Philippa Kaur

Is tiktok’s time up? As the social-media app’s chief executive, Shou Zi Chew, prepares for a grilling before Congress on March 23rd, TikTok’s 100m-plus users in America fret that their government is preparing to ban the Chinese-owned platform on security fears. Their anguish contrasts with utter glee in Silicon Valley, where home-grown social-media firms would love to be rid of their popular rival. With every grumble from Capitol Hill, the share prices of Meta, Snap, Pinterest and others edge higher.TikTok’s fate hangs in the balance. But what is already clear is that the app has changed social media for good—and in a way that will make life much harder for incumbent social apps. In less than six years TikTok has weaned the world off old-fashioned social-networking and got it addicted to algorithmically selected short-form video. Users love it. The trouble for social apps is that the new model makes less money than the old one, and may always do so.The speed of the change is astonishing. Since entering America in 2017, TikTok has picked up more users than all but a handful of social-media apps, which have been around more than twice as long (see chart 1). Among young audiences, it crushes the competition. Americans aged 18-24 spend an hour a day on TikTok, twice as long as they spend on Instagram and Snapchat and more than five times as long as they spend on Facebook, which these days is mainly a medium for communicating with the grandparents (see chart 2).TikTok’s success has prompted its rivals to reinvent themselves. Meta, which owns Facebook and Instagram, has turned both apps’ main feeds into algorithmically sorted “discovery engines” and launched Reels, a TikTok clone bolted onto Facebook and Instagram. Similar lookalike products have been created by YouTube (Shorts), Snapchat (Spotlight), Pinterest (Watch) and even Netflix (Fast Laughs). The latest TikTok-inspired makeover, announced on March 8th, was by Spotify, a music app whose homepage now features video clips that can be skipped by swiping up. (TikTok’s Chinese sister app, Douyin, is having a similar effect in its home market, where digital giants like Tencent are increasingly putting short videos at the centre of their offerings.) The result is that short-form video has taken over social media. Of the 64 minutes that the average American spends viewing social media each day, 40 minutes are spent watching video clips, up from 28 minutes just three years ago, estimates Bernstein, a broker. However, this transformation comes with a snag. Although users have a seemingly endless appetite for short video, the format is proving less profitable than the old news feed. TikTok monetises its American audience at a rate of just $0.31 per hour, a third the rate of Facebook and a fifth the rate of Instagram (see chart 3). This year it will make about $67 from each of its American users, while Instagram will make more than $200, estimates Insider Intelligence, a research firm. Nor is this just a TikTok problem. Mark Zuckerberg, Meta’s chief executive, told investors last month that “Currently, the monetisation efficiency of Reels is much less than Feed, so the more that Reels grows…it takes some time away from Feed and we actually lose money.”The most comforting explanation for the earnings gap is that TikTok, Reels and the other short-video platforms are immature. “TikTok is still a toddler in the social-media ad landscape,” says Jasmine Enberg of Insider Intelligence, who points out that the app introduced ads only in 2019. Platforms tend to keep their ad load low while getting new users on board, and advertisers take time to warm to new products. “You can’t really wave a magic wand and declare that your new ads are ‘premium’ without any performance history to back it up, so they start at the end of the line,” says Michelle Urwin of Skai, a digital marketing agency.Meta points out that it has been here before. Instagram’s Stories feature took a while to get advertisers signed up but is now a big earner. Meta is ramping up Reels’ monetisation and expects it to stop losing money around the end of this year. But it acknowledges that it will be a long time before Reels is as profitable as the old news feed. “We know it took us several years to bring the gap close between Stories and Feed ads,” Susan Li, Meta’s chief financial officer, said on an earnings call last month. “And we expect that this will take longer for Reels.”Some wonder if the gap in fact will never be closed. Even mature video-apps cannot keep up with the old social networks when it comes to monetising their users’ time. YouTube, which has been around for 18 years, makes less than half as much money per user-hour as Facebook or Instagram, estimates Bernstein. In China, where short-form video took off a few years before it did in the West, short-video ads last year monetised at only about 15% the rate of ads on local e-commerce apps.For one thing, the ad load in video is inescapably lower than on a news feed of text and images. Watch a five-minute YouTube clip and you might see three ads; scroll Instagram for five minutes and you could see dozens. Watching video also seems to put consumers in a more passive mood than scrolling a feed of friends’ updates, making them less likely to click through to buy. Booking 1,000 impressions for a video ad on Instagram Reels costs about half as much as 1,000 impressions for an ad on Instagram’s news feed, reports Tinuiti, another big marketing agency, implying that advertisers see Reels ads as less likely to generate clicks.Auctions for video ads are less competitive than those for static ones, because many advertisers have yet to create ads in video format. Big advertisers prize video ads (and report record engagement on TikTok, where products have gone viral with the hashtag #TikTokmademebuyit). But the long tail of small businesses from which social networks have made their billions find video spots tricky to produce. Just over 40% of Meta’s 10m or so advertisers use Reels ads, the company says. Getting the remaining 60% to create video commercials may be made easier by artificial intelligence. One senior executive imagines a near future in which a small retailer can create a bespoke video ad using only voice commands. Until that moment arrives, half the long tail is lopped off.Short-video apps are also hampered by weaker targeting. For audiences, part of the appeal of TikTok and its many imitators is that the user need do no more than watch, and swipe when they get bored. The algorithm uses this to learn what kinds of videos—and therefore ads—they like. But this guesswork is no substitute for the hard personal data harvested by the previous generation of social networks, which persuaded users to fill in a lengthy profile including everything from their education to their marital status. The upshot is that many advertisers still treat short-form video as a place for loosely targeted so-called brand advertising, to raise general awareness of their product, rather than the hyper-personalised (and more valuable) direct-response ads that old-school social networks specialise in.Here, at least, TikTok’s imitators have an advantage over TikTok itself. Using a trove of data built up over a decade and a half, when there were few rules against tracking users’ activity across the wider web, Meta already knows a lot about many of the users watching its videos and can make well informed guesses about the rest. If a new, unknown user watches the same videos as a group who are known to be rich, female graduates with children, say, it is a good bet that the new user has the same profile. TikTok says it has made big investments in its direct-response ads, including new tools for measuring their effectiveness. But it still has catching up to do. “Meta are leveraging their history,” says Mark Shmulik of Bernstein. The social apps will not be the only losers in this new, trickier ad environment. “All advertising is about what the next-best alternative is,” says Brian Wieser of Madison and Wall, an advertising consultancy. Most advertisers allocate a budget to spend on ads on a particular platform, he says, and “the budget is the budget”, regardless of how far it goes. If social-media advertising becomes less effective across the board, it will be bad news not just for the platforms that sell those ads, but for the advertisers that buy them. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

