TikTok’s Dilemma
Why TikTok Ads may not be the next great direct response ad platform
TikTok Ads are like the 5 star prospect who gets to the big leagues and just never seems to pan out. Let me explain.
Every advertiser, agency and business owner was excited for TikTok Ads. A platform that garners 4.43 BILLION minutes of attention per day from Americans would surely be able to use all of that data to create the next blue ocean for performance advertising.
But after months of testing and tinkering, I realized that TikTok wasn’t the direct response platform I had hoped for. ROAS/CPA were not even in the same ballpark compared to what we were doing on Meta/Google. For every dollar I put into TikTok’s ad machine I was lucky to get a dollar back. Compare that to Meta and Google who were regularly returning 3–6x ROAS at high amounts of spend.
Now maybe you could say that I’m a crappy ad buyer and thats why TikTok wasn’t working. But data from analytics firm Varos suggests otherwise; TikTok isn’t working for anybody. The below is the spend distribution for advertisers in Varos database of 6000+ businesses.
TikTok makes up only 4% of total ad spend for these businesses. The company profiles are mostly all direct response focused advertisers. And direct response advertisers don’t spend money unless there is ROAS.
Some marketers have seen some success on the platform but not at any meaningful scale. While TikTok doesn’t release revenue numbers as a private company, you can look at Meta’s record breaking Q4 earnings as a clue. Meta is TikTok’s main competitor and drove a record $38.7 billion from advertising in Q4. Based on these results, it’s clear TikTok wasn’t able to steal any meaningful amount of ad budget from Meta.
All of the evidence shows that TikTok is struggling as a direct response platform. To be fair, going up against Zuck and the Meta product team is no easy task (especially considering they had a 10+ year head start). TikTok Ads are still relatively new and they probably need more time to capture user data to feed their ad algorithms.
Still I’m skeptical TikTok ads will ever rival Google or Meta in terms of ad spend. And its because the user experience on TikTok doesn’t lend itself well to direct response ads. I’ve broken this down into three reasons all related to how users behave.
- Viewing intent
- Scrolling behavior
- Users don’t want to leave TikTok
Reason #1 Viewing intent
The biggest and most overlooked but pretty obvious reason: people log onto TikTok to watch TikToks. Not to shop. Not to post a story. Not to click out to an article. People log on to lean back and be entertained by short form videos.
This isn’t even specifically just a TikTok problem. Instagram Reels also doesn’t monetize well per comments from Meta CEO Mark Zuckerberg. Youtube also struggles to drive direct ROI from its ads.
What IG Reels, TikTok and Youtube have in common is that their users’ intent when logging on is to watch video content. This behavior is actually similar to somebody logging onto Netflix or Hulu.
Compare that to FB/IG newsfeed or stories. Users on these placements aren’t necessarily looking for one form of content. Think about all of the mediums and type of content on newsfeed/stories. There’s memes, social posts from old friends, articles from news accounts, static quote posts, video content, etc. Advertising works better on newsfeed/stories because users are open to a wider range of content and willing to take different actions. Sponsored content isn’t all out ignored as it is on TikTok or Reels. Psychologically users are more open minded in traditional social feeds.
To make an analogy: TikTok is like going to the movies. You’re going there for one reason, to watch a movie (hopefully Dune 2). Facebook and Instagram is like going to the mall. Yes, the primary reason is to shop but you can also go to socialize, eat at the food court, and maybe even go to the movie theaters at some malls.
Understanding TikTok users narrow engagement patterns sets the stage for another key observation: their scrolling behavior.
Reason #2 Scrolling behavior
Although TikToks are meant to be short, users still spend more time per post (dwell time) in video feeds compared to traditional social feeds. Even the shortest TikTok posts are probably around 10 seconds. Whereas social feeds often feature static images that only require a few seconds of attention.
Think about it this way: posts viewed per minute is probably much lower on video feeds like TikTok/IG Reels compared to posts viewed per minute in FB/IG newsfeed & stories. On TikTok you average 6 posts per minute whereas on FB/IG newsfeed you can view 15 posts per minute.
On its face this should make advertising better right? Users will spend more time watching my ads. Wrong.
Users are hyper aware of sponsored content especially millennials and gen z’ers. The Sponsored disclaimer at the bottom of ads is an automatic signal to get to the next post.
And because time spent per post on TikTok is higher, users have more of an incentive to get to the next organic post. The next post might be 30 seconds and then the one after that could be a minute. Getting to that next dopamine hit requires more time on a per post basis. Therefore users are even more aware of ad content and look to avoid it.
Reason #3 Users don’t want to leave TikTok
Last point: TikTok’s video feed is so addictive that users don’t want to leave it. Clicking an ad comes with huge costs to a user which is related to the last two points. Users want to continue down the dopamine filled treasure chest of personalized video content. Clicking on an ad means leaving that addictive experience.
This is one of the reasons why TikTok has pushed TikTok Shops so feverishly recently. They’re hoping that by keeping transactions in their app, users become more likely to purchase. But social shopping is still yet to take off in the west as noted by the low profile of IG Shops.
So unless TikTok builds a flawless checkout experience, TikTok will continue to struggle to drive direct sales and outcomes for businesses.
TikTok’s Dilemma
All of these reasons have a common thread: TikTok’s video feed is super addictive. They’ve built something so engaging that users are less likely to do anything other than watch organic content. This makes direct response marketing on the platform tough for marketers.
Their consumer product is so successful that their enterprise team will need to focus most of their energy on brand advertisers. Brand advertisers are less sensitive to metric based reporting and just want to be on the hottest new platform with a young demographic.
But for now, direct response advertisers should continue to focus most of their paid ad efforts on Meta and Google.
PS: I consider success for sponsored ads as direct click through revenue/ROAS verified in 3rd party reporting platforms like Google Analytics. Also this is specifically on the subject of paid ads. Virality and organic reach can boost product adoption and sales significantly but require different tactics and strategy
