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TikTok is one of the latest in a series of red-hot apps primarily aimed at teenagers and millennials. TikTok describes itself as the “leading destination for short-form mobile video,” with a mission to “inspire creativity and bring joy.” Based in China, the app was founded by Zhang Yiming, who remains something of a mystery, not giving many interviews.
Unlike its relatively unknown and secretive billionaire founder, TikTok is well known on the global stage. The company’s parent ByteDance continues to maintain offices from Los Angeles and London to Beijing, Warsaw, Singapore, Tokyo, Dubai, Ho Chi Minh City and Bordeaux, to name just a few. Read on to learn more about Zhang’s invention, how it’s used and whether or not it may be a good investment going forward.
TikTok at a Glance
| TikTok Company Snapshot | |
|---|---|
| Headquarters | Beijing, China |
| Year Founded | 2012 |
| Founder | Zhang Yiming |
| CEO | Shouzi Chew |
TikTok’s Net Worth: $50 Billion
TikTok’s worth is valued at $50 billion. Recent estimates place the value of TikTok’s parent company, ByteDance, at $300 billion based on the company’s most recent stock repurchase, according to Bloomberg. That’s a significant drop from last year, when the South China Post reported that the valuation had fluctuated between $325 and $450 billion in the previous months.
Last year, Tiger Global Management, which already had invested in ByteDance, purchased additional shares at a blended valuation of $460 billion, according to documents reviewed by Bloomberg.
TikTok itself has been valued at $50 billion by investors willing to bid that much to break off the company from ByteDance. The app could triple its revenue in 2022, Bloomberg reported.
TikTok’s Founder Net Worth
Zhang Yiming founded TikTok in 2012. He has become an unqualified success in the business world. The 38-year-old former software engineer is now worth over $49.5 billion, according to Forbes’ Real Time Billionaires List, making him the 22nd-wealthiest person in the world. Forbes’ China Rich List ranks Yiming second among China’s wealthiest.
What Is TikTok’s Primary Product and Source of Revenue?
TikTok is an app that allows users to create and share short videos. It comes with an extraordinarily wide range of features that users can employ, from music clips to famous TV show moments to other TikTok videos.
If that overall description of TikTok sounds vaguely familiar, it’s because it’s somewhat reminiscent of the app Vine, which was all the rage in 2013. Due at least in part to the popularity of Vine, video as a method of expression — and generating revenue — exploded in the mid-2010s, popularized still further with the explosive growth of Snapchat, Instagram — owned by Meta — and YouTube.
How Exactly Does TikTok Work?
TikTok allows users to film their own videos of up to 10 minutes. A database of sound bytes, songs or effects can enhance videos at a user’s creative whim. Initially, videos lasted a maximum of 15 seconds and primarily involved lip-synching or acting out comedy sketches. While “entertainment”-tagged videos are still the most-watched, followed by dance videos and pranks, the range of categories is limited only by creators’ imaginations.
ByteDance, the parent company of TikTok, reportedly generated about $58 billion in revenue in 2021, according to a January report by Reuters. If accurate, that was a 70% increase year over year, which represented slower growth than the previous year due to China’s increased regulation on tech companies.
However, The Wall Street Journal reported in October that ByteDance saw operating losses more than triple to over $7 billion, according to a financial report shared with employees. The document also showed an operating profit in the first quarter of 2022, suggesting the possibility of a turnaround.
According to analysts at Business of Apps, TikTok generated $4.6 billion in revenue in 2021 and had been downloaded three billion times as of August.
Susquehanna International Group has been one of ByteDance’s largest investors, but last October, the company tried unsuccessfully to sell $500 million of its shares, according to Bloomberg.
The Chinese arm of Sequoia Capital also counts itself as one of the early investors in ByteDance. Additional investors in TikTok parent ByteDance include the following, according to CrunchBase:
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TikTok’s Top Investors
- Sequoia Capital
- Kohlberg Kravis Roberts Japan
- Tiger Global Management
- GGV Capital
- CMB Wing Lung Bank
- Morgan Stanley
- Goldman Sachs
- Bank of China
How Does the Future Look for TikTok?
The company was perfectly positioned to benefit from the global quarantine created by the COVID-19 pandemic. The app has been downloaded more than three billion times and had 1.2 billion monthly active users users as of the fourth quarter of 2021, Business of Apps reported.
In the U.S., TikTok is the sixth-most popular social app, edging out Facebook Messenger, Snapchat and Twitter but coming in behind Facebook and Instagram, according to Statista.
One roadblock for TikTok has been the U.S. government’s security concerns regarding the app. A deal was struck for Oracle and Walmart to take over the U.S. operations of TikTok, but that deal reportedly has been tabled indefinitely while the Biden administration reviews security threats from Chinese tech companies, according to CNBC.
ByteDance’s stock buyback suggests that its anticipated initial public offering has been tabled.
TikTok still has a long way to go before it competes with the $2 trillion valuation of companies like Apple. However, the bottom line is that user penetration and in-app revenue are both showing strong, consistent gains, pointing the way to a bright near-term future for TikTok — as long as it’s not sidelined by regulations in the U.S. and China.
Should I Invest In TikTok?
Consider this before investing: TikTok is not a publicly traded company. Unlike so many of its “unicorn” brethren that have commanded multimillion-dollar valuations and then had a splashy IPO, you won’t find TikTok traded on say, the New York Stock Exchange. Since TikTok remains private, you’d have to find a way to convince management to accept your investment, which isn’t likely for most.
However, there could be good news later if ByteDance goes public. If an IPO comes to pass, you’d want to determine if investing in TikTok would even make sense for you as an individual investor.
Consider These Before Investing
- Reputation: Unlike a company like Disney or Walmart, TikTok is far from a “blue chip stock.”
- Private Company: TikTok isn’t subject to the same disclosures as a public company, meaning you won’t have access to quarterly earnings reports and other financial disclosures.
- High Risk/High Reward: Combined with the high valuation and the fate of similar companies that have gone before — e.g., Vine — TikTok solidly resides in the “high-risk/high-reward” camp.
- Security: Possible security concerns raised by the U.S. government include fears that information on millions of Americans could be passed to China’s Communist Party.
The bottom line is that any investment in TikTok at this time would have to be considered very speculative.
If you’re still interested in investing in TikTok, you might want to strongly consider enlisting the help of a fiduciary financial advisor, such as a Registered Investment Adviser or a Certified Financial Planner.
These types of professionals can not only help analyze your own investment objectives and risk tolerance but may also have better access to information about what an investment in TikTok would entail.
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Daria Uhlig contributed to the reporting for this article.
Information is accurate as of Nov. 3, 2022.
Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.
- Forbes. "China Rich List."
- Bloomberg. 2022. "TikTok Owner ByteDance's Valuation Drops Below $300 Billion."
- Forbes. "THE REAL-TIME BILLIONAIRES LIST."
- Reuters. 2022. "EXCLUSIVE TikTok owner ByteDance's 2021 sales growth 70%, slows yr/yr -sources."
- Crunchbase. "ByteDance."
- Oberlo. "MOST POPULAR SOCIAL MEDIA IN THE US."
- South China Morning Post. 2022. "TikTok owner ByteDance sees valuation drop a quarter to US$300 billion after latest share buy-back."
- The Wall Street Journal. 2022. "TikTok Parent ByteDance Sees Losses Swell in Push for Growth."
