Facebook (NASDAQ: FB) stocks are up by 38% this year but this social network giant might have to look over its shoulder shortly as TikTok, a short video app is creating waves among the youth. This app is owned by Bytedance, a start-up in China and was valued at $75 billion in 2018. In fact, reports from Sensor Tower reveal that TikTok has been downloaded 1 billion times among which 665 million downloads took place in 2018. In the month of October, 2018, TikTok was downloaded more than Instagram and Facebook.
Hans Tung, a venture capitalist reported that TikTok is one of those few apps that gained popularity both inside China and outside. In the United States of America, it has 27 million active users in a month where 60% users are between 16 years and 25 years.
A new rival stock against Facebook
Facebook came to know about this rival and immediately responded by introducing Lasso, a short video app in 2018 November. If you're an investor who has been following the stocks of FB for more than 2 years, this story may seem familiar. Previously, the same thing happened with Snap and Facebook had then responded by imitating the features of Snap.
Global expansion of TikTok
Bytedance purchased musical.ly, an app where it is possible to lip-sync music videos, in 2017 November and later on merged it with TikTok in 2018 August. TikTok reported in the month of January that it had 18 million active users in UK and 54 million active users in India. If you compare that to Instagram owned by Facebook, it is just 75 million users in the country.
Nevertheless, just as Facebook, TikTok was also subject to certain controversies regarding issues like obscenity and privacy. The government in Indonesia banned TikTok giving reasons like inappropriate content, pornography and blasphemy. Later on, they negated the ban when TikTok promised to delete all such content.
Is TikTok going to have any impact on Facebook stocks?
In case TikTok is successful in diminishing the time that users spend on Facebook, this will certainly have an adverse impact on FB stocks. One thing that stands as an obstacle to the growth of TikTok is its low rate of engagement. The engagement rate of an app measures the frequency of usage of the app. In case the engagement rate of an app is 100%, this means the users open this app everyday and if it is 50%, this means the users open it every alternate day.
A chart made by Apptopia reveals that TikTok has a lower rate of engagement than Facebook or even Instagram. Both Instagram's and Facebook's engagement rates are nearly 100% and this means that the average user opens both these apps every day. As compared to that, the engagement rate of TikTok is much lower where it is seen that the users open the app just 2 days in a week.
As per an article by Social Media Today, TikTok will require finding a new way out in order to earn money. Vine even tempted such audience to TikTok but was not able to monetize in an effective manner.