Analysis: Will the geopolitical developments around TikTok curb its global takeover?

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Following Facebook, TikTok is next in the spotlight as the Trump administration contemplates banning the app in the US over data privacy concerns. This comes shortly after the video sharing social app made headlines for recently exiting the Hong Kong market after the announcement of the national security law, and was banned in India at the end of June, along with 58 other Chinese apps.

The ban in India followed a border clash with China and the US's decision comes as White House adviser Peter Navarro said US President Donald Trump its expected to take "strong action" on Chinese-owned social media apps for "engaging in information warfare", South China Morning Post reported. Navarro was quoted by SCMP saying that even if TikTok were to become a separate American company, it would not help in the matter. In fact, "it is going to be worse", Navarro said, explaining that the US will have to offer China "billions of dollars for the privilege" of allowing TikTok to operate on its shores. On the corporate level, American bank financial services company Wells Fargo also instructed employees to delete the app from their work phones due to security concerns. Meanwhile, Amazon was said to have backtracked after it initially instructed employees to delete the app from phones they use to access work emails, SCMP reported.

TikTok was initially created in 2016 as an international version of Chinese app Douyin and both are owned by ByteDance. Over the years, ByteDance has made efforts to separate TikTok from its Chinese operations and give it an international feel. Its chief executive Kevin Mayer wrote in a letter to the Indian government on 28 June explaining that the Chinese government "has never requested user data, nor would the company turn it over if asked", Reuters reported. Mayer added that the data for Indian users is stored in servers in Singapore and that it would not comply with any request for user data. Last November, Reuters also reported that ByteDance was working to offer assurances to the Committee on Foreign Investment in the United States that personal data obtained by TikTok, is "stored securely in the US and will not be compromised by Chinese authorities".

The app certainly is popular among consumers, accumulating more than 315 million installs across the App Store and Google Play in the first quarter of 2020, according to statistics from market intelligence company Sensor Tower. Previously, its highest number of downloads was 205.7 million during the fourth quarter of 2018. Sensor Tower said the surge came amidst the global COVID-19 pandemic, which led consumers to be even more reliant on their mobile devices for entertainment. India was a key driver of TikTok installs, generating about 30.3% of total downloads, followed by China at 9.7% for Douyin. Meanwhile, the US contributes 8.2% of app downloads.

While TikTok has some fires to fight internationally, it is still relentless in its goal in targeting small and mid-sized businesses (SMBs) worldwide. Just last week, it rolled out a "Back to Business" ad credit programme comprising US$100 million in ad credits for SMBs in countries including Singapore, Malaysia, Indonesia, Thailand, Vietnam and the US to use on their journey to rebuilding the brand. This comes at a time when SMBs have been impacted by the COVID-19 pandemic.Head of SEA business marketing Chew Wee Ng said that Southeast Asia is a region that is important to the company and that it is committed to supporting the growth of local enterprises and SMBs. Some of the SMBs it has worked with include Indonesia's Javamedia Digital Group, Thailand's Cardinal Film, and Vietnam's Zera Việt Nam.

Will recent developments impact TikTok's expansion plans?

While TikTok did not respond to Marketing's queries on the new strategies it has adopted since the ban in India and its withdrawal from Hong Kong, prior to the recent turbulence faced, it seemed to be making all the right strategic moves. For one, it shifted its former senior director global marketing Lionel Sim to New York as head of global agency. Meanwhile, it was also actively hunting for an agency development leader in Asia Pacific.

Staying positive on the apps expansion, Gartner's senior director, analyst, Adrian Lee, told Marketing that recent developments is unlikely to slow down TikTok's international plans, adding that apps have faced criticism over privacy and data security since the term "social media" was coined. The TikTok team has acted in a transparent manner, responding to criticisms in a timely fashion, Lee said, adding that its efforts in international content aggregation and local operations do not seem to be affected.

"It has taken a gradual, measured approach in expansion. Unlike the China-only version, TikTok has optimised the in-app experience to suit more global audiences, while retaining the winning formula for short, punchy video content," he explained. Lee added that to win back governments, TikTok needs to "comply publicly, rapidly and transparently" with requests for information sharing. For companies and potential publishing partners, TikTok needs to reaffirm its trust credentials by showcasing more real world client references and customer success stories to remove any lingering doubt.

"This is the time where TikTok will do well to get real time feedback on how it can improve its service. Publish your privacy and data policies again. Ramp up customer service channel supports to deal with any user questions. From every crisis comes opportunity," Lee said, adding:

This is the time for TikTok to capitalise on the attention by putting forward the best version of its product experiences to different audience types.

Likewise, industry veteran Ranga Somanathan who has worked with the likes of media agencies such as Omnicom Media Group, Starcom and Mediacom, said TikTok must nurture a culture of transparency and accountability, and work on changing the perception of being a state tool. It has the potential to overcome this bump in the road if it proactively address the concerns across multiple levels of stakeholders - advertisers, governments, activists and the public.

To convert this crisis into an opportunity, TikTok can use this moment as a pitstop to organise itself as a global player, not only with regards to consumer experience but also as a corporate citizen of the world.

