The real story behind TikTok

Bloomberg business reporter Shelly Banjo explains how a goofy Chinese app took over the world.

About nine months ago, it seemed like TikTok’s wild ride might be coming to an end. In August 2020, Trump signed an executive order to effectively ban the app from US stores. Devastated creators filmed emotional eulogies for the platform on which they’d found community and fame, while newly appointed CEO Kevin Mayer quit the role that had curdled into something he’d never signed up for. That same month, Facebook released its copycat product, Instagram Reels, ready and waiting for the demise of its Chinese competitor.

But even then, it was clear to those who’d been paying attention that TikTok was never going to go away that easily. By the time of the presidential election, multiple courts had halted the ban, and with a new administration taking over the White House, dealing with the TikTok mess was far from an immediate priority.

This August, meanwhile, will mark three years since TikTok launched in the US and became the first-ever Chinese-owned app to fully penetrate the American market — and it’s been an object of fascination, fear, confusion, and joy ever since. As with many companies, the origin story of TikTok is a lot more interesting than the story that TikTok itself likes to tell, and that’s the focus of two feats of reporting from recent weeks. One is Forbes’s feature on the toxicity and intensity of TikTok corporate, particularly over the course of 2020.

The other is Bloomberg’s second season of its Foundering podcast, which covers the inside story of TikTok’s rise. Last week, I spoke to its host, Shelly Banjo, who explained how a goofy app called Musical.ly was bought by app giant ByteDance and became the defining platform for a generation. Below, we discuss the inner workings of the TikTok fame machine, the rivalry with Facebook, and the fact that the most common misconception people have about TikTok is that it’s all fun and games.

When Musical.ly first launched, people were extremely skeptical. Snapchat had already cornered the teen market, and Vine had totally failed, so short-form video was a tough sell. How did it manage to succeed despite its doubters?

I think there are two reasons it succeeded: One is that Vine and others were looking at older teenagers and high schoolers, and what Musical.ly was able to do was get people really young. At the time people called it “the world’s youngest app.” Nobody had created an app for that group, and for good reason, because it can be dangerous for 12-year-olds to go on an app, and 12-year-olds aren’t loyal customers.

The second reason is its focus on creators. Alex [Zhu, the founder of Musical.ly] showed a lot of foresight. Musical.ly realized that if they can make their creators famous, then they will be extremely loyal. That continues up until now.

Alex created fake usernames to talk to people on [Musical.ly]; he would create WeChat groups and convince younger Musical.ly users and their parents to get on WeChat. He would take them and their parents out for dinner and ask them, “What problems are coming up?” and would change things [on the app] on the fly every single day. I just find that so fascinating, a tech CEO literally taking someone out for dinner from the middle of nowhere Alabama to help them be better at Musical.ly. I can’t imagine Mark Zuckerberg or Evan Spiegel doing that.

At the time, it was unthinkable to Silicon Valley that a Chinese app could become so well-known and well-loved in the US. How did Musical.ly deal with that stigma?

When TikTok was Musical.ly, there were all these American investors that had invested in it, and Facebook originally sought to buy them. But then ByteDance, which is a Chinese company, came and bought it, and there was this moment of rebranding, like, “Now we’re an American company, or a global company.” The PR person would call up reporters and be like, “Stop calling us a Chinese company, we’re registered in the Cayman Islands.” They [later] hired an American CEO, Kevin Mayer; they did all these things to show that they weren’t a Chinese company, they just happened to have a founder that lived in China.

It sounded like working at ByteDance was … demanding. Can you describe China’s work culture a little bit?

I spent a few years in China and worked with a bunch of different tech companies, like Xiaomi, ByteDance, Tencent, and Alibaba. A lot of them are very similar in their “996 culture,” where you’re looking at 9 am to 9 pm, six days a week. But really, it was a 24-hour work culture where you’re expected to answer all the time. You constantly work, and they throw more people at things rather than technology. Compared to the US tech companies, a lot of Chinese tech companies have way more employees because they utilize people more, so it’s very common for people to get burnt out. They’d be working constantly and leave because they couldn’t take it anymore.

In August 2018, Musical.ly became TikTok overnight. Again, for the first couple of months, people were still super skeptical — there was this lingering belief that it was just for kids, that it was weird and cringey and embarrassing. How did the tides begin to turn?

They spent a ton of money. They would take out these ads on Twitter [and other platforms] where there would be TikTok videos, and inside of them, they would have an install button. So you’d be scrolling through Twitter, and you’d see a TikTok. They were literally siphoning off people from their competitors on Facebook and YouTube.

Once you’re No. 1 in the app store for a while, people really start to download you, but then it was still mostly kids. I think a real turning point was the pandemic. It became very mainstream for adults when all the kids were locked at home and had nothing better to do. TikTok also started differentiating and made a push for more creators around food, moms, and different sets of groups because they wanted to increase the age of users.

