Social media giant TikTok is cutting its global revenue target for this year by 20%, or by at least $2 billion, amid a decline in advertising spending and e-commerce.
The company had initially expected revenue to range between $12 billion and $14.5 billion this year, but now expects the figure to be closer to $10 billion, the Financial Times reports, citing four people familiar with the move.
According to the report, TikTok Chief Executive Shou Zi Chew revealed the downgraded outlook during a virtual “all-hands” meeting in which staff were blamed for not doing enough to drive sales in advertising and e-commerce, the company’s main revenue drivers.
The FT cites a number of current and former TikTok employees as saying that the firm had “overspent” on salaries and social events, among other things.
TikTok also reportedly offered employees in “relatively junior roles” six-figure salaries to attract them from rival companies.
A former executive also told the FT that “a lot of people decided to jump ship” when ByteDance told staff that it was delaying its IPO plan and has instead carried out share buybacks.
Multiple news outlets reported in September that ByteDance had offered to repurchase up to $3 billion worth of shares from investors at $176.94 apiece. The company’s backers include Japan’s SoftBank Group, Sequoia Capital, General Atlantic, Hillhouse Capital Group, and Susquehanna International Group.
To appease employees, ByteDance had planned to extend its existing employee stock incentive plan for 10 more years, The Wall Street Journal reported in September.
But despite being affected by reduced ad spending — a trend that is widely seen among major Silicon Valley giants like Meta and Alphabet — ByteDance continued on its “lavish” spending on travel and events, the FT says.
The newspaper said that TikTok declined to comment on revenue targets.
TikTok generated nearly $4 billion in revenue in 2021, mostly from advertising, and this year, revenue is estimated to reach $12 billion, Bloomberg reported in June, citing research firm eMarketer.
At that figure, TikTok would surpass Twitter and Snap combined.
However, the dry spell in advertising spending is proving to be a challenge for TikTok, prompting the company to overhaul its US operations, the FT reported in a separate article on Tuesday (November 8).
As part of the restructuring, North America General Manager Sandie Hawkins will be transferred to TikTok Shop, the company’s e-commerce channel, while Blake Chandlee, an executive based in Austin, Texas, will assume Hawkins’ role on an interim basis, the FT said, citing five people with knowledge of the changes.
TikTok’s restructuring in the US, which follows that in Europe earlier this year, comes as the company carries out a broader restructuring of its operations that has led to the layoff of about 100 staff.
In comparison, its bigger rival Meta, which owns Facebook and Instagram, is carrying out a bigger layoff, cutting around 13%, or 11,000 employees, of its global workforce, founder and CEO Mark Zuckerberg said in a letter published on Wednesday (November 9).
“The macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected,” Zuckerberg said.
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