"Unfortunately, for an Asian global player, and a challenger to the world order, the burden of proving this lies with the organisation. Their proactive action in Hong Kong vis-a-vis other global players could be to step in that direction," Somanathan said.

When asked if the data privacy scrutiny TikTok is facing in the US will spill over to Southeast Asia, Somanathan explained that Southeast Asian consumers have "a more empathetic and nuanced view" of Chinese businesses. Coupled with that, being the social capital of the world, he added that the people's appetite for connecting and expressing themselves in such platforms will likely leave TikTok unscathed in Southeast Asia.

Short term impact for TikTok

The ban in certain countries amidst geopolitical tensions might impact TikTok in the short term. However, SmartOSC's co-founder and CEO, Thai Son Nguyen, said that with the internet being one of the greatest tools of individual freedom, its global expansion is just a matter of time.

"With the target audience being users between the age of 15 to 30 years old, who are known for being 'rebellious', the app might even gain more popularity," he said. Nguyen explained that with a solid foundation of core products and being a user content generated platform that "can hardly be replaced", TikTok is leading a blue ocean market without rivals.

Nonetheless, there is a potential for the ban in India to create a domino effect and spread to certain Southeast Asian countries. While it is hard to predict which markets will follow suit first, Nguyen said it will likely be those with flourishing digital economies such as Thailand, Indonesia or Vietnam.

"Southeast Asia is still a not too mature market in terms of data and privacy security. So unless there are political or security threats, these countries will unlikely spend too much effort on the media to ban an application, while still having to deal with many other emerging issues," he added.

To win back the trust of governments and companies, Nguyen said TikTok can build a friendly image, deeply embedded and compliant with the culture of the countries it targets. Building partnerships with governmental organisations and KOLs in each country can help to enhance their brand positioning while addressing security concerns, he said. On the government front, TikTok already has strategies in place, such as its partnership with the World Health Organisation for the #SafeHands challenge. TikTok also tied up with Singaporean radio app Camokakis to launch the #SGUnited challenge, aimed at instilling positivity, community-spiritedness and unity among Singaporeans.

ECommerce is also an area it can invest in, from developing partnerships within the ecosystem of existing eCommerce platform partners to building their own. "After meeting the entertainment needs, optimising the platform can enable users to make a profit. Think about how Instagram has evolved, allowing users to purchase straight from user-generated content. Those will help engage existing audiences but also gain new audiences quickly," he explained.

TikTok's domestic and global positioning has always been clear

While TikTok is still constantly proving it has no relations with Beijing, Forrester's senior analyst Wang Xiaofeng told Marketing that the positioning of TikTok and Douyin serving international and domestic markets respectively, has always been clear to users both globally and in China. Like any business, TikTok has to comply with data security and privacy regulations in each market it operates in. TikTok’s Hong Kong decision, Wang said, makes sense since Douyin would be more applicable to Hong Kong than TikTok.

Facing a more difficult international business environment is definitely a critical challenge for TikTok and Bytedance, and other Chinese companies that look to grow overseas.

Like Gartner's Lee and Somanathan, Wang's advice for TikTok is to reinforce its compliance of data regulations and respect and protect consumer data privacy in each and every market it operates in. While it is hard to predict if the geopolitical impact on TikTok would be short- or long-term, she pointed out two trends.

Firstly, this will change the global expansion mindset and strategy of Chinese companies. "When the geopolitical environment is less friendly, Chinese companies that aim for global expansion should increase the variety of their investment, in terms of both market selection and investment methods, such as mixing indirect investment in local businesses with direct operations," Wang said.

Additionally, consumers worldwide are becoming more privacy-aware. They are raising their expectations of these companies to respect consumer data privacy, and will “break up” with companies who fail to meet their expectations and will only engage with companies that they can trust. Wang added this does not only apply to TikTok or other Chinese apps, but Western ones such as Facebook too.

Will the younger generation remain loyal?

While data privacy is no doubt a growing issue of concern among consumers nowadays, Gartner's senior principal analyst, consumer insights Jack Mackinnon, said the loyalty and continued use of TikTok among its main audience and users, who are younger Millennials and Gen Z, "is likely to be quite stable" in the near future.

Having grown up with the infrastructure of social media already in place, younger Millennials and Gen Z do not have an expectation that the platforms will provide perfect data privacy and security. They are there for the content.

"TikTok users are on the platform, despite data privacy and security concerns, because they love the dynamic video content, MacKinnon said. Citing Gartner's research, he said the company found that TikTok users are more likely to prioritise values such as curiosity, discovery, fun, and self-expression than those that do not use the app.

"If that new, interesting, and entertaining content unique to TikTok was somehow restricted, then we might see an exodus of young user from the platform. For now, however, TikTok’s throng of Gen Z users are likely to stay put," he said.

That said, Mackinnon stressed that younger consumers value transparency. While they know there is likely to be some data security trade-offs when using a social media platform, they do want tech companies to directly and honestly address those concerns. As such, TikTok would do well to address the concerns, empathise with consumers’ worries, and transparently publish a plan to improve.

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