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How TikTok has undercut social media rivals with cheap ads in a battle for growth

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TikTok’s popularity has soared to new heights over the past few years. The short-form video app, downloaded by over a billion users, has recently started offering cheaper ad rates compared to its rivals. The PHA Group's Paid Social Account Director, Alice Davies explores why this may be and the impact this has had on rival social media platforms.

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The app that initially launched as a lip-syncing platform, Musical.ly, in 2014, has gradually evolved into one of the most powerful advertising platforms. The unique reach potential that the platform offers has meant a number of brands have refocused their marketing efforts on the app and they are really benefiting from this exposure. 

The reduction in advertising rates on TikTok emerged in the last quarter of 2022. Competing platforms such as Meta and Twitter saw a dramatic downturn in revenue from digital advertising, which meant brands directed their attention to TikTok ads, for its lower costs and unique engagement.

Recent data shared by New York-based advertising agency, VaynerMedia, revealed the cost of 1,000 impressions (CPM) on TikTok is 62% cheaper than Snapchat, 50% cheaper than Meta and roughly 33% cheaper than Twitter. These cheaper rates haven’t gone unnoticed by brands, with the top 1,000 advertisers in the US increasing their TikTok ad spend by 66% last quarter. 

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One of the features that gives TikTok an edge amongst its competitors is its unique feed – the ‘For You’ page. Much like Instagram’s ‘Explore’ tab, the ‘For You’ page is designed to display content that the algorithm believes will engage the viewer.

Although you have a separate ‘Following’ tab, which shows follower content, the former is far more popular to users as it’s carefully curated based on users interests. Ultimately, TikTok’s USP is the ability to reach niche audiences in every corner of the world, which provides advertisers a whole host of audiences to target with their products and services.

While TikTok has seen mass success across the globe, we must weigh up the pros and cons of this low-cost advertising vehicle. First the pros; ultimately, cheaper advertising can allow brands to push their budgets much further, giving marketers the opportunity to test multiple optimisations and content styles with much less of a risk to performance.

These cheaper ads and developed algorithms are also a fantastic opportunity for small and medium businesses to dip their toes into the world of paid social, expanding their reach to new potential customers within their niche, without the worry of their budgets not being large enough to make an impact.  

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However, as with all advertising platforms, TikTok ads can have its cons, the main one being - quantity over quality. Whilst TikTok has proven successful for brands as a channel for acquisition, it’s important for marketers to assess if the platform is right for their chosen brand goals and to monitor performance to ensure that these cheaper results translate into measurable business growth. 

So, how will this offer of cheaper advertising affect other platforms? We have already seen large players in the industry, such as Meta, adapt their platforms to compete with TikTok’s continued rise in organic popularity but this adaptation needs to also be applied to paid social.

Targeting and algorithms must be updated to compete with the increased effectiveness of TikTok’s offering. However, a copy-and-paste approach to adaptation will not suffice, after all why would consumers use two of the same app?  

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With consumers now using multiple social platforms, increased competition in the market will also see advertisers spread their budgets across multiple platforms making the battle for growth and ad spend even more competitive.

Other platforms need to learn from the algorithmic changes that TikTok has imposed within their feeds and to ad targeting, to leverage what makes their platform unique and to compete with these cost-effective results. 

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