TikTok and Douyin Redefining Social Commerce

TikTok, following its Chinese counterpart Douyin, is reshaping our consumption of advertisements and e-commerce.

Tiktok has grown quickly enough to acknowledge its global rise. The short-form video app has become one of the most popular social media platforms among young people, reaching 2 billion downloads this April. Not everyone has heard of its Chinese counterpart Douyin, though. Hitting more than 600 million daily active users in August, Douyin is also enjoying rapid growth in its home market. 

1. TikTok and Its Roots in China

According to Influencer Marketing Hub, 41% of TikTok users are between the ages of 16 and 24. Although lots of its active users are not content creators, the impressively high engagement rate of 52.1% estimated by Cloudmeter indicates TikTok’s great potential of reaching a massive, enthusiastic audience. Since its merger with the lip-sync app Musical.ly in 2018, the short video application TikTok has expanded globally. Known as the international version of Douyin (抖音), TikTok is in fact a separate entity from its Chinese counterpart; they have completely different user pools, and users in mainland China are not allowed to download TikTok with their local phone numbers. Strict local policies for social media censorship in China may be one of the reasons that drives Bytedance, the company that brands Douyin and TikTok, to separate these two social networks. 

While different regulations are set for the two platforms, videos on trend on TikTok do not completely follow the pattern on Douyin because of the differentiated user profiles and cultural backgrounds. TikTok videos usually involve music, dancing, or people acting out meme scenes from movies. Besides, knowledge-based content is not as popular on TikTok as on Douyin, according to Katherine Wu, an investor from Notation Capital.  

2. Why TikTok Matters for E-Commerce

“Watching too many in a row can feel like you’re about to have a brain freeze. They’re incredibly addictive.” Just as Atlantics’ Taylor Lorenz describes, the similar low barriers of entry, the enormous poll of content, and the powerful personalized recommendation algorithm make both Douyin and Tiktok addictive for their users. With a massive Gen-Z-majority user base, high engagement rate, entertainment-oriented content, and an incredible growth rate, TikTok is now becoming a major player in social network e-commerce. In her writing for The New Yorker, Jia Tolentino states

Though it remains broadly similar to TikTok, Douyin has become more advanced than its global counterpart, particularly with respect to ecommerce. With three taps on Douyin, you can buy a product featured in a video; you can book a stay at a hotel after watching a video shot there; you can take virtual tours of a city’s stores and restaurants, get coupons for those establishments, and later post geo-tagged video reviews. Fabian Bern, the head of a marketing company that works closely with Douyin influencers, told me that some power users can make “fifteen to twenty thousand U.S. dollars” on a shopping holiday like Singles’ Day.

Two years ago, Douyin was in similar condition as today’s TikTok: significant traffic together with an unclear vision for turning this into cash flow inhibited investment into the network. However, as Douyin, with the similar addictive algorithms and popular content, is achieving a huge success in Chinese market, TikTok and its investors now see a bigger chance to realize an exponential growth in its e-commerce business. More and more brands are partnering with TikTok content creators for promotion. As Singular estimated, ad spend on TikTok jumped 75X from May to November in 2019. But what ad formats will best increase exposure and effectively convey to TikTok’s enthusiastic users?

3. Successful Advertising Features from Douyin

Douyin has a clear e-commerce integration into its content: MCN companies (Multi-channel network), organizations that work with video platforms like Youtube to offer assistance to content creators’ products, programming, etc., are now working closely with Douyin and its influencers. From the consumers’ side, Douyin users can click on links in the short videos and complete their purchases on other platforms like Taobao, an online shopping website owned by Alibaba. This makes Douyin a potential sales channel, well suited to impulse purchases. However, Douyin just announced that they will ban outside links that direct consumers to third-party shopping websites this September, and rolled out Douyin Xiaodian (literally “Douyin’s Store” in Chinese), a virtual mall built within Douyin. 

A Douyin representative explains that the change is to protect the rights and interests of consumers, “we will strengthen the management for promoting products on livestream shows.” 

With the support from Douyin’s user database, Douyin Xiaodian will be more accurate in targeting potential customers. Brands can continue to insert links into their videos or live streaming if they decide to partner with Douyin Xiaodian. However, brands will have to pay an extra fee to Douyin if they want to lead consumers to a third-party website, which requires going through a transit website called “Xingtu”, also owned by Douyin. 

