TikTok is like crack cocaine, according to a Wall Street research firm. A top market analyst explains how the Chinese app has displaced giants across Big Tech.
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Phil Rosen
Aug 25, 2022, 19:40 IST
A person walks past a sign for TikTok.Jens Kalaene/picture alliance via Getty Images
TikTok is addictive, easy to access, and provides quick hits — which prompted Bernstein to compare it to crack cocaine. A top analyst breaks it down.
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1. TikTok's dominance is getting noticed on Wall Street. With over 1 billion users logging on to the app per month, every major US social media brand is trying to replicate the success of the Chinese video platform.
"The algorithm pushed the most viral content directly to the user delivering endorphin hit after hit with each swipe," the authors wrote.
It's an extreme comparison; the real crack epidemic devastated communities and killed thousands. While the note doesn't suggest TikTok will kill anyone, it does present a severe description of the app's addictiveness.
I sat down with Bernstein senior analyst Mark Shmulik for a deeper dive.
"If you look at stocks like Meta and Snapchat, they've underperformed, and that's in part because of TikTok," Shmulik told me.
Though shares of TikTok parent ByteDance are not public, its meteoric rise is in stark comparison to the sagging fortunes of its competitors. Shares of Meta have dropped more than 50% so far this year, and Snap has seen a 76% decline.
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"Really, it's something new that's come around and displaced the giants."
Competitors like YouTube, WeChat, and others are diving into this "digital epidemic", as he describes it, trying to grab TikTok's ballooning share of social media users.
"You get these hits every video, and it's really easy to access," Shmulik said. "It's about a faster, shorter high, with a lot of addictive properties."
The internet-stock expert also touched upon why TikTok has sparked such a dramatic ripple across Wall Street.
TikTok, ultimately, has emerged as a master attention-grabber — and eyeballs are a key currency for investors.
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"If you think about how those stocks trade, it starts with user engagement," he said. "Anything that's shown exponential growth that takes away attention from your company can change how investors feel about long-term potential."
What do you think of TikTok? Has it impacted your outlook on Big Tech investing?Email me at prosen@insider.com or tweet @philrosenn.
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