TikTok: What It Is, How It Works, and Why It's Popular (2024)

TikTok, released in September 2016, is a popular social media app that allows users to create, watch, and share short videos shot on mobile devices or webcams. With its personalized feeds of quirky short videos set to music and sound effects, the app is notable for its addictive quality and high levels of engagement. However, its Chinese ownership has also made it controversial because of concerns that the Chinese government could use it for propaganda purposes and to collect data on users. In April 2024, American lawmakers passed legislation, signed by President Biden, that would ban TikTok in the U.S. unless its parent company, ByteDance, sells it within a year.

Key Takeaways

  • TikTok allows users to watch, create, and share short videos online.
  • The app was launched in 2016 by the Chinese technology company ByteDance.
  • Now available in more than 150 different markets, TikTok has offices in Beijing, Los Angeles, Moscow, Mumbai, Seoul, Tokyo, and other cities.
  • Concerns about ByteDance's Chinese ownership and possible links to the Chinese government have made TikTok controversial in certain countries, particularly the United States.

Understanding TikTok

TikTok's short-form video format lends itself to entertainment and comedy. However, it is increasingly used for infotainment. Influencers who gain a steady audience on TikTok offer snippets of advice and tips along with self-promotion. Beauty, fashion, personal finance and budgeting, and cooking are all popular topics for informational videos. Increasingly, the format is used to promote and sell products.

Launched in its present form in 2018, TikTok joined the ranks of social media giants in record time. As of February 2024, it has been downloaded approximately 4.7 billion times.

Like other social media companies, TikTok has been the subject of persistent concerns about the potential use or misuse of the private information that it gathers about its users. It has become a particular focus of attention because the majority of TikTok is Chinese-owned.

TikTok's Launch

The name TikTok is meant to suggest the short format of the videos. Launched in September 2016 by the Chinese startup company ByteDance, it's known there as Douyin. Its stratospheric growth in usage really began in late 2017, when it acquired a rival app, Musical.ly, and ported over its 200-million-account list to TikTok.

ByteDance was reportedly worth up to $140 billion by mid-2020, based on the private sale of a small stake in the company. In 2023, TikTok was valued at $66 billion. That would make it the most valuable startup in the world.

TikTok's Business

Marketing on TikTok is still maturing, but a growing number of agencies are eager to help brands create the kind of quirky content that gets clicks on TikTok. Conventional advertising that stresses a product's superior qualities doesn't work.

Instead, brands open user accounts on TikTok and, just like any of its users, create and post mini-videos. They can also pay to promote their videos to other users. The ultimate goal is to go viral and spur takeoffs, drawing in a huge audience for the brand's message. Light, fun campaigns set to music hit the spot.

Some of the most successful marketing campaigns on TikTok:

  • The Chipotle restaurant chain ran a Halloween "Boorito" coupon giveaway campaign encouraging TikTok users to dress up for the holiday and post their images. The campaign scored 4 billion views.
  • e.l.f. Cosmetics teamed up with a few social media influencers to create an online reality show and contest called #eyeslipsface. The ad campaign had 10.4 billion clicks as of January 2024.
  • The NBA signed up for an account and has scored 21.7 million followers as of May 2024. Its aim is to enhance global awareness of the NBA, particularly among young people.

TikTok has headquarters in Los Angeles and Singapore as well as offices in New York, Berlin, Dublin, Jakarta, London, Paris, Dubai, Seoul, and Tokyo.

Like many other social media sites, TikTok also makes money from in-app purchases, which is a big contributor to its revenues.

Since January 2014, more than 900 apps have launched worldwide hoping to capitalize on TikTok's popularity.

TikTok's User Base

TikTok is available in more than 150 markets and more than 50 languages.

