Like it or not, TikTok is now a global phenomenon, not just in terms of cultural relevance, but also as a real business success. (As we all have seen with Twitter, you can be very culturally relevant and still struggle as a business.)

Based on the latest round of earnings reports from all the large social media companies, everyone is having trouble growing and competition from TikTok is a big reason why. As popular as TikTok may be, how it got to where it is today is poorly understood – until this Chinese language article was published last week. Titled “TikTok Behind the Scenes: Zhang Yiming’s Global Journey Among Giant Waves” (original Chinese title: 《TikTok内幕：张一鸣的巨浪征途》), this deeply-sourced, well-reported, and beautifully-written article told the story of ByteDance’s global ambition that dates back to at least 2015 – long before TikTok was conceived.

For more of our previous writings on TikTok, see “Zhang Yiming’s Last Speech” (premium content) and the ByteDance tag.

There is a ton of materials worth unpacking in this 22,000+ character long article. Today, we will focus on one part that is particularly interesting to me – how TikTok strategizes and invests in its global expansion. (My day job is driving global expansion strategy at GitHub, which is, of course, a very different type of company and product than TikTok.)

Market Ranking Framework: S/A/B/C/Others

To prioritize all the markets TikTok wants to expand to outside China, it established a “S/A/B/C/Others” market ranking framework. Here is how this framework works:

• S (as in “strategic”, highest priority): United States, Japan, United Kingdom, India (now banned)
• A (2nd priority): Germany, Brazil
• B (3rd priority): a group of 15-20 countries. Examples include France, Italy, Spain, the Netherlands, Russia, South Korea, Indonesia, Mexico, Canada, Australia.
• C (4th priority): a group of 20-30 countries. Examples include Thailand, Vietnam, Saudi Arabia, UAE, Egypt, Argentina.
• Others (lowest priority): rest of the world

The author of this article, Zhang Xiaoyun, made a helpful graphic (in Chinese) summarizing this market ranking model and the reasoning behind each tier.

Some of the inputs TikTok used to rank these markets are quite common: population, GDP, mobile internet penetration level, size of digital advertising market. Other inputs are based on proprietary data (possibly illegally obtained) and competitive dynamics.

As the article revealed, ByteDance lured many Facebook managers away in 2019, when TikTok was also spending millions of dollars advertising on Facebook. Along with those ex-Facebook managers came Facebook’s internal, proprietary data that mapped not only its daily active users (DAUs) in every country, but also its Average Revenue Per User (ARPU) by country.

Having this data helped TikTok populate its “Tier B” countries, some of which might have been ignored if Facebook’s data did not reveal their commercial potential. Russia and Latin American countries received priority, simply because ByteDance’s Chinese competitors, Kuaishou and Likee, were also expanding into those markets. This “S/A/B/C/Others'' framework was fully operationalized in early 2020, when TikTok the product was reasonably mature (after merging with Musical.ly) and Zhang Yiming was hyper-focused and hyper-aggressive in realizing his global expansion ambition.

Back then, his own OKR was “No Gaps Allowed, Full Court Press” (“不留空档、全面压制”).

Every Two Months: Adjustment with Execution

TikTok uses this framework to allocate user growth spending, but every two months, these countries’ tiering is evaluated and adjusted with learning and data from execution.

ByteDance is famous for its “every two months” cadence, which permeates every corner of the company, not just engineering or product. Zhang Yiming’s own executive-level OKRs follow the same cadence. This is fast, very fast, especially for a global company that now has more than 130,000 people working for it.

Some interesting examples of countries being adjusted:

Indonesia: it started out in “Tier B”, but was elevated to “Tier A”, because TikTok discovered that its Indonesian users have a stronger penchant for creating content than other countries – 10% versus Chinese users’ 5% and Japanese users’ 2-3%.

South Korea: it started out in “Tier A”, but was dropped for a while to “Tier C” after lackluster DAU growth, then later elevated to “Tier B”. South Korea has been a difficult market for TikTok. Some employees posit that Korean users are very nationalistic and generally resist foreign products. Others believe Korea’s entertainment market is so mature and full of choices that it is more difficult for a new product to gain traction.

Iraq: it was always in the “Others” tier, but the way TikTok gained traction there was particularly noteworthy. The “Others” tier buckets all countries, where TikTok does not believe requires any spending to grow, because they will grow organically as downstream markets of other countries. Sounds like a nice theory, but does it work in reality? It did, and surprisingly well, in Iraq. In the Middle East, TikTok spent some money acquiring users in Saudi Arabia and the UAE to trigger this downstream effect, and its traction in Iraq skyrocketed. During the early days of the pandemic, TikTok’s DAUs shot up to 6 million in Iraq, out of a total mobile internet population of 25 million – a 24% market share without spending a single cent!

These market expansion learnings and tiering adjustments illuminated a profound insight – content downstream effect.

Unlike building a social network with a real social graph, content can be pooled and leveraged cross-culturally in a much more scalable way, if you know which (downstream) countries like which (upstream) countries’ content. TikTok’s data and experience yielded these patterns:

• Chinese content has downstream effects in East Asia and Southeast Asia
• Saudi Arabian content has downstream effects in other Middle Eastern countries
• American content has downstream effects…everywhere!

That’s why TikTok was hellbent on growing in the United States, even if it will cost a fortune and unprecedented political scrutiny.

A Survival Guide for Meta?

As TikTok’s global expansion strategy and methodology becomes better understood via resources like this article, the biggest beneficiary may be TikTok’s biggest nemesis, Meta fka Facebook.

Meta’s one product that can go up against TikTok is Instagram Reels. While there are some video length differences – TikTok video limits are longer than Reels’s – the two products are very similar. In fact, much of the best performing content on Reels are originally from TikTok, with TikTok watermarks.

Recently, Instagram officially announced that it will demote Reels that have a TikTok watermark, likely a desperate defensive measure. But for IG Reels to go on the offense, it should tap into the same framework and methodology that TikTok is using, which was built on Facebook’s internal data anyway. The content downstream effect can work for IG Reels too, as long as it has the content and knows to which direction its algorithms should push.

Before it became Meta, Facebook was mostly asleep at the wheel in 2018, as TikTok poured millions of dollars into buying Facebook ads to fuel its global growth. Even though it cloned TikTok with Lasso in mid-2018 (shut down in mid-2020), TikTok was such a huge customer that Facebook happily ignored its own role in seeding its largest competition.

For all the Meta shareholders out there, let’s hope it won’t make that mistake again and take more pages out of TikTok’s playbook instead. After all, Facebook has never been shy about copying anything.