Lots of countries have big construction projects that become a byword for ineptitude. In America the “Big Dig”, a highway project that snarled up the centre of Boston for years, came in five times over its initial budget. The stadium built for the Montreal Olympics in 1976 was unaffectionately known as the “Big Owe” after costs overran massively; the debts from the games were paid off only 30 years later. Even the Germans get megaprojects wrong. Ground was broken at Brandenburg Airport in Berlin in 2006, and the first flights took off in 2020, ten years later than scheduled. Listen to this story. Enjoy more audio and podcasts on More

Twelve months ago Russia joined the ignominious list of countries—alongside North Korea and Cuba—where consumers are denied the joys of a Coca-Cola. The American beverage giant had halted its operations there following the Russian invasion of Ukraine. Thirty years before, when Coca-Cola expanded in Russia after the collapse of the Soviet Union, barriers to global commerce were being torn down. Today they are being re-erected—and not just around Russia. Listen to this story. Enjoy more audio and podcasts on More

When a New York short-seller’s report wiped some $150bn, or two-thirds, from the combined value of the Adani Group’s listed holdings in late January and early February, several big questions were keeping India Inc up at night. Would Indian banks and insurance companies with significant exposure to the ports-to-power conglomerate also teeter? Would the contagion spread to the rest of the Indian financial world? And would India’s government pursue an aggressive investigation into the short-seller’s allegations of fraud and stockmarket manipulation, which set off the imbroglio (and which the Adani Group vehemently denies)?A month and a half on, the answers to the first two questions are, happily for India, “no”. The answer to the third is less categorical, and somewhat less constructive: the government seems in no rush to settle the matter, perhaps because the Adani firms’ modest free float means a small number of mostly big shareholders bore much of the pain and no angry mob of retail investors is pressing Delhi to get to the bottom of it, fast. With those big questions out of the way, attention has turned to the next conundrum: can the Adani Ggroup and its eponymous tycoon founder, Gautam Adani, recover? Or will they founder, possibly dragging the Indian government’s grand plans for investments in infrastructure and green energy down with them?The past month has offered hope to those rooting for Mr Adani and his businesses, which operate some of India’s biggest ports and airports, store a third of its grain, run a fifth of its power-transmission lines, produce a lot of its cement—and have their eye on clean hydrogen and steelmaking, among other ventures. The group’s total market value has climbed back to more than $110bn, from a low of $82bn. That of its flagship public company, Adani Enterprises, is up by 54% from its nadir on February 27th. The yields on bonds issued by some Adani firms have come down from levels indicating distress. The big turn in the Adani Group’s fortunes came in early March, after GQG Partners, a fund that is based in America, listed in Australia and run by an Indian, bought $1.9bn in shares of several of the group’s companies directly from the Adani family. At the time, GQG’s boss, Rajiv Jain, who lives in Florida, told the Financial Times that “the market was mispricing Adani” and praised the conglomerate’s “very competent management” and “fantastic” execution capabilities. Mr Adani used the proceeds to help repay $2.1bn in margin loans that used Adani companies’ shares as collateral, relieving one possible source of financial stress. Another $1.1bn, half coming from the Adani family and half from the Adani businesses’ cashflows, was used to meet other near-term obligations. These moves reduced the group’s outstanding debt by just 4%, to $27bn. But they eased pressure and reassured the market. So did the acquisitive conglomerate’s decision to pause new capital investments, beyond those it had already