Here's a breakdown of some of the app's most notable stats:

  • About 36% of users are age 18 to 24
  • 49.2% are female, and 50.8% are male
  • 102.3 million users in the U.S. in 2023
  • 30.8 million daily active users via iOS
  • Children spend an average of 75 minutes per day on it

TikTok and Political Controversy

Like most social media sites, TikTok is not immune to controversy. TikTok and many other Chinese-made apps were banned in India in mid-2020 as a danger to the nation's sovereignty. The move came amid growing tensions between the two nations.

TikTok is also banned in Bangladesh. It was briefly banned in Indonesia for "p*rnography, inappropriate content, and blasphemy," but the ban was overturned a week later after the company promised to take all objectionable content off the platform and set up a local office to monitor and sanitize content.

In February 2019, the company paid $5.7 million in the U.S. to settle allegationsthat it illegally collected personal information from children. It was the largest civil penalty ever obtained by the Federal Trade Commission (FTC) in a children's privacy case.

That was not the end of TikTok's problems in the U.S., however. Starting in July 2020, then-President Donald Trump launched a public attack on TikTok, threatening to ban it from the U.S. on the grounds that the Chinese Communist Party could use data gathered on users to spy on U.S. citizens. He demanded that TikTok be sold to U.S. interests to eliminate the threat. By September 2020, Trump had declared that he had solved the problem. TikTok's U.S. operations would be severed from its Chinese owner, ByteDance, and incorporated as a U.S. company.

The proposed deal would have created a new spinoff, TikTok Global. Oracle would own a 12.5% stake in the company and become its cloud provider in the U.S. In addition, Walmart tentatively agreed to buy a 7.5% stake in TikTok Global. It planned live-streamed shopping events hosted on the app. The remaining 80% would remain owned by ByteDance. The deal fell through in 2021.

In 2022, bipartisan legislation was introduced in the U.S. House and Senate to ban TikTok. Ultimately a bill passed both chambers, and President Biden signed it into law on April 24, 2024.

Meanwhile, the European Commission opened formal proceedings in February 2024 to investigate whether TikTok had violated the European Union's Digital Services Act (DSA) with regard to "the protection of minors, advertising transparency, data access for researchers, as well as the risk management of addictive design and harmful content." In April 2024, the Commission launched a second inquiry, this one into a TikTok rewards program on TikTok Lite.

What Company Owns TikTok?

The majority owner of TikTok is ByteDance, a Chinese technology company. In late 2020, following pressure from the Trump administration, ByteDance agreed to create a new company, TikTok Global, in partnership with Oracle and Walmart as its minority owners and U.S. partners. That deal was never consummated. In 2024, a newly passed federal law ordered TikTok to change ownership or face a ban in the U.S.

How Do I Invest in TikTok Stock?

At the moment you can't, because TikTok remains wholly and privately owned by ByteDance. If the company, or part of it, is spun off as a result of current U.S. pressure, that situation may change.

Is TikTok Banned?

As of 2024, TikTok is banned in India and Pakistan. It was briefly banned but restored in other countries including Indonesia and Bangladesh. It faces a ban in the U.S, unless the company is spun-off by a Congressionally imposed deadline, which is likely to fall in 2025.

The Bottom Line

TikTok is an astronomically popular web app worldwide. But its Chinese ownership has proven problematic and led to several bans and threatened bans, most recently in the United States.

TikTok: What It Is, How It Works, and Why It's Popular (2024)

References

Top Articles
Latest Posts
Article information

Author: Kimberely Baumbach CPA

Last Updated:

Views: 6027

Rating: 4 / 5 (41 voted)

Reviews: 80% of readers found this page helpful

Author information

Name: Kimberely Baumbach CPA

Birthday: 1996-01-14

Address: 8381 Boyce Course, Imeldachester, ND 74681

Phone: +3571286597580

Job: Product Banking Analyst

Hobby: Cosplaying, Inline skating, Amateur radio, Baton twirling, Mountaineering, Flying, Archery

Introduction: My name is Kimberely Baumbach CPA, I am a gorgeous, bright, charming, encouraging, zealous, lively, good person who loves writing and wants to share my knowledge and understanding with you.