The rise of TikTok has been nothing short of remarkable. It has achieved in just four years what took Facebook almost seven years to accomplish in terms of user growth. As a result, TikTok advertising has become a necessity for brands. However, like Facebook and other social media platforms, TikTok faces the challenge of attracting enough advertisers to ensure its long-term sustainability. Advertising is what keeps the World Wide Web spinning.
Based on a comprehensive dataset compiled by Wolfgang Digital, it is evident that although spending on TikTok has increased by 800% year over year, it still only represents a fraction (5%) of the amount spent on Meta (Facebook and Instagram). Advertiser adoption has been slow, but it is rapidly gaining momentum.
Wolfgang Digital conducted an analysis of TikTok’s performance over the past year to determine the advertising opportunities it offers. Let’s delve into the findings discussed by Brendan Almack and Roisin Linnie of Wolfgang Digital.
Cost Efficiency: TikTok vs. Meta The first major opportunity lies in the cost. Due to the faster growth of TikTok’s user base compared to advertiser adoption, advertising on TikTok is significantly more cost-effective. Here’s a comparison with Meta (Facebook & Instagram):
The Value of TikTok Advertising TikTok offers considerably lower CPM (cost per thousand impressions) compared to Meta. In fact, it costs 2.5 times more to reach the same number of people on Meta.
When examining the CPC (cost per click), which indicates the cost of getting a user to click on an ad and visit a website, TikTok again proves to be more cost-effective with CPCs being 30% cheaper.
Why Choose DMI? Higher User Engagement and Platform Loyalty on TikTok Apart from reach, advertisers are deeply interested in how users engage with their ads—liking, sharing, and commenting on them.
The Value of TikTok Advertising
According to this study, the engagement rate for TikTok ads is 835% higher than that of Meta. This can be attributed to the authentic nature of the ads on TikTok, which often blend in seamlessly with the platform’s content and don’t appear overtly promotional. Consequently, TikTok provides a significantly higher opportunity for audience engagement.
On TikTok, the likelihood of driving comments and shares is much higher. However, interestingly, users on Meta are almost three times more likely to click on an ad. Why might that be the case?
One reason could be the design of TikTok ads. They appear as full-screen videos, blending in with regular content, and may not be immediately recognized as advertisements. Additionally, TikTok’s mantra to advertisers in 2022 was “Don’t make ads, make TikToks.”
Another factor contributing to higher engagement on TikTok is the platform’s algorithm, which excels at delivering content that users enjoy, making it difficult for them to leave the app. The phenomenon known as the “TikTok lost hour” is real.
TikTok’s Impact on Sales For advertisers, TikTok offers cost-effective means to reach and engage with an audience. However, it can be more challenging to steer users away from TikTok’s algorithmic grasp compared to Meta.
Ultimately, advertisers use these platforms with the primary goal of driving sales.
How does TikTok perform in this regard?
This is where it gets tricky for advertisers. The return on ad spend (ROAS) provided by TikTok ads is 26% lower than that of Meta, but still a healthy 11x return on investment for advertisers.
However, as we previously mentioned, users are less likely to leave the TikTok app (refer to Table 2), resulting in a cost per sale that is seven times higher on TikTok compared to Meta.
However, this data doesn’t reveal the complete picture because we know that users are influenced by ads they see on TikTok, even if they don’t click on them. Recent research shows that 49% of TikTok users have purchased a product or service after seeing it advertised or reviewed on the platform. The hashtag #TikTokMadeMeBuyIt, with over 6 billion views, exemplifies the platform’s influence on user purchasing decisions.
Measuring TikTok’s Impact on Sales Wolfgang Digital has been exploring alternative methods to measure TikTok’s impact on sales. Here’s what they have discovered:
- TikTok has a measurable impact on brand searches. In one case, they observed a 10% increase in brand searches correlated with TikTok activity. While these sales may have been inspired by TikTok, they are attributed to Google search.
- TikTok affects in-store sales. Through testing with certain clients who promoted niche products exclusively on TikTok, they recorded sales uplifts of 25% to 35% in physical stores.
Although these examples aren’t flawless and other external factors come into play, confidence is growing in TikTok’s ability to influence sales. The challenge lies in adapting measurement protocols to capture TikTok’s true impact, as the current methods predominantly favor platforms like Google.
“When you create an app designed to retain users, the way we measure advertising impact needs to evolve.”
The Verdict on TikTok Advertising
For years, Meta and Google have dominated digital ad spend. The industry as a whole stands to benefit from the competition TikTok brings to the advertising ecosystem. All platforms will be compelled to innovate and improve as a result.
Currently, TikTok offers tremendous value for advertisers to reach a highly engaged audience. However, as more advertisers join the platform, this advantage may diminish. There is an early adopter advantage to be gained.
If your digital marketing impact is solely measured by last-click attributed sales in Google Analytics, you may be disappointed with TikTok’s performance, as well as with other channels outside of Google. Expanding your measurement protocols to include brand searches, share of search, and in-store impact will provide important additional context to assess TikTok’s true performance.
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