As TikTok usage continues to gain steam – and face bans by U.S. state governors – reports project it to ramp up its ad revenue dramatically. By dramatically, we mean surpassing Meta, Instagram and YouTube combined. This is a bold prediction but somewhat defensible given TikTok’s usage and global ad growth.
Specifically, this comes from Informa-owned market research firm Omdia. The firm projects in its new Global Media and Entertainment Trends report that TikTok will increase its share of the online video advertising market (where it classifies TikTok’s revenue) from 15 percent today to 24 percent by 2027.
This will chew into incumbent market share, as the ad market decelerates in a downturn (more on that in a bit). For example, Meta’s share is projected to decline from 16 to 12 percent, while YouTube sinks from 15 to 12 percent and the fragmented long tail of “other” players falls from 47 to 36 percent.
As for the size of the whole pie, Omdia projects it to grow from $189 billion this year to $331 billion in 2027. To put this into perspective, that outer-year figure will outweigh streaming subscriptions (Netflix, et al.) by 2.6x, and legacy television advertising by 2x. We’ll say it again, these are bold calls.
Paradoxical Growth
So what’s behind these figures and how could online/mobile video advertising – and TikTok’s inclusive market share – reach these lofty totals? Indeed, this ramped-up growth is projected amidst an economic downturn when advertising spend usually declines. That should raise some eyebrows and skepticism.
But the answer could trace back to a phenomenon we sometimes see in economic downturns. Though brand ad budgets are slashed – generally the first expense to be cut, along with headcount – emerging and performance-based media often paradoxically grows. We’ve seen this movie before.
Specifically, we saw the accelerated emergence of search in the years that followed the early-2000’s dot-com bust. And we saw social advertising inflect in the wake of the late 2000’s financial crisis. Why does this happen? Emerging formats are given the chance to shine as ad budgets are shaken up.
A lot of that has to do with the fact that digital performance-based media offers more concrete ROI. And that’s what’s scrutinized most during periods of budget scarcity. In other words, yes ad budgets are slashed, but they’re also redeployed. And the casualty is often legacy media, such as broadcast.
Maturation & Saturation
Beyond the growth in online/mobile video, what about TikTok usage and market-share projections? Here, we can look at momentum. TikTok continues to ramp up its ad revenue while others decline. This is a function of TikTok’s under-monetized state, relative to its massive global reach. It’s growing despite the economy.
Meanwhile, the other giants in video ads – Meta and YouTube – reported dismal Q3 results, in some cases seeing the first declines in their lifespan. That’s due to a combination of the economy, maturation & market saturation, platform privacy restrictions, and fallout from past misdeeds (in Meta’s case).
But it’s also due to TikTok usage. In fact, the reason it’s growing is that it’s taking share from the above players – one of the only mathematical possibilities in a zero-sum market. So you can add TikTok to the list of headwinds facing any business that relies on video ad spend, especially those in the social bucket.
But it’s not all good news for TikTok. As noted, it faces ongoing geo-political drama. That sort of came and went under the Trump administration, but has recently heated up as U.S. state governors make high-profile moves to ban Twitter in the places they have jurisdiction to do so (state devices/employees).
That obviously makes all of the above a moving target… and one we’ll keep in our crosshairs.
