One of the purest forms of American capitalism today involves, ironically enough, Chinese enterprise.
TikTok, the wildly popular app imported from Chinese company ByteDance, continues to circle around the original king of social media, Facebook and Instagram parent Meta, with the latest example arriving this week.
After days of snowballing criticism over changes to the Instagram app designed to mimic popular TikTok recommended videos, Instagram backtracked on Thursday and said it would reverse course on the update. In a interview with PlatformerInstagram boss Adam Mosseri never made a reference to TikTok, but implicitly acknowledged that his team had been unable to replicate the rising competitor’s secret sauce.
“For new flow designs, people get frustrated and the usage data isn’t great,” Mosseri said. “So there, I think we need to take a big step back, regroup and figure out how we want to move forward.”
The episode offers a stark case of American free markets at work, albeit tinged with the shadow of the Chinese government. Just as Facebook conquered the Internet by perfecting a relatively new concept – an interactive digital experience powered by users’ social networks – TikTok has created something that could be so superior that it ultimately supplants its predecessor.
With Meta boasting more than 3.65 billion monthly active users across its family of apps, the conventional wisdom is that the value of the business – and the main bulwark against competition – is the network of interconnections built into its massive audience. You must be on Facebook or Instagram because that’s where all your friends live and all their favorite content (photos, news, gossip, party invitations).
TikTok has reversed this logic. The ByteDance unit averts Meta’s eyes not by having built an equally large social network, but by avoiding the social graph altogether. Instead, TikTok leverages superior AI-powered algorithms to dazzle and hook users.
Consumers are voting with their thumbs, downloading TikTok at breakneck speed, and closing the usage gap with Facebook and Instagram. The world of TikTok the number of active users has increased from 55 million in early 2018 to 1 billion in mid-2021. During the same period, Facebook’s monthly asset count fell from 2.2 billion to 2.9 billion, with a dramatic slowdown over the past 12 months. Meta does not regularly publish Instagram usage data.
Meta tries to keep up with the times. During his earnings call on Wednesday, Mark Zuckerberg said he wants to double the amount of AI-recommended content displayed on Facebook and Instagram by the end of 2023. But the reversal of Instagram’s redesign this week highlights the gulf that exists between Meta and TikTok.
In essence, TikTok is simply better at knowing what you want and delivering it to you.
The origin of this phenomenon is certainly the subject of intense debate, often centering on thorny questions regarding ByteDance’s ties to the Chinese political regime.
Since ByteDance is a private company, we know little about its financial ties to the Chinese government. Information reported last year that Chinese executives have taken one of three seats on ByteDance’s board of directors, as well as a 1% stake in the company, although the Chinese government doesn’t really need official seats on the board. administration or equity investments to exercise authority over a national company.
There’s also the specter of TikTok benefiting from the Chinese version of ByteDance’s app, Douyin.
There is no evidence to date to suggest that Douyin perfected superior AI technology using immense amounts of intrusive data collected and provided by the Chinese government, but it is certainly a possibility. And like the New York Times reported late last year, an internal company document suggests that TikTok’s development process “is closely tied to the Douyin process.” (A TikTok spokeswoman told the Time that “while there are commonalities in the code, the TikTok and Douyin apps run entirely separately, on separate servers, and neither code contains user data.””)
Nonetheless, the rise of TikTok is shaking up a decade of Silicon Valley dominance, with the potential to reshape the industry’s commercial and regulatory landscape. Meta officials are spending huge sums of money to remodel their product in the image of TikTok, diverting money from their R&D budget into augmented and virtual reality. The emergence of TikTok also takes some of the antitrust heat away from Meta, allowing Zuckerberg’s team to argue that this fast-arriving freight train shows the social media ecosystem remains competitive.
Silicon Valley loves to talk about using innovation to “disrupt” entrenched industries. The rise of TikTok is a painful lesson for Meta, but one that tech entrepreneurs should appreciate.
TikTok could eventually fall victim to changing tastes, a more forward-thinking competitor, government intervention, public scandals, or its own inflated largesse. (Does something sound familiar to you, Meta?) If that happens, it will once again show capitalism at its best.
