TikTok joins the AI advertising camp to compete with Meta for advertising revenue

Whip Bull reported that on October 7, according to foreign news reports, TikTok's cultural influence is undoubted, but what about advertising revenue? Not yet.

That's where Smart+ comes in – TikTok's response to Google's Performance Max and Meta's Advantage+, AI-powered ad buying tools that promise to make campaign management effortless, paving the way for marketers to spend more freely on advertising.

Officially launched today (October 7), Smart+ automates all processes, from creative development to targeting and optimization, streamlining the entire ad buying process on the app.

In fact, marketers can let TikTok's AI do the heavy lifting – creating and running ads to drive conversions, leads, or app downloads. However, they also have the option to stay on top of things at critical stages, as Smart+ offers the flexibility to use its features selectively.

For example, marketers can leverage the tool to create and optimize ads and then choose whether to manage campaigns themselves or hand over control to AI. This modular approach allows marketers to choose which features to take advantage of, setting it apart from competing solutions that typically require full investment in the entire suite.

This flexibility may alleviate concerns that tools like Smart+ require marketers to give too much control to elusive algorithms.

However, it also highlights a more important problem with tools like Smart+: While these black box models promise to improve performance through advanced machine learning, they require a high level of trust from marketers and often lack the insight and control they're used to.

Still, many people seem willing to trade a little oversight for faster results and better ad results.

That's exactly why TikTok is pinning its hopes on Smart+. Adolfo Fernandez, director of TikTok and global head of commerce product strategy and operations, said that Smart+'s pitch is focused on simplicity and speed – no more weeks of guesswork and endless A/B testing.

He added that TikTok's AI has been trained on the factors that drive the success of advertising campaigns on the platform, and advertisers can expect to achieve quick success with less hassle. The same goes for creativity; Smart+ is connected to Symphony, another of TikTok's AI tools, to help marketers generate and refine ad concepts.

According to Fernandez, advertisers who use Smart+ network campaigns for value optimization can see an average 53% increase in return on ad spend compared to those who don't.

Ray-Ban is an example of this. This summer, the brand launched a beta version of its Smart+ campaign, which reduced the cost per acquisition by 50% compared to previous campaigns that didn't use the tool. Conversion rates soared by 47%, driving the eyewear brand's ROI up 42%.

Such results are designed to appeal to a specific type of marketer – people who have so far avoided TikTok, unsure if the platform will deliver results faster, or unwilling to spend time and money to find out. Smart+ is TikTok's way of attracting them. If successful, it could reshape TikTok's advertising business, with small advertisers as the foundation for its growth – just as Meta and Google have done.

B·lake Chandley, president of TikTok's global business solutions, told Digiday: In my opinion, with the advent of Smart+, Meta's gap will almost completely close. This [Meta's Advantage+] is really the industry benchmark. Historically, we've been so strong at brand building that our branded products outshine anything on the market. But I think our performance products, especially including Smart+, are comparable.

However, closing the gap won't be easy, and TikTok's advertising business still needs to catch up with Meta.

According to eMarketer's March 2024 forecast, TikTok's global ad revenue is expected to reach $22.32 billion by the end of this year and grow by 27.3% to $28.42 billion by the end of 2025. In comparison, Meta's global ad revenue is expected to reach $154.16 billion by the end of this year and grow 23.2% to $173.92 billion by the end of 2025, according to eMarketer.

David Kaufman, TikTok's Global Head ·of Monetization Products and Solutions, said during the TikTok conference: "Automation is a critical step for us as we enable advertisers to invest further in TikTok and get a greater return on investment.

Shop continues to be a key part of these plans – so much so that it has launched its own AI tool to boost merchant sales. The AI tool, called GMV (Total Product Value) Max, automatically tests and picks the best-performing creative assets for sellers. It optimizes traffic, organic content, paid ads, and affiliate posts to reach shoppers across TikTok's entire shoppable space – from the For You page to the Shop tab and even the search results. However, it can't optimize ROE, only the overall ROI within TikTok. But TikTok executives don't see this as a drawback — in fact, they see it as a feature, not a bug.

"Moving from a return on investment (ROAS) perspective to an overall return on investment (ROI) perspective is an important step in our vision to transform from a media partner to a true business partner for our clients," said Fernández.

In other words: TikTok wants to emphasize broader business outcomes – such as long-term growth and marketing efficiency across the ecosystem – rather than just driving instant sales through advertising. Early test results suggest it may have yielded some results: Fernandez says merchants using GMV Max have seen an average 30% increase in gross merchandise transact.

Taken together, all signs point to a change in the way TikTok advertises to marketers. The company wants to be more than just an entertainment app for users to pass the time by watching popular videos. It's becoming a platform where people choose to spend their time – and with this shift in mindset, people are increasingly searching, discovering, and buying what they see.

To prove this, TikTok's Head of Measurement Product Solutions and Operations points to some compelling data. Ann Nguyen, Head of Product Solutions and Operations at TikTok Measurement, said: Research shows that 79% of purchases driven by TikTok are not attributed to the platform, and the conversion rate is underestimated by 73%.

According to the executive, this trend has been taking shape for some time now – and existing measurement tools can't capture it. So, instead of waiting for third-party metrics to catch up, TikTok built its own.

When external data doesn't tell the story it wants to tell, TikTok uses its own tools, including conversion lift research, to create its own story. The studies measured sales that would not have happened without TikTok ads and used methods similar to those found in scientific studies for randomized controlled trials. TikTok executives encouraged Smart+ advertisers to take advantage of the research, though marketers also have the option to use their own tools.

"They continue to prove that TiKTok is a highly incremental platform that generates demand far beyond last click attribution." Anne Wynn said. "For example, advertisers see an average increase in conversion rates of at least 25%."

This isn't a new strategy – Google and Meta have used similar tactics for years to construct undervalued, underinvested narratives. But TikTok is trying to stand out by focusing on privacy-enhancing technologies like data cleanrooms and trusted execution environments to keep marketers' data safe while proving its worth.

As TikTok repositions itself as a significant player in the advertising space, it is under pressure to prove that it can achieve its goals in what matters most: the bottom line.