TikTok is slashing its revenue target by 20%, signaling that companies are facing a massive slowdown and are cutting their advertising budgets.
ByteDance Inc.’s TikTok, a short-video platform, is a social network that has gained popularity, especially among teenagers.
Last year TikTok said that over one billion people use its app monthly since users prefer its platform to create videos and suggest them to their social network via its algorithm that makes recommendations.
A survey by the Pew Research Center in 2022 showed that at least two-thirds of respondents who are 13 to 17 years old use the app.
A growing number of adults in the U.S. told Pew Research Center that they receive their news regularly from TikTok, unlike other social media companies that have either flat-lined or lost readers' consumption.
Revenue Growth Slowing
TikTok chief executive Shou Zi Chew cut its global revenue target by $2 billion since the video platform faces roadblocks in meeting its goals despite its popularity.
The massive cuts were made in late September by Chew during a virtual “all-hands” meeting, four sources told the Financial Times.
Chew was named CEO in May 2021 after serving as CFO of Chinese smartphone company Xiaomi.
TikTok is the latest tech behemoth to be impacted by the global slowdown in online advertising.
Revenue for TikTok is now estimated to reach only $10 billion instead of the previous estimates of $12 billion to $14.5 billion, the sources told the FT.
The staff at TikTok were told during the meeting they did not increase sales in its advertising and eCommerce divisions, the company's two largest sources of income, according to the source.
Both current and former employees told the FT that the the company did not stick with its budget on salaries and social events, spending generously on parties in Europe, the U.S., and Latin America, according to videos posted on TikTok by employees.
The Hong Kong IPO of ByteDance, which owns TikTok, would be delayed and not occur in 2022, the employees were told during the meeting.
TikTok faces similar financial woes as its competitors who have struggled, despite being in the business longer and building their brands.
Meta Platforms META, the owner of Facebook and Instagram, reported revenue falling by 4% while Snap and YouTube also said their revenue grow slower.
Popular with Generation Z and millennials, TikTok's rivals have tried to adopt their own version of shorter videos to capture the attention of its users.
Social media giant Meta Platforms which also owns WhatsApp, the messaging platform, and Alphabet GOOGL, parent company of Google and YouTube, have both launched their own versions - Reels at Meta and Shorts at Alphabet.
Billionaire Elon Musk, who now controls Twitter, asked users if he should bring back Vine, a mobile app that enabled you to record and share short videos. It was discontinued in 2016.
