TikTok: byte-sized offer

TikTok is clever to appoint a Disney character as its new chief executive. US lawmaker concerns about the app’s security have weighed on Chinese parent company ByteDance. A reassuringly homegrown executive was needed. Offering the job to Disney’s former head of streaming Kevin Mayer suggests big plans are afoot. Whether those plans involve TikTok striking out alone is unclear.

TikTok was created when ByteDance mimicked and then acquired US app Musical.ly. Wildly popular for its seconds-long, user-made videos, it is the most successful new social media platform since Snapchat. Lockdown boredom has extended its appeal even more widely beyond teenage early adopters. By the end of April, TikTok and Chinese counterpart Douyin had exceeded 2bn downloads, according to data company Sensor Tower.

If TikTok was spun out of ByteDance the obvious comparison would be US social media company Snap. ByteDance, which has a potential valuation of $75bn based on its last funding round, may chafe at this comparison. TikTok has more users and a global audience. But like TikTok, Snap’s social media platform was fast growing and targeted a younger demographic than Facebook when it listed in 2017. Its $24bn valuation was 59 times trailing sales.

TikTok’s sales are not public but Apptopia, which tracks app revenues, estimates its in-app spending at about $155m this quarter. Applying Snap’s sales multiple to this would give TikTok a standalone valuation of about $36bn.

Mr Mayer’s background in streaming might encourage TikTok to consider making its own content — something teen users would probably cringe at. His most important job is to help the company generate more revenue while simultaneously reassuring US politicians that the app is not mishandling user data or censoring content at the whim of its Chinese owner. A clean division would help his case. But Mr Mayer’s appointment as chief operating officer of ByteDance as well as CEO of TikTok suggests the line drawn between the two businesses will not be quite as rigid as its critics would like.

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