We released our quarterly benchmark report today looking at the ad spending habits of the biggest spending consumer mobile apps. One of the big stories that came out of it was the explosive growth in the number of advertisers using TikTok year-over-year (YoY). To get the broader insights on Facebook, Google UAC, Apple Search Ads, Snapchat and the expected impact of the IDFA losses you can download the report here.
However, I just wanted to give you a quick rundown of some of the key TikTok findings from the report here. So let’s jump in.
Advertiser adoption rockets nearly 5X YoY
The key headline is that TikTok grew advertiser adoption nearly 5X YoY. They went from 4% adoption in Q3 2019 to 19% adoption in Q3 2020. Whilst this growth is explosive, it has also likely been slowed by the impact of the Covid-19 pandemic.
What we saw was that between Q1 and Q2 2020 advertiser spend dropped due to the Covid-19 pandemic and consequently advertisers looked to consolidate onto core channels like Facebook, Google UAC and Apple Search Ads. This meant advertiser adoption growth for TiKTok slowed as advertisers weren’t looking to add new incremental channels. However, they returned to growth in Q3 2020 as advertiser spend increased once again.This drew them level with popular mobile Demand Side Platform (DSP) Liftoff on 19% advertiser adoption.
TikTok was the lowest adopted channel we examined in Q3 2019. There are now 7 channels with lower adoption in Q3 2020 including Twitter and Pinterest as well as 5 out of the top 6 ad networks we examine. If this growth rate in advertiser adoption continues, TikTok could end up approaching Snapchat’s advertiser adoption in 2021.
Spend has a LOT of catching up to do
Whilst growth in advertiser adoption is good it doesn’t always translate into hard dollars. This is particularly the case for a channel in its infancy like TikTok as advertisers cautiously test it before scaling spend. Unfortunately for TikTok, that’s the case here. They held just a 0.3% overall share of wallet in Q3 2020, with only Pinterest having a smaller share of wallet. That’s actually decreased from a 0.6% share when we first started tracking share of wallet in Q1 2020. So spend is going the opposite way to advertiser adoption.
The reduction in share of wallet isn’t particularly alarming for a couple of reasons:
- These numbers are so small that you’re going to see variance. We see similar volatility with the likes of Twitter and Pinterest who float around a similarly small share of wallet.
- The decrease came in Q2. All channels outside Facebook and Google UAC were seeing share of wallet decreases in Q2 due to consolidation as a result of decreasing spend during the height of the Covid-19 pandemic.
- Their new advertisers are coming from the smaller bucket of spenders, which won’t impact share of wallet numbers significantly, yet. We’ll explore this a bit more now…
Spend is being taken from Facebook amongst smaller spenders
Whilst advertiser adoption growth didn’t translate into overall share of wallet gains, TikTok has seen significant share of wallet gains amongst the smallest advertisers (spending less than $250k per month). They’ve gone from no spend in Q1 2020 to a 5.2% share of wallet in Q3 2020 for this category of spenders.
To put this in context, here is how the overall share of wallet looked for advertisers in this bucket of spenders in Q3 2020.
So where is this spend coming from? Well it appears that a lot of the spend is coming from Facebook who now hold just a 17.2% share of wallet for advertisers in this spend bucket. Smaller advertisers appear to be getting squeezed out of Facebook investment and we hear a lot of reports that CPMs have grown quite significantly on Facebook in the last 12 months. Whilst Google UAC, Apple Search Ads and Snapchat are beneficiaries of this, TikTok also appears to have taken money from Facebook in this bucket of advertisers.
Smaller spenders do tend to be early adopters of new channels as they seek outsized returns for their investment and are also more nimble when adopting new channels. This spend coming from smaller advertisers seeking outsized returns tends to be a good leading indicator of larger advertisers coming onboard too. So expect to potentially see the share of wallet and adoption increase amongst the mid and upper-tier of spenders for TikTok in the coming quarters.
Adopt early for outsized returns
To summarise, the beauty of TikTok today is that it offers nearly the scale of Instagram in terms of Monthly Active Users (MAUs), but it’s nowhere near as saturated with advertiser spend yet.
On top of that, the user base is still growing unlike more mature channels such as Instagram. They’re now challenging the likes of Instagram at 1bn MAUs. Between January 2019 and 2020 TikTok saw 37.5% growth in MAUs compared to Instagram who didn’t see any growth.
So there’s likely still significant growth in scale as more advertisers adopt the channel. This includes western markets where MAUs are also growing.
Want to learn how to start building and optimising campaigns? We’d recommend starting with this session from App Promotion Summit where Darius Moravcik, CMO, from journaling app Reflectly drops some insight bombs after spending $500k on TikTok in the last 12 months.
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