In a 2023 report by WARC Media, it was revealed that the digital advertising industry is currently experiencing a slowdown in terms of growth. Despite this, TikTok’s advertising revenue sees an opposite trend.
As a social media platform fast-growing in popularity, TikTok is now also used by brands for their digital advertising campaigns.
Below is a discussion of WARC Media’s report on the current slowdown in the digital ad industry, how much revenue TikTok generates within this context, and the factors that can contribute or hinder TikTok’s ad revenue.
A slowdown in the global digital ad market
Digital advertising is still experiencing growth, but is currently undergoing a shift in its pace. In a 2023 study by WARC Media, it was reported that investments in digital advertising are expected to slow down as marketers cautiously navigate changes in the tech industry and consumer spending.
According to WARC, almost a third of its surveyed marketer respondents indicated that they intend to reevaluate their 2023 ad budgets, to increase expenditure towards the online video, social media, and gaming industries instead. WARC has also revised its worldwide advertising investment prediction to $880.9 billion, slashing $90 billion of potential revenue from its former forecast for 2022 and 2023.
TikTok’s advertising revenue and the future of ad spending
Given this outlook, Big Tech companies have a lot to reconsider. However, in defiance of the existing global trend, TikTok is still expected to draw in more investments — and even increase its 2023 ad revenue by 53%. This figure projects huge growth for TikTok’s ad revenue forecast, now reaching $19 billion for 2023.
Through WARC’s Toolkit survey for marketers, it was revealed that 76% of its respondents intend to increase their ad investment in TikTok this 2023. This results in two key takeaways for TikTok marketing in terms of the different product categories:
- Every product category is expected to increase in TikTok ad investments. With TikTok benefiting from marketers’ decision to reshuffle their ad budget, WARC anticipates that this move will involve all product categories. This 2023, all categories will raise their TikTok ad investments — a trend that is predicted even for industries expected to decrease their overall ad expenditures.
- Changes in tech and electronics advertising lead to the increase in ad investments. Advertising in the tech and electronics industry is seeing a move towards video and audio digital formats. This discovery is significant because the tech and electronics sector is considered one of the fastest-growing categories in terms of ad investments. WARC projects an increase in their TikTok ad investment by 14.3%, amounting to a combined investment of $2 billion.
These key takeaways reveal insights behind the predicted boost in TikTok’s profit growth for 2023. However, certain factors due to current events can place these impressive developments at risk.
Potential barriers to TikTok’s ad revenue
In the coming months, ongoing economic, political, and technological crises can have marketers rethinking their strategies.
In the case of TikTok, continuing political tensions with international governments have resulted in rising opposition to the China-based app. In the United Kingdom (UK), TikTok is already banned from being installed on government devices. On the other hand, the Trump and Biden administrations in the United States (U.S.) have both expressed their concerns over TikTok’s ability to secure data.
Moreover, marketing and advertising executives have also raised the challenges they’ve encountered due to TikTok’s difficulties with content moderation.
So far, TikTok has been involved in controversies spanning politics and health misinformation across the globe. Reports of fake accounts further confuse marketing and advertising professionals as these have resulted in bogus traffic data.
Should TikTok’s regulation woes continue, it could serve as a boost for rival social media platforms looking to capitalize on viral content. Especially in the U.S., platforms such as Facebook, Instagram, Snapchat, and YouTube would benefit from possible limitations placed on their competition.
Factors contributing to TikTok’s growing ad revenue
Nonetheless, TikTok remains an exception to the observed decrease in digital ad investments. In 2022, TikTok was also recognized as the most downloaded app in the world, with TikTok marketing campaigns in Asia making up a quarter of the influencer marketing campaigns across the continent.
Analysts credit TikTok’s advertising revenue growth to its increasing popularity among the youth and its improvements to its in-app shopping and social commerce functions:
- The social media app maintains strong numbers among the younger demographic. TikTok’s potential ad reach is estimated at around 1.05 billion users, with almost half of them between the ages of 18 to 24.
- The development of its in-app shopping and social commerce experience drives the amount of revenue that TikTok generates. Its success is further confirmed by the rise of copycat products created by its rival apps, like YouTube Shorts and Instagram Reels. This can prove beneficial for advertisers overall, since video formats are useful for their storytelling function, which advertisers can expand on creatively.
Furthermore, TikTok continues to play an increasing role in cultures around the world, according to WARC Media Head of Content Alex Brownsell. The platform has allowed its millions of users to easily manage user-generated content, with TikTok creators now being able to share premium content.
Despite the slowdown, TikTok’s ad revenue shows growth
Although digital advertising continues to experience overall growth, 2023 is currently seeing a slower change in its pace. This comes as digital marketers and advertisers reevaluate their ad budgets and adjust their expenditures.
However, the opposite is observed with TikTok’s profit growth, which is predicted to defy the current trend. In addition, the majority of marketing experts are considering shifting their efforts to the said platform. This increase in investment with TikTok is also expected across different industries, even those that will decrease their ad expenditures overall.
Given its increasing popularity with the youth and its new functions in social commerce, TikTok continues to influence cultures worldwide and prompt changes – even from competitors that have subsequently launched their own versions of short-form video products.
These developments come at a time of public controversy for TikTok, which includes opposition from different international governments and marketing executives. Social media platforms looking to recreate the success of TikTok will have to find ways to create similar experiences, while complying with strict privacy and data regulations.
To navigate new opportunities in spite of these challenges in the entertainment industry, read the guide to media effectiveness created by WARC Media in partnership with TikTok.