TikTok and the creation consumption balance


TikTok and the creation consumption balance

Skip ahead to: Down the rabbit hole

Every day, we watch 1 billion hours of video on Youtube, upload 250 million stories to Instagram and upvote 58 million times on Reddit. At the core of these far-reaching digital communities, there is a simple structure of incentive and reward binding millions of users in a relationship of creation and consumption. These platforms, built on a foundation of user-generated content (UGC), have come to define the day to day interactions of our lives. When we intuitively switch between the distinct modes of interaction across these platforms – from watching a video to posting a story – what we’re essentially doing is navigating the different UGC models that have become pervasive today. The evolution of these various models has resulted in communities that congregate around creation and consumption to varying degrees. Platforms like Youtube are consumption dependent with 79% of views accruing to only 10% of users, while a community like TikTok is creation dependent with up to 55% of viewers also creating videos.  

YouTube was not always consumption dependent, in its initial endeavour for network effect its primary creators also acted as its primary consumers. The amateur content creators that flocked to the platform saw the introduction of more lucrative rewards post the Google acquisition – a commercial model that hypercharged the race to build larger and larger followings. While the creators still appealed to the authenticity of UGC, they poached users with the promise of studio-level quality and frequent content updates. This race to be quicker and better left most common creators in the dust, struggling to gain any eyeball time let alone build a following. The incentives for creation that once seemed abundant and accessible to all users now appeared more exclusive to a production elite among UGC creators. Naturally, as smaller-scale creators tailed off, YouTube emerged as a consumption focused platform where success for the smaller creator was statistically more difficult. 

TikTok’s mimicry model: a tether to virality

TikTok’s explosive growth as it entered the market followed on the heels of strong positioning as a UGC centric platform made for the consumer and the creator. The primary concerns for a UGC creator on any platform is the ideation of original content and the potential return on effort. Where a user on Youtube may be apprehensive about creating content in such a competitive landscape, TikTok has sanded down the barriers to content creation to almost nil. It does away with the cognitive expense of creating a unique brand, encouraging mimicry as the tether to a larger community and millions of views. TikTok’s focus on mimicry through broader trends and fads, provides creators with the virality that they would otherwise need to build organically from the ground up. 

TikTok’s heavy-handed ML algorithm, leveraging a viewer’s unspoken preferences,  diffuses eyeball time across multiple creators belonging to any number of trends. It’s not to say that this algorithm prevents the emergence of ‘TikTok influencers’ but rather that the limelight tends towards shared virality within the broader community. In a model that natively leans on mimicry the consumer’s enjoyment of content is enhanced by contextual clues from neighbouring content. The interplay between individuals and the broader trends of virality is symbiotic but necessarily draws even the most successful individual creators back to shared ideas. This broad accessibility to viewership is only compounded by the ease of creating TikTok’s dominant content form – sub-minute videos filmed on a mobile camera. It is this fundamental difference in content creation that allows TikTok to maintain a creator-consumer balance where other UGC platforms tend to prioritise consumption. 

It is an oversimplification to assume TikTok has resolved for the stickiness of the motivation for UGC creation by reducing the onus of ideation. There is a far more nuanced engineering to the platform’s approach. While viral mimicry is the prolific form of UGC on TikTok – the real power of TikTok lies in their ability to optimise the utility of hard-won original ideation. Where one original idea on a platform like YouTube yields one video, one original idea on TikTok can yield hundreds of thousands of videos for the platform. This lowers the threshold count for original ideas across the platform as a whole and places TikTok in the powerful position of creating an incredible bank of content at a far lower ideation cost. TikTok’s users provided with the kernel of an idea take it and quickly churn out creative micro-variations that are engaging for the viewer. 

In the face of Youtube’s hallmark model of UGC, one that pivots on the concept of unique and original content, where does a preference for mimicry leave TikTok? 2019 was a banner year for the app, now downloaded more than 1.5 billion times. However, ongoing growth is contingent on its ability to enable content creation that will elicit and hold attention despite the mimicry model of ‘micro variations’. The current TikTok strategy actively promotes new trends as the engagement levels of existing trends tail off, refreshing the platform’s content for the hungry consumer. Its ability to continue pushing back the consumer threshold for mimicry will determine its ability to maintain its unprecedented growth trajectory – one that has thus far leveraged a hard to create balance of creation and consumption.

Down the Rabbit Hole

1. Social networks and the diffusion of user-generated content: Evidence from YouTube 

“One of the hallmarks of YouTube is the tremendous variation in the success of content, where a handful of videos acquire Internet superstar status while most languish in obscurity. The inequality and unpredictability of success in cultural markets has been attributed to social contagion. Social contagion broadly describes a class of phenomenon where preferences and actions of individuals are influenced by interpersonal contact, impacting the aggregate diffusion and spread of behaviours, new products, ideas, or epidemics. 

