TikTok: why the design of their business model is both a success and a threat.

Blog.

They are the new kid on the block in the land of social media. We have been researching the business model of TikTok and see several reasons for its sensational worldwide success. Yet, the strengths of their business model design seem to have a flip side of the coin. Its algorithm has been designed to drive intense user engagement, but not to facilitate a safe environment.  

Facebook and Meta founder Mark Zuckerberg might regularly wake up at night. Maybe even bathed in sweat, regretting that he did not create TikTok. In his rear-view mirror, he sees the Chinese social media platform getting closer and closer. It’s true, Facebook, WhatsApp and Instagram are still ahead in terms of total numbers. But what worries him most, is seeing so many users spending more time on TikTok, as well as new users going straight to the Chinese social media platform. It causes headaches at the Meta headquarters in Silicon Valley.


A super sticky platform.

The Chinese company ByteDance bought musical.ly, Inc in November 2017. They combined it with their own app TikTok into a single app that launched in August 2018 under the name TikTok. Every second, 8 new people join TikTok. The social media platform now has about 1 billion active users per month.


The numbers make you realize: TikTok is not just a one in a dozen platform, it is a super sticky one. But how come? Read on for the core strengths that makes both users and creators hooked in their model.


To inspire creativity and bring joy.

Let’s first take a closer look at the mission that TikTok has articulated: ‘TikTok is the leading destination for short-form mobile video. Our mission is to inspire creativity and bring joy.‘ They claim to be passionate about earning the trust of their community and strive to build responsibly, equitably, and openly. The most important factor in this formulation lies in the word ‘creativity’. TikTok facilitates people to be as creative as they want to be and does so in an extremely accessible way. The core building block? Artificial intelligence. Parent company ByteDance is an AI company in the core.


Self-learning platform that creates a circle of looking and swiping.

While Facebook initially was designed by looking at demographic factors, the algorithms of TikTok have been designed to respond to behavior as the underlying principle. It’s a platform that keeps getting smarter and it does so at an insane speed. As a new user, you choose some areas of interest and after that the game is on. You spend most of your time in the central ‘For You Feed’, to discover new content in a very low threshold way. The AI keeps track of how long you watch, where you click, what you share, which content you create and when you drop out. It uses that information to tailor the content completely to your wishes, getting you caught up in a circle of looking and swiping.


But here we see something that strikes us. Clearly, TikTok is able to build tech that gets their community hooked in their model. On the other hand, they have not succeeded in creating a safe and inclusive place for their users. We will discuss this alarming combination in a moment.

TikTok Business Model Canvas


TikTok sets the tone...

TikTok sets the tone for other (social) media. Stimulated by a clever trick: sharing content is easier than with other social media platforms. It is therefore not surprising that more videos from TikTok go to Instagram and SnapChat, for example, than the other way around. This means they determine what content goes viral or what songs are in the top 40. TikTok is even transforming the way we teach Gen Z. By understanding and facilitating the way this generation engages with content, they designed and positioned their app as the go-to platform for education.


...and makes business, consumers and society flourish.

TikTok knows how to convert this intensive platform usage into various value streams for business and influencers. However, because of TikTok, monetizing social media isn’t just for established influencers anymore.

TikTok Coins enables users to give virtual gifts to content creators, to express their appreciation. This creates a new direct relationship that makes the community engage even stronger; co-creating in a way. The platform empowers ‘regular’ consumers to participate in the growing social commerce market by lowering the thresholds, facilitating creative monetization frameworks, and providing education on how to do this. Users buy virtual Coins and creators can withdraw them for money again, of which TikTok benefits as well. Brands can come in here by partnering up with these newly minted creators.

But the platform also facilitates organizations that want to make a positive impact on society. Their program offers nonprofits accessible solutions to target the right audiences, make them engage in creative ways and receive donations easily. TikTok makes it fun and viral. And they even increase donations themselves by rewarding engagement actions.


TikTok followed with suspicion.

Despite its huge global success and ambitions to do good, we see dangers emerging in TikTok’s business model. Not only do various countries have serious concerns about the influence of the Chinese government in data handling, as we can see in multiple ban attempts from politicians. Even more remarkable is the design and focus of the algorithms and morals that ByteDance uses to moderate content. There is, for example, little room for inclusivity. It is stated that TikTok is deliberately not showing all kinds of content under pressure from their Chinese headquarters. Fat people, certain minorities and bare bellies, for example, were not done. Discrimination and exclusion therefore laid foundation in the algorithms, while influences of pornography, fraudulent ads, conspiracy theories and propaganda relatively got free way. As a result, TikTok now has to pay the consequences and invest most of their money in Trust & Safety teams to try and turn the tides, whilst their moderators are reporting mental health problems as a result of the big pressure.


A safe and inclusive environment by design.

Social media is never a 100% safe place, bad intentions can’t be banned. But we see it like this: ByteDance is an AI-driven company. Their clever minds have designed to bring joy and creativity. And they managed to do so quite well, building a model that gets the community intensely engaged and hooked in personalized content loops. Their accessible frameworks, their self-learning algorithm and the direct relationships in the community make TikTok a one-of-a-kind platform. But the building blocks for their success show a flipside. One that harms the engaged community members in a fast pace once they fall into the wrong loop.


We know that, with digital solutions, success is always about more than just tech. It’s the combination of the technology and the focus of the people that build it. This makes us wonder – has TikTok been designed by the right combination of tech and people? Have they had the right priorities before scaling up, or have the platform’s algorithms been trained incorrectly since the beginning?


The right focus is essential to build a solid base before scaling up your business. Designing to facilitate a safe place requires time, but even more so the right focus and the right morals. In the case of TikTok, this approach of design would have undoubtedly made their business model even more robust and sustainable. Not only for global success but even for positive social impact on its community.

Are you ready to continue your explorative journey from a social media platform to a fully immersive world?

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Michiel Hoogenboom
Business designer Amsterdam

Michiel Hoogenboom

Technology addict, energetic people connector,  strategic smartass, balancing body & mind, leading by example, team player, mastering the infinity game, quality time with family & friends, Rotterdam & Türkiye, getting shit done. 

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