A man walks past a sign of Chinese company ByteDance's app TikTok at the International Artificial Products Expo in Hangzhou, China, Oct. 18, 2019.CHINA STRINGER NETWORK/Reuters
Legendary Fidelity investment manager Peter Lynch said that observing what your kids do will help you pick winning stocks. These days, teenagers and young adults watch a lot of short videos on TikTok. But the Chinese platform is privately owned. We asked Justin Krieger, senior analyst and director of technology, media and telecommunications at audit, tax and consulting firm RSM Canada, where the sector is headed.
1. Krieger likes the emerging-technology hype cycle developed by consulting firm Gartner, and he figures social media generally is hitting stage five, the final one: the steadily rising “plateau of productivity” that follows initial euphoria, a crash, disillusionment and then enlightenment. “I don’t think consumers are going to get bored of social media,” he says.
2. TikTok’s tech isn’t hugely advanced. “I think it’s a platform within a sector. What it’s doing is somewhat not even unique these days,” he says. But TikTok sure is popular. Launched in 2016 in China by ByteDance, it hit North America in 2018 and reached 100 million monthly U.S. users in 2020—now the second-fastest ever after AI sensation ChatGPT.
3. Will TikTok remain a leader or fall behind, as Nokia and BlackBerry did in cellphones after Apple launched the iPhone? TikTok will have to keep changing and adapting, Krieger says. “Some things are going to fall behind, and some companies are going to fall behind. But some are going to adapt,” he says. And they will “continue to have a place in the market.”
4. Krieger cautions that he’s not an investment analyst or adviser. But remember that private companies usually only release select information, whereas public ones disclose much more and have to conform to rules when they do it. Take anything you read from a private company “with a grain of salt,” he says. Don’t get too excited or depressed.
5. Some analysts and advisers recommend investing in publicly traded companies that compete with privately owned sensations like TikTok. Krieger again urges caution. Meta, for example, owns several businesses, including Facebook, Instagram and WhatsApp. You have to compare apples to apples, he says, not just the hottest platform a company owns.
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