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TikTok worldwide ad revenue projected to soar, surpass Twitter and Snap combined

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Debra Aho Williamson, Insider Intelligence Principal Analyst, joins Yahoo Finance Live to discuss TikTok's expected ad revenue in 2022, teenagers and average users preferring TikTok over other social media platforms, and concerns over social media use.

Video Transcript

DAVE BRIGGS: In the app and, frankly, in the C-suite, everybody's got to be dancing at TikTok right now, given these new projections over their ad revenue that suggests they have become an advertising juggernaut. So much for those concerns over data collection and privacy issues-- no longer a concern.

Let's talk about the numbers with Debra Aho Williamson, principal analyst at Insider Intelligence. Debra, nice to see you. This app that most people just associate with these trendy viral dances has become so much more. What are the projections for ad revenue? And how do they compare to Twitter and Snap?

DEBRA AHO WILLIAMSON: Yes, so this is our inaugural forecast for TikTok's ad revenue, both worldwide and in the United States. We are estimating that this year, TikTok will make $11.6 billion worldwide. To put that in context, that is more than Snapchat and Twitter combined, which, to me, is absolutely incredible.

You think TikTok wasn't even around, like, four years ago. It was formed by the combination of a small app called Music.ly that nobody basically remembers with some other assets that TikTok's parent company, ByteDance, owns. And suddenly now, here we are, four years later, looking at a company with $11.6 billion in ad revenue this year. That's, to me, incredible. It really is.

To put it in a little bit more perspective, it's nowhere near what we're expecting for Meta, the parent of Facebook and Instagram, which is leagues ahead still and remains to be that way. But more and more, we're really seeing TikTok coming on strong as an advertising vehicle that advertisers around the world are starting to clamor to be on, just like users.

DAVE BRIGGS: You're not kidding. These numbers are eye popping. I almost fell out of my chair when I saw them. What makes TikTok such an ad-friendly environment?

DEBRA AHO WILLIAMSON: There's a couple of things. So the user base, right now, we're estimating that about one in five social network users worldwide is right now-- is using TikTok. But more than that, it's really about the amount of time these users spend. In the United States, we estimate that just among adult TikTok users, so not including those teens, among the adult TikTok users, we're estimating that they spend 40 minutes a day watching TikTok videos.

And that's absolutely the testament to how TikTok is set up. Its algorithm shows you videos of all types that you think-- that they think you're going to be interested in. And in a scrolling feed, that's pretty much endless. And it just keeps you going. And the advertising, it ends up being interspersed in that.

I think another factor that's driving this growth is that TikTok really has a lock on the youth market. So we just saw a major survey from investment company, Piper Sandler, last week, where teens now say that TikTok is their favorite social media app ahead of Snapchat and Instagram.

And then in our own numbers, we estimate that about 2/3 of all teens in the United States and about 3/4 of young adults, 18 to 24, are monthly users of TikTok. So we're seeing a huge audience spending a lot of time on the app and really being engaged, watching videos for what seems to be hours, if not-- minutes, if not hours on end during the course of a day.

DAVE BRIGGS: And correct me if I'm wrong, Debra, but it seems one of the effective attributes of TikTok is that some of these ads are actually original content that people aren't clicking out of, they're watching voluntarily, and even sharing.

DEBRA AHO WILLIAMSON: Yeah, I mean, one of the really unique things that TikTok did is to involve creators or influencers in the advertising. So a creator might partner with a brand. They might create their own video of supporting that brand. And then that creator will turn to their followers, which, oftentimes, number in the millions, and say, OK, now you guys create a video.

Using these similar assets, this similar hashtag, you put your own spin on it. And these kinds of things have spread virally across TikTok. We've seen this over and over again. And this really tight partnership between creators, brands, and then the followers of creators is really what's helping TikTok advertising tick.

DAVE BRIGGS: It's been a large driver in the name, image, and likeness rules in the NCAA, a lot of players making significant money. So I mentioned in the intro those concerns about data collection and privacy, given this is a Chinese-owned app. What happened to those? A year ago, there was a big movement to push people off of that app and to get children off of it entirely.

DEBRA AHO WILLIAMSON: I don't think those concerns have gone away, to be honest. I think they certainly have diminished in terms of the public awareness, but I do think that there are still studies that have come out about the effects of TikTok on people's health, just like on other social media apps.

But TikTok isn't immune to some of those concerns. We're also seeing pretty regularly investigations into how the data is used. Is it going to China? TikTok says no, but that's really hard to prove. So I wouldn't say that advertisers, or users, for that matter, should disregard the privacy concerns or the concerns about data usage. But at this time, TikTok's momentum is really strong. And I think that both advertisers and users are really just willing to overlook that right now.

DAVE BRIGGS: Conversely, we don't have a lot of time here, Debra, what's happening over at Twitter in terms of their growth, their ad revenue? Do you expect changes, regardless of whether or not Elon Musk's Twitter takeover eventually succeeds or whether he just hangs on to that 9%?

DEBRA AHO WILLIAMSON: Yeah, you know, hard to sum up what's going on in Twitter in a short period of time, but let me see if I can do that for you. So, before all of this started with Elon Musk, we forecast that Twitter will have another really good year for revenue, with revenue growth-- advertising revenue growth about 25% year on year getting to be be about $5.6 billion. That's after 41% growth last year. So right now, we're looking at very strong performance for Twitter.

What's hard to predict right now is the effect of Musk. Is he going to push for subscriptions? Is he going to, as he tweeted over the weekend and then deleted, push for an ad-free Twitter? These are some concerns that we have. We're obviously going to be paying a lot of attention to it because anything that someone like Musk does to change how Twitter is experienced by its users does have a ripple effect on advertisers. And that's something we have to pay attention to.

DAVE BRIGGS: Yeah, whether he's on the board or not, he's going to push for change and may push Donald Trump back onto the format. We shall see. Debra Aho Williamson, Insider Intelligence principal analyst, enjoyed talking with you. Thanks so much.