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A winning hand. The House adopted an extensive technology-related spending program On Thursday, that includes $52 billion in subsidies for semiconductor makers, sending the bill to President Joe Biden for his expected approval, The Associated Press reported. House Democratic leaders pushed through the $280 billion bill despite last-minute fears that Republican members would scuttle it in response to a surprise Senate deal reached Wednesday on a separate spending and tax package . House members voted 243-187 in favor of the so-called CHIPS-plus bill, with 24 Republicans backing the measure.
Don’t panic here. Apple shares rose 3% at midday on Friday following the tech giant’s third fiscal quarter earnings slightly beat analysts’ forecasts, reported Bloomberg. The iPhone maker posted revenue of $83 billion for the quarter, beating Wall Street forecasts of $82.8 billion and earnings of $1.20 a share, four cents better than intended. Sales of Apple’s smartphones and iPads beat analysts’ forecasts, although its Mac, laptop and services revenues were slightly lower.
Find its peak. Amazon frames delivered a surprisingly optimistic outlook on consumer spending in an earnings call on Thursday, leading to an 11% increase in trade at midday on Friday, CNBC reported. The company released a mixed second-quarter earnings report, beating revenue estimates but falling short of profit forecasts as the e-commerce giant’s core retail business continued to see slower growth. But Amazon’s high-income customer base, which hasn’t cut spending as much as low-income shoppers, should support its e-commerce business in the second half of 2022.
The objection has been duly noted. Chairman of the Federal Trade Commission Lina Khan overruled the recommendation of agency staff against the continuation of a challenge of Metathe acquisition of a virtual reality developer In, Bloomberg reported on Friday, citing three sources familiar with the decision. Khan’s support for the lawsuit, which seeks to halt Meta’s reported $400 million purchase of the company, illustrates his commitment to ending big acquisitions by Big Tech companies after more than a decade of backlash. unfettered agreements. Critics of the FTC’s action argued that the Meta-Within deal did not meet the legal requirements to halt an acquisition on anticompetitive grounds.
FOOD FOR THOUGHT
How they really feel. Intel announced appalling third-quarter financial results Thursday night, and Wall Street is taking the chipmaker to the stake. MarketWatch reported on Friday that analysts criticized Intel for falling well short of revenue and profit estimates, despite the company’s claims of an impending revival. A sampling of the ominous phrases used in client notes: “circle the drain”, “their competitor is about to destroy them”, “we just don’t see a way forward”, “about as messy as ‘a quarter maybe’. The disappointing results, which stem from slowing demand and internal production issues, were associated with a reduction in the company’s guidance for the current quarter. Intel shares fell 10% in midday trading on Friday.
Barclays analyst Blayne Curtis also suggested more pain could follow.
“The substantial shortfall smacks of time to clear the bridges some investors have been looking for, but we’re not even sure if the estimates are sufficiently reset and we’re struggling with what exactly the bullish case is with ongoing roadmap issues. and such a disconnect between corporate optimism and current reality,” he wrote in his note to clients.
IN CASE YOU MISSED IT
After putting a dent in Facebook and Instagram, TikTok has Spotify in its sights nextby Christine Mui
AI is rapidly transforming biological research, with big implications for everything from drug discovery to agriculture to sustainabilityby Jeremy Kahn
Ethereum Original Coin Prices Soar as Crypto Miners Flock to ETC Ahead of Imminent Mergerby Christiaan Hetzner
Leaked documents show how TikTok staff were told to ‘downplay’ parent company ByteDance and any ties to Chinaby Christiaan Hetzner
TikTok says it rejected China’s request for stealth propaganda account targeting Western audiencesby Olivia Solon and Bloomberg
Someone Has Recreated Kmart In Virtual Reality And Has Thousands Of Nostalgic Fansby Chris Morris
Twitter’s 5-day lawsuit against Elon Musk will begin October 17 in Delawareby Jeff Feeley and Bloomberg
BEFORE YOU LEAVE
The class is in session. TechCrunch reported on Friday that the companies behind Hulu (disney) and HBO Max (Discovery of Warner Bros.) have found an unusual arrangement to share the broadcasting rights of the ABC show Abbott Elementary School. I’m going to use this as a not at all shameless entry point to promote this wonderful piece of old school network comedy. Star Creator Quinta Brunson is a real delight, Sheryl Lee Ralph and Lisa Anne Walter are perfect as grizzled veteran teachers, and by Janelle James the main incompetent is the best character on TV (apologies to Jimmy McGill/Saul Goodman). I highly recommend catching up on the first season, wherever it airs.