There has been a lot of market chatter lately about the threat TikTok poses to Facebook. Is this really an issue for Facebook, and is the company’s Lasso platform a worthy competitor?

The story isn’t really new, but earlier this month an audio recording of Mark Zuckerberg addressing the issue with staff was leaked. In the recording, Zuckerberg clearly acknowledges that TikTok is the first social platform from China to gain real traction around the world.

 

The Social Entertainment Era

TikTok is a video sharing platform with a lot of editing features. It allows users to create content or ‘remix’ content from other users or elsewhere. The platform uses AI to recommend videos, based on the other videos a user has liked. Evidently TikTok does this very well and is able to generate an endless stream of tailor-made entertainment to each user. The result has been very high engagement rates. Analysts have described the content as social entertainment rather than social media.

The platform is owned by ByteDance which owns a handful of platforms, all leveraging the power of AI. The unlisted company, backed by Softbank, was most recently valued at $78 billion, making it the most valuable start-up in the world.

 

Facebook’s TikTok Problem

TikTok already has 500 million users of which over half are outside of China and 25 million are in the U.S. Over a billion videos are watched each day.

In response, Facebook launched Lasso, a virtual clone, in November 2018. Lasso is a standalone app, which even includes some features that TikTok doesn’t have.

However, the features are not the problem. The content and users are. TikTok already has 500 million users of which over half are outside of China and 25 million are in the U.S. Over a billion videos are watched each day.

With so many users and so much content, there is little reason for anyone to choose Lasso instead. It’s therefore not surprising that TikTok is downloaded as much as 20 times more each day.

 

The Cost of Winning Against TikTok

If Facebook really wants to drive adoption, it will probably need to incorporate Lasso within Facebook or Instagram. That’s a problem for two reasons. Facebook and Instagram are built around lists of followers and friends – whereas TikTok’s success comes from its AI-powered recommendations.

Incorporating Lasso in another platform will also take attention away from everything else on that platform. So, while TikTok is taking attention away from Facebook (and other platforms like Twitter and YouTube), the only way for Facebook to challenge it is to make Lasso compete with its own platforms. Users only have so many hours in a day, and any time spent on one platform is time they can’t spend on another platform.

TikTok’s audience is young, so this doesn’t affect Facebook’s entire audience. But it does affect a large chunk of it.

It may not be an existential threat to Facebook, but it will be an ongoing headache as the company tries to increase engagement and build on its user base of 2.7 billion users. For investors, it also provides a good illustration of how quickly the social media landscape is evolving and that no platform is immune to being disrupted.