Friday, 2022 August 12

‘You need to be global and local at the same time’: TikTok CEO Shou Zi Chew on creating a successful global strategy

Since its launch in 2016, TikTok has had frequent leadership changes. In April 2021, the short video giant saw yet another shuffle among its major executives.

Shou Zi Chew was appointed CEO of TikTok while Vanessa Pappas took on the role of TikTok COO. The strategic reorganization was made to optimize TikTok’s global teams and drive growth.

“The leadership team of Shou and Vanessa sets the stage for sustained growth,” Zhang Yiming, founder of ByteDance, TikTok’s parent company, said in a statement.

Chew first joined ByteDance as CFO in March 2021 before he was appointed TikTok CEO a month later. He relinquished his CFO role at ByteDance in November 2021. Previously, he was CFO of Xiaomi Corp, where he oversaw its IPO in Hong Kong in 2018.

As CEO leading the overall strategic planning at TikTok, Chew mainly spends his time on matters related to cybersecurity, legal compliance, and government and public relations.

Meanwhile, Pappas oversees content, operations, marketing, and product teams for the short video platform. Known as the public face of the app in the United States, Pappas has a reputation for being a hard-working and detail-oriented person.

Another key member of the leadership team is Zhu Wenjia, who leads TikTok’s R&D department. He oversees the platform’s products and technologies, including its recommendation algorithm, which is said to drive the app’s viral success. TikTok entails the use of an AI technology that powers its content recommendation system, feeding curated content to users based on their interests and activity.

The selection of TikTok’s leadership team was a high stakes decision for ByteDance. Despite being one of the world’s biggest private tech companies with recent trades in the private-equity secondary market valuing it at about USD 300 billion, ByteDance was experiencing declining revenues in China, where the bulk of its turnover is generated.

In 2021, ByteDance’s total revenue grew by 70% year-on-year to around USD 58 billion. By contrast, in 2020, its revenue more than doubled from the previous year to USD 34.3 billion. Faced with challenges in China posed by the changing regulatory and business environment, the tech giant is counting on TikTok to drive growth abroad.

Global ambitions

Despite Chew’s impressive resume, some industry observers were unsure whether he was up to the task as CEO. There was initial concern that Chew might not have a solid understanding of product operations and R&D.

Nevertheless, Chew had other strengths. For example, he was highly adaptable and blended into ByteDance’s low-key company culture. He eschewed his signature suit and tie to dress in more casual attire. He also deleted his personal posts on Twitter and Instagram to keep a low profile.

In March this year, Chew told Bloomberg that it was “challenging to build a global company” because “you need to be global and local at the same time.”

One such hurdle he faced was cross-cultural issues at the company’s US offices. While TikTok is headquartered in Los Angeles, its parent company ByteDance is in Beijing, where it defined the working culture.

The cultural disconnect between TikTok’s US and Chinese offices was a major point of contention for a number of US employees. Working at the unit of Beijing’s ByteDance was difficult and exhausting, they said.

Turning a profit with TikTok

At the same time, Chew and his team faced other pressing business challenges. While the short video app has become a cultural powerhouse with 1.2 billion monthly users, it needed to find a way to convert its international internet traffic into revenue.

To do that, the short video app ramped up its push into social commerce. Under Chew’s stewardship, in the second half of 2021, TikTok accelerated the rollout of in-app shopping features such as shoppable links and livestream shopping to allow users to make purchases with business partners. Last year, TikTok partnered with Shopify to launch TikTok Shopping for select Shopify merchants in the US, UK, and Canada.

Although TikTok’s current share of the total US social commerce market is relatively small, the market holds untapped potential. Consumers in the US are expected to spend USD 45.7 billion on social commerce purchases in 2022.

Notably, TikTok’s foray into social commerce will boost revenue through cross-border e-commerce. In 2021, the gross merchandise value of TikTok’s e-commerce segment hit around RMB 6 billion (USD 951 million), of which more than 70% was from Indonesia and the rest was from the UK, according to 36Kr.

Untapped potential

Southeast Asia is a lucrative market with immense growth potential. This would explain why the short video platform is doubling down on cross-border e-commerce by expanding such offerings to more Southeast Asian countries such as Thailand, Vietnam, Malaysia, and the Philippines, according to tech media outlet Pandaily.

According to eMarketer, e-commerce sales in Southeast Asia will reach USD 89.67 billion in 2022, a 20.6% increase over the previous year. This means the region will experience the fastest digital sales growth in the world this year.

The short video platform has also leveraged global advertising revenue to drive business growth. While TikTok’s ad revenue in 2021 was just under USD 4 billion, roughly 7% of ByteDance’s overall revenue, in 2022, its worldwide ad revenue is expected to triple to USD 11.64 billion, according to eMarketer. Nearly USD 6 billion, or more than half, of this year’s ad revenue is expected to come from the US.

TikTok is no longer seen as an experimental play but a must-buy for an increasing number of advertisers in the US, according to a recent report by eMarketer. TikTok’s US net ad revenue is expected to rise by 184.4% to USD 5.96 billion in 2022.

For now, it appears that TikTok’s internationalization efforts have gained traction. But whether the company can successfully tap its billion-strong user base to fuel growth in a sustained manner remains to be seen.

This article was adapted based on portions of a feature originally written by Zhang Jun (WeChat ID: benita-story) and edited by Gao Yulei. KrEurope is authorized to translate, adapt, and publish its contents. 

KrASIA Connection
KrASIA Connection
KrASIA Connection features translated and adapted content published by 36Kr.com, the largest and most influential tech portal in Chinese language.
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