We build upon a rich set of explanations for social contagion, such as the desire for social conformity, homophily, and awareness diffusion. We find that social interactions play an important role not only in the success of user-generated content but also on the magnitude of that impact. 

We find that diffusion proceeds in a two-stage process in which a product’s search characteristics matter in the early stage in triggering awareness diffusion creating a role for subscriber networks, while the experience characteristics matter more in the later stage, and thus the role of a central channel in the friend networks in disseminating experience related information.”

Source: Social Networks and the Diffusion of User-Generated Content: Evidence from YouTube – Anjana Susarla, Jeong-Ha Oh, Yong Tan (March, 2012)

2. Stages of motivation for contributing user-generated content

 Initial ContributionSustained ContributionMeta Contribution
DescriptionThe first contribution, all contributors must pass through this stageContributions beyond the initial point of interaction, will form the bulk of UGCA few contributors will shift focus to creating structure and enabling further contributions by others
MotivatorCuriosity, testing the waters.Intrinsic enjoyment of the contribution process and feedback from other participants.Group membership and belonging. Intrinsic enjoyment.
ConditionContent platform needs to be visible and easily accessible with low barriers to creationThe perception that the platform requires or benefits from their contribution and that their contribution is well received.Ideology and group identification

Source: Stages of motivation for contributing user-generated content: A theory and empirical test – Kevin Crowston & Isabelle Fagnot

3. Clubhouse introducing audio UGC

Clubhouse, a new audio-based social platform, allows a user to jump into live chat rooms together, join their conversation or just listen in on interesting conversations. 

Source: Clubhouse voice chat leads a wave of spontaneous social apps – TechCrunch

4. Exposure: UGC Platforms

Exposure to UGC platforms like Youtube and TikTok is less straightforward, they are often tied up in much larger umbrella corporations whose exposure is diluted by adjacent vectors including broader ad-revenue, gaming and entertainment. Understanding Youtube and TikTok’s role in the overall revenue of their respective parent companies, Alphabet and Bytedance, dictates the concentration of exposure.

Alphabet  & Bytedance

Alphabet’s near trillion-dollar valuation isn’t news to anyone who’s been watching the giant grow since the 2015 restructuring that made it parent to Google and all of Google’s subsidiaries at the time, Youtube one of its most notable entities. Youtube’s ad revenue ($15.2 billion) the past year has accounted for almost one-tenth of Alphabets 2019 revenue, no doubt a strategic release of strong financials to end the 14 year silence on Youtube’s performance. 

Much younger, TikTok’s revenue accounts for only 0.88% of Bytedance’s estimated $20 billion in revenue in 2019. Of the $176.9 million raked in by TikTok, China’s IOS consumer spend accounts for a large chunk ($122.9 million) followed by the U.S. ($36 million) and the U.K. ($4.2 million). Ad revenue is Bytedance’s strongest driver and in the first half of 2019 its digital ads saw a 113% growth, but largely due its other subsidiaries and businesses. TikTok still in its early stages of monetization will continue to experiment with its revenue generation, leaving its revenue potential still largely untapped. Scaling TikTok’s contribution to Bytedance’s growing valuation will heavily depend on how effectively TikTok converts its social capital into actual revenue streams.

Alphabet Valuation (GOOG)Alphabet Revenue Youtube RevenueYoutube share of Alphabet Revenue
$900+ billion
(April 2020)
$161.9 billion
$15.15 billion
Bytedance Valuation  Bytedance RevenueTikTok RevenueTiktok share of Bytedance revenue 
$78 billion
$20 billion
$176.9 million

Unsurprisingly, ETF options for UGC related exposure are also tied up in the dilution of parent entities as well as broader ‘social media’ adjacencies. 

Global X Social Media ETF (SOCL:US):

Top 10 Holdings:5 Year ReturnTracked Index
Tencent Holdings 11.6%
Facebook 10.26%
Naver Corp 8.35%
Snap Inc 7.59%
Twitter Inc 6.68%
Spotify Technologies SA 5.51%
Netease Inc 5.4%
Alphabet Inc 4.82%
Yandex NV 4.57%
IAC/Interactivecorp 4.43%
11.95%Solactive Social Media Total Return Index: companies involved in the social media industry, including companies that provide social networking, file sharing, and other web-based media applications.


We welcome thoughtful discourse on all our content. If you would like to further explore or discuss any of the ideas covered in this article please contact our editors directly.
Contact Details