Douyin launched “Xingtu” in September 2018 as an official trading platform for Douyin’s commercial promotions that connect Multi-channel Network (MCN) companies, influencers, and advertisers. Douyin charges an average 5% commission fee, and it will deliberately limit the natural exposure of promotion videos if the advertising deals are not made on Xingtu. Through encouragement of partnership, Douyin is now attracting more and more influencers and the MCN companies behind to join its business.

However, outside links are still permitted on TikTok. Recently, the American clothing company Levi’s collaborated with influencers on TikTok and introduced Future Finish, Levi’s new online customization service. This encouraged customers to try Levi’s new denim customization service through the links in the in-feed ad videos. Due to the coronavirus, Levi’s has closed about 70% of its retail stores and turned to focus on its online store. The “Shop Now” call-to-action button is relatively new for TikTok users, thus this social commerce campaign successfully encourages active engagement and doubles Levi’s product view on its website. In ModernRetail’s interview with Brady Stewart, managing director for Levi’s U.S. direct-to-consumer business, he states that

Experimenting early with emerging social commerce platforms like TikTok, as well as Instagram, Snapchat and Pinterest are critical to growing Levi’s DTC business. That’s especially important now while Levi’s stores remain closed.

Though still facing a rough road of operation, Levi’s is now seeing positive feedback from its partnership with the social media giant. With more and more advertisers attracted by the potential economic return of partnering with TikTok, more major brands will join and further strengthen the future development of social e-commerce. 

Hashtag challenges seem to generate more popularity on TikTok, where a matching trading platform like Xingtu doesn’t exist yet. Hashtag challenges are user-generated content (UGC) games that highly involve followers in the promotion; generally, influencers will post a video with an in-feed ad, and then add a sponsored hashtag to encourage his or her followers to create videos of their own. The “Join this Hashtag” button is inside the video, so most obstacles that dissuade users from participating have been removed. This July, Spotify ran a successful hashtag challenge campaign #HowDuoYouListen to engage with consumers and showcase its new “Duo” premium plan. The audience is encouraged to post videos of couples with different music tastes enjoying “Duo”, a premium plan for couples. The result turned out to be rather impressive – 280,000+ couples sent in entries, amassing an astonishing 850.8+ million video views. 

4. Influencer Economy and Realizable Wealth in Intellectual Property

How can we distinguish influencers’ output and other users’ engagement on social networks? 

Pervasiveness of digital labor has blurred the distinction between production and consumption of digital content. Before becoming an influencer that can generate economically equivalent income with their output of creating videos, these digital artisans must go through a period of voluntarily creating content and creating value for the social platform. Their immaterial labor is invisible on social media, which will never be compensated by the platform whether or not they finally become top influencers. 

MCN companies, then, turn out to be the guarantor for this investment. Aside from signing influencers and playing the role of middleman between the platform and these creators, MCN companies in China, specifically those that focus on Douyin, now begin to hire unknown content creators that desire to become influencers. MCN companies would provide a salary and an account with a certain fan base, and any content creators that could expand the impact of the account with viral content will later become the owner of this account. 

In this aspect, human labor is becoming products on the assembly line, non-human capital is more likely to be valued and assured by MCN companies. This drives the influencer economy in a completely different way. Instead of being granted abundant freedom for creativity, content creators are losing control of their content, and themselves are becoming “actors” in funny videos and dancing clips. Terranova first put forward the concept of a structural free, digital labor system of social media in 2000 – this was a time when people couldn’t even imagine smartphones, but things have turned out to be following the same pattern.  

Outro

The viral nature of Douyin and TikTok has assured its success in changing people’s social content consuming habits. To stay at the forefront of digital trends and reach potential teenage consumers, more and more businesses are considering marketing their products on the breakthrough applications. Referring to the development pattern and direction of e-commerce on Douyin, TikTok influencers and advertisers may get invaluable insight into their future marketing strategies and connection with the platform. 

This article was written by Claire Gu, currently based in Shanghai, China. Please send an email to sg6201@nyu.edu or via Instagram @riimonnnn to get in touch.

Photo Credit: Dado Ruvic/Reuters

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