May 8, 2023

The Value of TikTok Advertising

by Digital Marketing Institute

The growth of TikTok has been phenomenal. The user growth that they have achieved in only 4 years, took Facebook almost 7 years. Marketing on TikTok is becoming a must-have for brands. Still we can see that the challenge for TikTok (as it was for Facebook and every other social media app) is to make the shift from attracting an audience to attracting enough advertisers to make it a sustainable business. After all, advertising makes the World Wide Web go round.

According to a dataset collated by Wolfgang Digital, it’s evident that while spend on TikTok has increased by 800% YoY, it’s still only a fraction of the amount spent with Meta (5% to be precise). Advertiser adoption has been slow, but is accelerating rapidly.

Wolfgang analysed TikTok performance over the last year to see exactly what the advertising opportunity is.  

Here, Brendan Almack and Roisin Linnie of Wolfgang Digital discuss the results they found from that analysis.

TikTok is cheaper than its competitors

The first opportunity is the cost. Since user growth is outpacing advertiser adoption, there’s a massive cost efficiency for those wanting to advertise on TikTok. Here’s how it compares to Meta (i.e. Facebook & Instagram):

The Value of TikTok Advertising

CPM, which is an indicator of reach, is considerably cheaper on TikTok. In fact, it costs 2.5 times more to reach the same number of people on Meta.

Looking at the CPC which is typically a proxy for the cost of getting the user to click on the ad and visit your website, TikTok again offers value with CPCs being 30% cheaper.

Read more: How to create TikTok content.

TikTok users are more engaged and less likely to leave the platform

Beyond reach, advertisers are obsessed with how much users engage with their ads (like them, share them, comment on them).

The Value of TikTok Advertising

In this study, the Engagement rate on TikTok ads is 835% higher than Meta. This is likely due to the authentic nature of the ads on the platform, where they often don’t look like ads which leads to a far higher opportunity for audience engagement.

Your chances of driving comments and shares are far higher on TikTok but one of the interesting features of this data is that users on Meta are almost three times more likely to actually click on an ad. So, why is that?

Part of the reason might have to do with how TikTok ads are designed. TikTok ads appear like any other full-screen video on the platform, so they aren’t always immediately discernible as ads. In addition, TikTok’s mantra to advertisers in 2022 was - “Don’t make ads, make TikToks.”

Perhaps another reason is that the TikTok algorithm is particularly good at showing users content they like or want so that users can’t bear to leave the app. The TikTok lost hour is real.

Read more: Know what times are best for when you should post on TikTok.

TikTok's impact on sales

So, for advertisers, TikTok is cost effective to reach and engage with an audience but more difficult to prise them away from the clutches of the algorithm than that of Meta.

Ultimately though, the main reason advertisers use either of these platforms is to grow sales. How does TikTok perform here?

This is where things get tricky for advertisers. The return on ad spend (ROAS) offered by TikTok ads is 26% less than Meta, but still a very healthy 11x return on an advertiser’s investment.

The Value of TikTok Advertising

However, we’ve already outlined how users are less likely to leave the TikTok app (see table 2), which means that when measured directly, the cost per sale for TikTok is seven times that of Meta.

That doesn’t tell us the full story though because we know that users are influenced by the ads that they see (but don’t click) on TikTok.

According to recent research, 49% of TikTok users purchase a product or service from a business after seeing it advertised or reviewed on the platform. Take #TikTokMadeMeBuyIt as an example of its influence. This hashtag has over 6 billion views and showcases the vast amount of products that users have been influenced to buy. 
 

The Value of TikTok Advertising

Ways To Measure TikTok's Impact On Sales

Wolfgang Digital has been testing alternative ways to measure TikTok’s impact on sales. Here’s what we have learned:

1.     TikTok has a measurable impact on searches for a brand. In one case they measured a 10% increase in brand searches that correlated with initiating TikTok activity. These sales might have been inspired by TikTok, but credit will go to Google search.

2.     TikTok has an in-store impact. This was tested with some clients selecting niche products that were only promoted through TikTok. In store sales uplifts of between 25% and 35% were recorded.

Neither of the above examples are perfect and there are undoubtedly external immeasurable factors, but confidence is growing in TikTok’s ability to influence sales. The challenge is that current ways of measuring digital marketing performance are unlikely to reveal the full impact.


 

“When you create an app that is designed to keep users on it, the way we measure the advertising impact will need to evolve. ”

What’s the verdict on TikTok Advertising?

Meta and Google have had a vice-like grip on digital ad spend for a number of years. The wider industry will benefit from the competition that TikTok brings to the ad ecosystem. Every platform will be forced to innovate and get better as a result. 

Right now, TikTok offers tremendous value for advertisers to get their brand in front of a highly engaged audience. That won’t always be the case as more advertisers join the platform. There is an early adopter advantage here. 

If you currently measure the impact of your digital marketing via last click attributed sales in Google Analytics, you’ll be disappointed by TikTok performance. In fact, you’ll be disappointed by all channels that aren’t Google. Expanding your measurement protocols to brand searches, share of search and in-store impact will give you important additional context on TikTok’s true performance.

 

Brendan Almack is managing director of Wolfgang Digital and Roisin Linnie is the agency’s Head of Social.

Become a TikTok Marketing Expert

The success of video as a content format across social media makes it a powerful tool to connect with prospects and customers. DMI’s certified Social Media and Marketing course will help you understand the intricacies of platforms such as TikTok, YouTube and Instagram to grow and engage your audience. You will also learn how to conduct social research and devise a cohesive digital marketing strategy across channels.
 

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