pledged, until September 2024, and to put big takeovers on hold.As these demonstrations of financial discipline were taking place, the Adani Group embarked on a global charm offensive, set to conclude on March 17th in California. It appears to be working. Mr Jain, for one, has said GQG’s stakes in Adani businesses “most likely will increase depending on the price and how they deliver”. The group says it has been receiving plenty of interest from investors looking to park their money in its assorted companies. It says that a recent news report of a sale of just under 5% in its cement operations is bogus. But it does not dismiss the possibility of selling stakes in some of its divisions. Several of these, like the ports business, are solid operations offering predictable returns—maybe even good ones, if India’s economy continues to grow at its recent pace of 7-9% a year.With the Adani Group on more stable footing, another question is bound to arise: how long can Mr Adani hold his nation-building ambitions in check? On March 1st his conglomerate was awarded a bauxite mine in a government auction. For the time being, the asset, for which the company had always been planning to bid, will be folded into Adani Enterprises’ mining subsidiary. But before the short-seller’s assault, the bid for the mine was widely regarded as part of a larger plan to enter aluminium smelting, steelmaking and other bits of heavy industry. Mr Adani is unlikely to have forsaken that idea for ever. ■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

After Bill Anderson, Bayer’s new boss, arrives on April 1st at the firm’s headquarters in Leverkusen, Werner Baumann, the German drug-and-chemicals giant’s outgoing chief executive, will be on standby for two months to ensure a smooth transition. Given Mr Anderson’s lack of experience in crop sciences, Bayer’s biggest business, you might ask what the board was thinking handing him the reins. The answer is that he has two qualifications that make up for his shortcoming. He used to run the pharmaceuticals business at Roche, a Swiss drug behemoth. And he is American. That makes him just the man for a company that is betting big on its pharma business across the Atlantic.Listen to this story. Enjoy more audio and podcasts on More

The world’s energy supermajors had a bountiful 2022. ExxonMobil, the largest of the private-sector giants, reported a record annual net profit of $56bn, after Russia’s invasion of Ukraine sent oil prices soaring. Mouth-watering—unless you are Saudi Aramco, in which case it’s peanuts. Last year the desert kingdom’s oil giant brought in some $160bn of net income, the most by any company in corporate history.■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

Even people who love their jobs have a few gripes. Even people who excel at their work have their share of worries. The office environment makes it hard to concentrate; their colleagues are annoying beyond belief; their career path within the organisation is not obvious. There are aspects of the workplace, like “reply all” email threads and any kind of role-playing, which are completely beyond redemption. This column is here to administer the balm of consolation for some of work’s recurring irritations. Listen to this story. Enjoy more audio and podcasts on More

Don’t feel bad if MSC, the Mediterranean Shipping Company, is the biggest ocean-going carrier you have never heard of. It is meant to be that way. Its founder, Gianluigi Aponte, is a publicity-shy Italian billionaire, based in Switzerland, a country with no maritime borders and a culture of secrecy as deep as the ocean. His firm has taken the seafaring world by stealth. Born in 1970 with a single vessel trading between Somalia and southern Italy, msc last year overtook A.P. Moller-Maersk to become the world’s biggest container-shipping company. Yet its culture of silence remains. When its CEO, Soren Toft, spoke at a shipping jamboree in Long Beach this month, he revealed next to nothing. “We’re not going to make [talking in public] a habit,” he said gruffly. Listen to this story. Enjoy more audio and podcasts on More