TikTok’s ‘almighty ecosystem’: Hybrid between social network, shopping app and music streaming, making users more and more ‘addicted’

ByteDance, the parent company of TikTok, has just begun negotiations with music labels to expand its streaming service globally. This is considered a competitive attempt by ByteDance to beat the industry leaders, including Spotify Technology, according to the WSJ.

There are still many negotiating hurdles, but ByteDance wants the service to eventually be integrated into the short-video app TikTok and operate as the official worldwide music distribution platform.

Reportedly, ByteDance recently discussed the expansion of its music streaming service Resso, which is currently rolling out in India, Indonesia, Brazil and more than 10 other markets. The US is not on ByteDance’s next expansion list, but the group wants the new service to be available globally so that anyone can discover and subscribe to music right on TikTok. Negotiations are still ongoing and have not come to a final conclusion due to some disagreements during the evaluation process of TikTok advertising benefits for brands.

Thanks to its huge influence on young people, TikTok has helped many songs become hits. The number of users increased significantly during the time of the pandemic, while many Billboard Hot 100 tracks began to emerge from the TikTok trend.

Glass Animals’ “Heat Waves”, spent 5 weeks at number 1 – the longest record on the chart thanks to TikTok. Weeknd’s “Blinding Lights” has also gone mainstream.

According to experts, ByteDance’s expansion in the music streaming field will help the group retain large users in the ecosystem. Even so, in the process, ByteDance still has to compete with other giants, such as Spotify. The market leader has now expanded into podcasts and audiobooks to increase profits.

According to the WSJ, ByteDance’s revenue is constantly increasing, reaching 61.7 billion USD in 2021. Selling expenses of this Chinese group also reached 27.4 billion USD for 2021, up 79% compared to the previous year. last year.

To expand its music streaming service, the Chinese Internet company needs to reach agreements with all the major music labels. Executives have expressed concern that ByteDance will find it difficult to monetize through Resso in all three markets today. The termination of the agreement by Sony Group’s Sony Music Group with Resso has resulted in the company’s song library being removed from the app.

Currently, very few users pay for Resso. This makes the conversion rate from free to paid subscriptions extremely low. Meanwhile, the same conversion rate at Spotify is 45%.

In some markets like Indonesia, Resso has experimented with various business models, such as allowing users to listen for free if they watch a video ad. Music labels aren’t opposed to such deals, but they want to make sure they get the commission they deserve.

Previously, Resso disappointed partners because the conversion rate of users was too low. There is no clear difference between free and paid services, so Resso does not create an incentive for customers to upgrade.

The copyright holders have been working with TikTok in the short term so that users can add song excerpts to short videos. However, these agreements will soon expire. The executives argued that ByteDance was hesitant to meet the market price.

However, according to experts, when expanding the market for Resso, ByteDance will consider integrating the music streaming application into TikTok. This will make it easier for content creators to make money through streaming.

Previously, from May, TikTok also allowed content creators to share a portion of advertising revenue, similar to what YouTube does with vloggers. TikTok also started selling TopView ads based on clicks and impressions so customers can target more and flexibly use their budget.

“Two years ago, TikTok was only in beta. It’s different now. It went beyond that test,” said Ryan Detert, CEO of an influencer marketing agency.

TikTok has nearly $4 billion in revenue in 2021, mainly from advertising, and is expected to reach $12 billion this year, according to research firm eMarketer, according to Bloomberg. This helps TikTok increasingly expand to the size of both Twitter and Snap social networking platforms combined, only 3 years after it started promoting advertising.

“This is definitely going to be a big threat to Google and Facebook. TikTok is starting to scale its media budget to better match the size of its users,” said Pieter Jan de Kroon, CEO of online advertising agency Entravision MediaDonuts.

According to experts, the model that ByteDance is building goes beyond conventional advertising. TikTok is multi-colored, diversifying into both music production and game publishing. It’s also branching out into e-commerce, an ambition that is slowly blurring the lines between social media and online shopping apps.

By: WSJ, Bloomberg