A curious combination of prediction-technology and human censors enables ByteDance to create a dynamic global video ecosystem.

While the BAT – Baidu, Alibaba and Tencent – dominate internet browsing, e-commerce, messaging and gaming in China, one kind of success has eluded them so far. Despite their might, they have yet to gain much ground beyond China, with the possible exception of Alibaba in Southeast Asia.

Recently, though, a newer Chinese big tech firm, ByteDance, has managed to secure vast consumer markets on a global scale with its video platform, TikTok.

Hugely popular with teenagers and millennials, TikTok – known as DouYin in China – is a social media application used for creating and sharing short videos. Lasting 15 seconds or less, the typical clip features fun music, a skit, lip-sync, dance or light-hearted humour.

Users often participate in “challenges” or create “duets”, i.e. videos with split screens built on existing content.

The app has been downloaded more than one billion times so far, with a global footprint including India, the United States, Japan, South Korea, European nations, Brazil and much of Southeast Asia. In the first quarter of 2019, it was the third most downloaded app in the world after WhatsApp and Messenger.

TikTok is a consumer AI success story, as I explain in my upcoming case study, “ByteDance Beyond China: Leveraging Consumer Artificial Intelligence (AI) from Toutiao to Musical.ly and TikTok”, co-written by Minh H. Vo, INSEAD PhD candidate, and Anne Yang, INSEAD Research Associate. TikTok relies on AI technology in two ways.

First, on the consumer side, its algorithms quickly learn individual preferences, as they capture not only the users’ “likes” and comments, but how long they actually watch each video. As the clips are very short, TikTok’s algorithms quickly build sizeable datasets.

Secondly, on the producer side, AI also helps content creators craft viral videos. It simplifies video editing and suggests music, hashtags, filters and other enhancements that are trending or have been proven popular based on the category.

This AI recipe is so effective that experts have cautioned against TikTok addiction. Similar to Facebook and Instagram users, the average TikTok user spends 52 minutes per day on the app. In that timeframe, they may watch more than 200 videos, including carefully targeted ads or offers.

In short, ByteDance combines prediction-based AI and network effects on its vibrant multi-sided platform. More and more users join for a highly personalised stream of content they find addictive, and ever more producers join the ecosystem to create these quickly trending videos.

Advertisers and vendors follow with well-targeted ads and offers. AI tightens the connections between players so that each can find a valuable niche in a thriving community. It is perhaps no wonder that the company became, in November 2018, the world’s most valuable start-up, estimated at US$75 billion, one year after TikTok’s international launch.

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About the author

INSEAD Knowledge is the expert opinion and management insights portal of INSEAD, The Business School for the World. Knowledge showcases the latest business thinking and views from award-winning faculty and global contributors

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