By Stuart Thomson
Digital TV Europe publisher Informa organised our first Media & Entertainment Leaders Summit (MELS) this week, with input from a number of top global media executives and data from our sister research organisation Omdia.
Omdia’s opening presentation at the event, following a keynote from Starzplay CEO Maaz Sheikh, highlighted the phenomenal growth of TikTok.
Senior director at Omdia, Maria Rua Aguete told the assembled attendees that TikTok will attract more than two thirds of online video advertising revenue by 2027, more than both Meta and YouTube combined.
Online video advertising is predicted to generate more than US$331bn in the next five years, with the short-form video hosting service taking the biggest slice of that pie.
In terms of the overall media pie, online video is predicted to take an ever-growing share of a larger whole, with the shares of pay TV and linear over-the-air TV shrinking.
While in 2017 online global media revenue amounted to US$661 billion, with online video (advertising and paid) accounting for 12 per cent, Omdia predicts that the total pie will amount to US$1.18 billion by 2027, with online video accounting for 42 per cent.
Online video revenues overtook pay TV in 2020 in terms of subscriptions, and the gap between the two will grow, with pay TV forecast to slowly decline. While pay TV today generates more revenues than SVOD or advertising, by 2027, online video advertising will account for a greater share of the overall total than either SVOD or pay TV subscription revenue.
And TikTok will lead the online video advertising pack.
Such a tectonic shift in the landscape highlights not only the shifting balance of power in social media and the phenomenal rise of TikTok, but also the limited reach of more traditional media companies in online video advertising.
TikTok itself recently leapfrogged Netflix to become the the second most popular app in the US, with only YouTube retaining the crown for under 35s viewing, again according to Omdia’s research. TikTok’s popularity with a younger demographic points to the direction of change.
There are of course a number of things that could stand in TikTok’s way – not least the hostility of the US government – but as things stand, Omdia predicts that TikTok and TikTok Douyin (the domestic version of the app) will between them net US$76 billion in online video advertising revenue by 2027.
Netflix, which has just launched its ‘Basic with Ads’ offering, is predicted to take a 2 per cent cut of the overall online video advertising pie by 2027, compared with 37 per cent for the TikTok universe. Meta and YouTube are expected to take 12 per cent each. Advertising is of course only one part of Netflix’s business model, and a relatively small part at that, but it is clear that TV-centric media companies are minnows in the expanding online video ad universe
TikTok is not of course a TV-centric app. Speaking on the introductory panel session at the Media & Entertainment Leaders Summit, head of global IP rights at TikTok/ByteDance, Yannis Ioannidis said that distributing premium content on the app could be challenging because TikTok is a mobile app, focused on short-form videos designed for mobile consumption.
TikTok has in fact also developed TV apps, notably with Samsung but also recently with Vizio and Vestel, but Ioannidis said that there were challenges. Content is the wrong format – 9:16 rather than 16:9 – and TikTok could not bring its recommendation engine to TV.
Nor does TikTok have ambitions to invest in its own content. Ioannidis said that the platform would “for the foreseeable future remain a user generated content app” although there is “space for collaboration” with content creators.
TikTok could of course evolve, and the platform is clearly of growing interest to content companies. Earlier this year TikTok extended the maximum length of videos that could be uploaded from three to 10 minutes, making it more like YouTube.
Money will inevitably follow eyeballs when it comes to online video. TikTok along with other social media platforms seem likely to capture an increasing share of overall viewing time. Whether that means they become more TV-like themselves remains to be seen.