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Startups

TikTok gives Chinese advertisers a trick to target Gen Z

Seconds-long video app provides a rabid audience of users in teens, 20s

TikTok users have set consumer trends, fueling sales of bubble tea and body spray brands. (Photo by Daisuke Harashima)

DALIAN, China -- Growing ranks of Chinese companies are embracing TikTok, a video-sharing app that boasts 400 million users in the country, as a way to win the hearts of young consumers who tend to click off conventional advertisements.

TikTok, run by Chinese startup ByteDance and known as Douyin in its home market, encourages advertisers to create clips of dancing and other content, just like general users. The advertisers then insert their corporate logos or mascots in the videos in hopes of retaining the attention of Generation Z users.

"I thought it was a user clip," said Li Miaomiao, a 21-year-old Dalian resident who was perplexed when watching a video recently. "But it turned out to be an ad."

She was watching one of her favorite TikTok dancers when a huge white stuffed dog suddenly appeared in the background. It was the canine mascot of JD.com, the Chinese e-commerce company.

TikTok is now one of the most downloaded apps in China. The service also has spread to Japan, Southeast Asia and the U.S. Users record and post clips of themselves lasting up to 15 seconds as they are lip-syncing, dancing or making silly movements.

Advertisers in China are on track to spend $8.8 billion this year on video-hosting platforms, or five times more than in 2013. But appealing to Gen Z, which makes up the bulk of the app users, is difficult.

"We're looking to draw more young shoppers, so we'll be strengthening our presence [on TikTok and other video platforms]," a JD.com executive said.

TikTok does offer conventional advertising formats: ads played when users open the app, and those shown in corporate accounts. But the biggest revenue source is the video clip designed not to look like an ad. These clip-type ads cost about 1 yuan (14 cents) per view, depending on the number of clicks.

Advertisers also like that TikTok uses artificial intelligence to measure what users watch. The company categorizes user interests like autos and food, providing such data to enhance advertising efficiency.

Many products that became top sellers this year in China can thank TikTok for their popularity.

CoCo Fresh Tea & Juice, a bubble tea chain, saw a constant stream of customers making an original drink with toppings that were not on the menu after it was featured in TikTok videos. At Miniso, a low-cost household goods retailer, a body spray that smelled like a perfume went out of stock after TikTok users rushed to buy it.

Advertisers increasingly are shifting away from other social media platforms like WeChat, the messaging app from Tencent Holdings. The wide range of users, from children to adults, makes targeting the ads difficult. These ads cost about 10 times more than at TikTok as well. The app also may benefit from YouTube being blocked in China.

The country's rollout of the 5G mobile network next year should provide a boon to the startup as well. The faster network will enhance the video-viewing experience, encouraging users to spend more time on the platform and improving TikTok's appeal as an ad medium.

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