms are different, incrementally much more prominent.
TikTok is also facing challenges that can endanger its existence. One such challenge is product innovation and future growth. There is danger in complacency, especially in social media and tech. TikTok can expand into other emerging markets and unleash the potential of its unmatched AI algorithms, or fade away in some years, when some competitors may have developed the next TikTok, but more powerful.
Innovating is a challenge about the potential of expansion for TikTok, how to deal with complacency, and “echo chambers”, which could wreak havoc on the company’s empire that has just started. By leveraging AI so powerfully to recommend user content similar to the ones they watch most, TikTok may risk ending up in the same position as Facebook in the past couple of years, where fake news and groupthink have turned the platform upside down and made its CEO, Mark Zuckerberg, a criticized public figure by a significant percentage of the population in the USA.
TikTok can become a marketplace where creators directly sell their products and NFTs. In the Web3 advent, tech companies are setting themselves up for expansion and taking market share in the new internet. TikTok merges creativity, entrepreneurial spirit, and addictive AI algorithms to make consumers stick. Through a natively integrated e-commerce space for NFTs (and non-NFT products) creators could be able to sell the by-product of their creativity and business savviness directly on TikTok, hence increasing their monetization potential and remaining loyal to the platform. If creators stay loyal, so will consumers. And the network effect continues.
Such a strategy could take less than one year to get right. Other social media giants like Facebook already implemented marketplace models in the West, which could make the learning curve of TikTok less steep. For Facebook, it took about two years to set up and iterate on their marketplace (although the idea came much earlier).
TikTok is here to stay. Their unconditional use of artificial intelligence algorithms is currently unmatched in the market, but having a first mover’s advantage is not always positive. When you are a first mover, there is a significant learning curve and economies of learning. Late entrants can cut through those obstructions. TikTok is taking advantage of network effects and zero marginal costs to scale aggressively and take on the entire social media ecosystem. But in such a high-change sector, uncertainty and lack of innovation may result in a loss of market share and touch with the consumers. That is the main challenge for TikTok. A challenge that requires attention to detail and staying in touch with social media and tech trends. TikTok is AI, and AI is the future of technology. By leveraging their competitive advantages tactfully, TikTok may become, after all, the new Facebook.
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