TikTok and the Sorting Hat
This insightful analysis of the rise of TikTok by Eugene Wei decodes how an algorithm worked around significant cultural relevance barriers. In contrast to traditional social media growth and relevance, which are determined by social graphs and the actual (often physical) connections people have, TikTok de-emphasizes relationships to focus on shared interests elucidated by the algorithm. This transcends differences between eastern and western cultures. From Wei: "The rise of TikTok updated my thinking. It turns out that in some categories, a machine learning algorithm significantly responsive and accurate can pierce the veil of cultural ignorance. Today, sometimes culture can be abstracted." Wei marvels at the ByteDance/ TikTok algorithm's powerful ability to connect the right content to the right consumer: "It is a rapid, hyper-efficient matchmaker. Merely by watching some videos, and without having to follow or friend anyone, you can quickly train TikTok on what you like. In the two-sided entertainment network that is TikTok, the algorithm acts as a rapid, efficient market maker, connecting videos with the audiences they're destined to delight. The algorithm allows this to happen without an explicit follower graph." Past Beach Reads have talked about the value of demand versus supply aggregation, what it means to run a marketplace or platform, and how customer focus is an important growth driver. According to Wei, TikTok does a lot of each of these right. "In a two-sided entertainment marketplace, they provide creators on one side with unmatched video creation tools coupled with potential super-scaled distribution, and viewers on the other side with an endless stream of entertainment that gets more personalized with time. In doing so, TikTok, with a product team and infrastructure mostly located in China, came out of left field and became a player in the attention marketplace on the same playing fields around the world as giants like Facebook, Instagram, Snapchat, YouTube, and Netflix." With a rumored acquisition price around $30B, Wei thinks TikTok is a bargain and that more US tech companies should be bidding for what he sees as an incredibly high-quality asset.