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Chinese company Byte Dance’s short-video app, TikTok is going through a series of troubles in its global operations making the future looking troubled. Recently, Indonesia has banned e-commerce transactions on social media platforms to regulate fair trade practices, online and offline. The nation has issued an ultimatum to TikTok to become a standalone app, devoid of any e-commerce feature or shut operations. Moreover, Indonesia alleges that TikTok has been involved in predatory pricing causing damages to local small- and medium-sized businesses.
It is noteworthy that the video-streaming app is already being scrutinised by US lawmakers amid concerns over the company’s ownership structure and ties to China. A number of countries in North America, Europe, and Asia-Pacific have also banned the popular video-sharing app TikTok between 2020-2023 amid increasing concerns over privacy and cybersecurity.
Importance of Indonesia to TikTok
With 125 million users, Indonesia is the largest Southeast Asian market and the second-largest global market after the US for TikTok. Evidently, the ban on e-commerce in Indonesia is likely to impact TikTok’s revenue to a great extent.
Originally, Indonesia’s e-commerce market was dominated by platforms like Tokopedia, Shopee, and Lazada. However, TikTok Shop launched in 2021 gained a significant market share rapidly. In 2022, Indonesia represented 42% of TikTok’s $4.4 bn regional gross merchandise value (GMV). Reports suggest that TikTok Shop was recently on the verge of handling more than $6 bn worth of transactions in Indonesia in 2023. This is more than a third of the entire Southeast Asian e-commerce.
Uncertain future in the US, banned from government phones in the UK
TikTok faces a difficult year ahead in the United States as anti-China Republicans demand tighter scrutiny of the video-sharing app. The US alleges that the app downloaded by a massive number of young people in the US can be used for spying or propaganda by the Chinese Communist Party. But now President Joe Biden last week signed a new law that bans the use of TikTok on government-issued devices. In turn, the short-video app has promised to spend $1.5 bn on a program to protect its US user data and content from the influence of the Chinese government.
In June 2023, Britain also banned the Chinese-owned video-sharing app from the mobile phones of ministers’ and civil servants, bringing the UK in accordance with the US and the European Commission and reflecting deteriorating relations with Beijing.
TikTok future: Shift to music streaming, video games?
Global revenue share is critical for TikTok. With 113 million and 84.1 million active TikTok users aged 18 years and above, Indonesia and Brazil are TikTok’s second and third-largest markets, after the US, reports Datareportal. Meanwhile, Mexico is TikTok’s fourth-largest market with 62.4 million users.
However, the TikTok shop is not the only area of expansion as per the company. “Shoppertainment is not the only destination, but it is definitely one of the main areas, especially in Asia Pacific that we are leaning heavily into,” stated Shant Oknayan, head of business across Asia Pacific, the Middle East and Africa & Eastern Europe at TikTok.
Several experts believe that TikTok could look at expanding its music streaming services in the future and turn their already large installed base of users into paid music subscribers. There are also reports that TikTok is looking to capture Asia’s increasingly competitive video game market by associating with game developers, especially independent studios, to put advertisements on its short video platform.
In terms of ad revenues from TikTok, analysts believe that the pace of growth would slow down based on the potential bans. They predict that the platform’s ad revenue will surge by 30.7% to hit $17.2 bn in 2024. By 2025, this will hit $22 bn, indicating a 28% annual increase.
