Snap (NYSE: SNAP) CEO Evan Spiegel loves TikTok, the short-form video-sharing app that zoomed past Facebook (NASDAQ: FB) and Facebook-owned Instagram last year to become the second-most downloaded app. (WhatsApp held the download crown at No. 1.)
TikTok's parent company, privately held ByteDance, reported 1.5 billion monthly active users and 700 million daily active users across its family of about a dozen apps in July. Spiegel thinks there's a strong potential for TikTok to grow bigger than Instagram and draw engagement away from the popular social media app.
At the annual Digital Life Design Conference in Munich, he likened the landscape of communication technology and social media to a pyramid: "At the base of that pyramid -- the very broad base -- is self-expression and communication. And that's really what Snapchat is all about," he told the audience. "As the pyramid gets narrower, you sort of have maybe the next layer, which would be like 'status.' ... And then sort of at the top of the pyramid, which I think is represented by TikTok, is really talent."
Spiegel says original social media companies like Instagram are more status-based content. And talent-based social media apps like TikTok could draw people away from those types of apps, including Instagram. Meanwhile, everyone will always want to connect with their friends and see what they're up to.
Image source: TikTok.
"More entertaining and more fun"
If Instagram is all about following people you find interesting, TikTok is all about surfacing the most interesting content from those people (and people you don't know yet).
When asked if he thought TikTok's user base could surpass Instagram's, Spiegel said, "I think it's certainly possible because this talent-based content is often more interesting than status-based content." And while fewer people might be able to create truly interesting content -- per Spiegel's pyramid model -- TikTok does an excellent job at surfacing the most interesting content its users create and keeping viewers engaged. The average user spends over 45 minutes per day on TikTok -- more than either Facebook or Instagram (or Snapchat for that matter).
Instagram is more focused on the feed of content from users you already follow. Instagram's Explore tab is better suited for surfacing interesting content, but it's relegated away from the main part of Instagram -- the feed and following. That said, Instagram has made several improvements to Explore over the last few years, and it's taken steps to monetize the valuable asset.
There's certainly overlap in creators and the type of content on Instagram and TikTok. But the talent-based focus of TikTok can make it more engaging than its predecessors.
Is Snapchat safe?
Spiegel suggests that Snapchat's core use case of more private sharing with friends is harder to draw engagement from than status-based sharing from influencers like on Instagram. "Everyone's interested in what their friends are doing," he said.
Likewise, Snapchat's position at the base of the pyramid -- where users are just sharing how they feel and communicating with friends -- means the content on Snapchat is easier to create. It'll be a go-to tool just for creating fun little photos and videos to share with friends, whereas TikTok is for creating content with the intent to entertain the broader public -- something only accessible to a small group of people.
The challenge for Snap is that it's very hard to monetize private sharing and messaging. Just ask Facebook.
Snap's Discover platform has emerged as a key revenue driver. It's investing heavily in Snap Originals to engage its user base and expand ad inventory. And it's generally trying to foster that top of the pyramid -- talent-based sharing -- within Snapchat.
To be sure, TikTok is just as much a threat to Snapchat as it is to Instagram. But while Instagram can leverage its user data to produce more valuable ad impressions, Snap doesn't have the same advantage over TikTok when it comes to drawing in advertisers. Investors in social media companies -- regardless of what part of Spiegel's pyramid their favorite companies mainly operate in -- need to keep an eye on TikTok's growth and ability to attract advertisers.
10 stocks we like better than Snap Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Snap Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of December 1, 2019
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.