TIKTOK’S IPO: Analysing the Possible Initiative

About TikTok

TikTok is a short video content creation and social networking service and platform catered to serve users with an easy interface to create and share content. It was developed originally for lip-synching and dancing videos. Tiktok is a company owned by its parent company ByteDance. ByteDance is a Chinese Company. TikTok includes videos from various genres, including entertainment, Tricks, stunts, dance, and memes or jokes.

Speculations regarding TikTok’s IPO

There have been initiations regarding the release of TikTok’s IPO to the public in The U.S. The IPO would be separate from the IPO of ByteDance. If it happens then, it would be very profitable for ByteDance because the separation would be very profitable for the parent company in the long term. However, as the U.S. saw the chances of TikTok getting the ban sentence under President Trump, the execution was far from the statement.

Now, under the presidency of Joe Biden, that change is unlikely to happen as there is no official confirmation regarding the ban of Tiktok. Therefore, chances are TikTok would persist in being prevalent in the U.S. among the young audience for a very long time. Byte Dance is one of the biggest private tech companies, and they expect TikTok to raise a lot of capital to fund its parent company in its global business strategy.

The problem with the release of the TikTok IPO is that it has its Chinese version Douyin. TikTok is the international version of Douyin. The difference between TikTok and Douyin is that the content provided by each of the platforms is separate. Douyin and TikTok cannot access each other’s content as the servers are kept separate for different versions for their respective market segments. According to the U.S. and Chinese regulatory authority exchanges, there needs to be operational separation for both the companies for TikTok to avail entry into the stock exchanges.

TikTok’s Valuation

Tiktok is valued at around $50 billion by investors. Investors are trying to get its parent company ByteDance to separate it from TikTok and bid high. ByteDance’s valuation rose from $200 billion to $400 billion. Trading on TikTok IPO would be the same as any other share listed on the stock exchange by using any trading platform and starting trading.

The parent company ByteDance owns Douyin, TikTok, Jinri Toutia (news aggregator), Helo, and many other applications. The company claims these applications as a very easy-to-use interface to connect and consume video content, the headquarters based for all these applications in Beijing (China).

TikTok’s Money Making Strategy

TikTok makes money from its advertisement revenue by allowing businesses to promote their offers and brands on their platform. The advertisements that run inside TikTok are in-feed promotions and brand takeover advertisements. Brand takeover appears when a user opens the app. Branded hashtags are another way TikTok makes money as the companies are willing to pay to appear on the discover feeds of people.

Competitors

TikTok’s competitor includes Clash, Triller, Lomotif, Instagram, Cheez, Vigo Video, Dubsmash, KWAI, Firework, and VideoShow. Instagram reels being a very harsh competition to TikTok. With TikTok’s analyzed success, Instagram rolled out its new reels feature.

Revenues

As per sources, as of Nov 2021, Tiktok revenues surged from $63 million in 2017, $150 million in 2018, $350 million in 2019, and a massive gain of $ 1.9 billion in 2020, and it was a 457% increase year-on-year. From official sources, Tiktok has been downloaded three billion times and accessed by almost 600 million users in China alone. TikTok’s cumulative download records showed that in the year 2017, it had 130 million users; for 2018, it was 750 million users, for 2019 being 1.5 billion users and 2.6 billion users for the year 2020.

ByteDance had a revenue goal of $34.3 billion for the year 2020. ByteDance, however, posted an operating loss of about $ 2.1 Billion in 2020. It has 1.9 Billion active monthly users accumulating from all of its platforms. The company’s gross profit was around $19 billion, and the sources could not fulfill much financial information as the company declined to disclose any comments related to their financials. TikTok has a fair global dominance, and the fact that it acquired Musical.ly for $ 1 Billion backs it up to be a popular video content creation platform.

Business Model

TikTok’s business model is quite simple. It operates as a merger feature of Instagram, Facebook, and Youtube. It uses a powerful artificial intelligence technology to acquire user data and refine user feed to increase user engagement. The app can use the machine learning algorithm to enhance and boost engagement with audiences of all genres and provide targetted content to maximize content consumption.

Threats to TikTok

Tiktok had to consider the various regulations imposed on different countries, such as India, regarding the content it would feed the audience. Still, following its ban, it reduced its employees in the country and avoided certain losses. A piece of terrible news for TikTok to succeed internationally and India played a significant part in fueling more revenue.

According to sources from the global consumption of TikTok content, a considerable chunk was from the Indian audience. Outside of China, the second-largest market of TikTok was from India, with about 190 million users.

TikTok’s IPO Release Signals

The TikTok IPO was being pushed back with Trump’s threat in the U.S. TikTok had to deal with getting caught of data security issues and illegal collection of personal data. ByteDance had to rectify these issues by China’s cyberspace administration.

ByteDance expects to roll out TikTok’s IPO despite facing all the hurdles. The capital raised from TikTok will go massive in the long run.

According to sources, it can be a good indication that TikTok is gearing up to launch its IPO. It hired Shou Zi, a former executive of Xiaomi company, as the new chief financial officer.