TikTok, Meta duel for social media supremacy shows modern capitalism at work

One of the purest forms of American capitalism these days involves, ironically enough, a Chinese company.

TikTok, the wildly popular app imported from Chinese outfit ByteDance, continues to run circles around the original king of social media, Facebook and Instagram parent Meta, with the latest example arriving this week. 

After days of snowballing criticism about changes to the Instagram app designed to mimic TikTok’s popular recommended videos, Instagram backtracked on Thursday and said it will reverse course on the update. In an interview with Platformer, Instagram boss Adam Mosseri never made reference to TikTok, but implicitly acknowledged that his team hasn’t been able to replicate the ascendant competitor’s secret sauce.

“For the new feed designs, people are frustrated, and the usage data isn’t great,” Mosseri said. “So there I think that we need to take a big step back, regroup, and figure out how we want to move forward.”

The episode offers a striking case of American free markets at work—albeit tinged with the Chinese government’s shadow. Just as Facebook conquered the internet by perfecting a relatively novel concept—an interactive digital experience powered by users’ social networks—TikTok has created something that may be so superior that it ultimately supplants its predecessor.

With Meta boasting more than 3.65 billion monthly active users across its family of apps, the conventional wisdom has been that the company’s value—and main bulwark against competition—is the web of interconnections embedded in its massive audience. You need to be on Facebook or Instagram because that’s where all your friends and all their favorite content (pictures, news, gossip, party invitations) are living. 

TikTok turned that logic on its head. The ByteDance unit is taking eyeballs away from Meta not by having built an equally vast social network, but by sidestepping the social graph entirely. Instead, TikTok leverages superior A.I.-driven algorithms to dazzle and hook users.

Consumers are voting with their thumbs, downloading TikTok at a blistering pace and closing the usage gap with Facebook and Instagram. TikTok’s global active user count has grown from 55 million in early 2018 to 1 billion in mid-2021. During that same stretch, Facebook’s monthly active count rose from 2.2 billion to 2.9 billion, with a dramatic slowdown in the past 12 months. Meta doesn’t regularly release Instagram usage data.

Meta is trying to get hip with the times. On its earnings call Wednesday, Mark Zuckerberg said he wants to double the amount of A.I.-recommended content shown on Facebook and Instagram by the end of 2023. But Instagram’s revamp reversal this week highlights the gulf that exists between Meta and TikTok.

In essence, TikTok is just better at knowing what you want and delivering it to you.

How this phenomenon came to be is certainly subject to intense debate, often centering on thorny questions about ByteDance’s ties to the Chinese political regime. 

Since ByteDance is a private company, we know little about its financial ties to the Chinese government. The Information reported last year that Chinese leaders took one of three seats on ByteDance’s board, along with a 1% stake in the company—though the Chinese government doesn’t really need formal board seats or equity investments to exert authority over a domestic corporation.

There’s also the specter of TikTok benefiting from ByteDance’s Chinese version of the app, Douyin. 

There’s no evidence to date suggesting Douyin honed superior A.I. technology by using immense amounts of intrusive data collected and provided by the Chinese government, but it’s certainly a possibility. And as the New York Times reported late last year, an internal company document suggests that TikTok’s development process “is closely intertwined with the process of Douyin’s.” (A TikTok spokeswoman told the Times that “while there’s some commonality in the code, the TikTok and Douyin apps are run entirely separately, on separate servers, and neither code contains user data.”)

Nevertheless, TikTok’s rise upends a decade of Silicon Valley domination, with the potential to reshape the industry’s business and regulatory landscape. Meta officials are throwing huge sums of money at reshaping their product in the image of TikTok, siphoning money away from their augmented and virtual reality R&D budget. TikTok’s emergence also takes some of the antitrust heat off Meta, allowing Zuckerberg’s team to argue that this fast-arriving freight train shows that the social media ecosystem remains competitive. 

Silicon Valley loves to talk about using innovation to “disrupt” entrenched industries. The rise of TikTok is a painful lesson for Meta, but one that tech entrepreneurs should appreciate.

TikTok eventually could fall victim to changing tastes, a more forward-thinking competitor, government intervention, public scandals, or its own bloated largesse. (Anything sound familiar there, Meta?) If that happens, it will once again show capitalism at its finest.

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Jacob Carpenter

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