And by “making a push for creators,” you mean literally paying influencers and celebrities to join the app, right?

Well, that’s a tricky question. In China, they definitely have had [influencers] on salary. But in the US, what’s more likely to happen is that they will organize a sponsorship with a brand so they can ensure that creators get paid. They might say, “Hey, we want you to do this big live event with us, and we’ll get a sponsor and then that sponsor is going to pay you a million dollars,” or whatever it is.

They’re very careful in the US to not necessarily pay directly. It’s a little bit more like, “Let me call you into the TikTok office, we’ll make an account for you and we’ll have someone show you how to do it. We’ll bring you to Charli D’Amelio’s house and you guys can collab and we’ll find a brand for you who will pay all this money.” Everybody gets paid.

The clearest way that this system works definitely seems to be within the music industry. You recently wrote a piece about how TikTok was basically responsible for the success of Megan Thee Stallion’s “Savage.”

I definitely want to be clear that Megan Thee Stallion is an amazingly talented performer and artist, and that we’re not discounting that. What I thought was really interesting was that the record label wanted “Captain Hook” to be the focus track. They thought it was her best song, but the head of music partnerships at TikTok basically said, “No, don’t put that one on there, instead let’s peek into our users’ brains.”

There are these secret sound folders on TikTok that every user has, where they save a sound because they want to use it tomorrow or next week. TikTok can see what you’re intending to do in a couple days, so they can almost predict whether a song will go viral. They started seeing that it wasn’t “Captain Hook” that people got into, it was “Savage.” Once they found that information out, they could plan all the marketing around that song, and they could make it so that you saw a “Savage” video come up right away on your For You page.

TikTok’s algorithm naturally makes some people uncomfortable because it really does feel like it’s more powerful at getting to know you than anything we’ve seen before. I know this is the million-dollar question, but in your reporting did you get any insight into how the algorithm actually works?

It is all speculation, and I think it is constantly changing. We spoke to some AI associates and the former head of AI, and we spoke to some people who handled content moderation.

They’re taking hundreds and hundreds of data points about you and figuring out what is going on to keep you on the app and then showing it to you again and again.

A lot of that has been done by Twitter and Facebook as well, but it’s just a different velocity. Facebook’s viewpoint is that you care about people and the connections you’ve made, and you want to see things that make you feel more a part of this community. ByteDance has a very different point of view, which is that what you care about has nothing to do with what your friends care about.

People complained when their parents got on Facebook, then it no longer became cool. But that doesn’t matter for TikTok, because you’re not seeing the same thing that your parents are, you’re only saying what you want to see. I think that creates a staying power for the app that just doesn’t exist [elsewhere].

What are the biggest misconceptions people have about TikTok?

I think the biggest misconception is that TikTok is this ephemeral, fun, authentic place where everyone can be themselves. These creators, as you know, work so hard. It’s their job; they will sit there for hours and hours making 15-second videos that appear fun and authentic.

Young kids are on the app and they’re seeing these really well-produced things that they might not necessarily be able to do, and then they’re holding themselves up to that standard. You speak to these kids that are spending five hours a night on the app and this is their worldview, and it’s all manufactured. How is it really affecting the people who are using it? I don’t really know the answer to that. It could be all fine. But it does worry me.

As soon as TikTok took off, there was panic about how all these kids are on this app owned by China. To some extent, it’s a reasonable concern, but do you get the sense that users are in any sort of danger?

When you talk to 15-year-olds, they’re like, “Oh, everybody’s taking your data. Facebook’s taking my data, Google’s taking my data, like, I’m totally fine with that. I know the contract: I give you my data, I get this app for free.”

But the fact is that TikTok is owned by a Chinese company, and the Chinese government has a law on their books that they can require all tech companies to give over their data. TikTok says it hasn’t given any data to the Chinese government, but we don’t know if that means they’ll never give any data in the future, because it’s really impossible to argue over something that hasn’t happened yet. Maybe they are creating an entire database of hundreds of millions of teenagers that eventually one day will end up in the hands of the Chinese government, but we don’t know. Tiktok obviously denies any such thing, but the person in charge of TikTok today might not be in charge of TikTok tomorrow, because in China they can just take over your company.

What’s the future of TikTok now that Trump isn’t explicitly threatening its demise?

I think that they are trying to keep a low profile politically. It’s hard to tell, because I don’t think anyone expected what Trump did to begin with. I do think that they’re going to continue to grow. They’re getting into e-commerce now, which I think could be huge for them.

People in this industry still today are asking the question, “Is TikTok just a fad?” To me that’s crazy, because it’s this huge, mega-company that’s the most downloaded app, it’s gotten people like Mark Zuckerberg scared, their parent company is about to IPO. The idea that it’s just like Vine, that it could fade away tomorrow, is crazy.

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