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currently in, a dramatic increase in ad load might cause users to switch to other platforms that are more content-friendly. Thus, we consider in-feed ad load a critical factor on Douyin’s ad revenue growth. From its current ratio of 2.4%, we think there is quite some space for an increase, though a conceptual cap exists. For revenue projection, we consider the possibility of ad load both increasing and decreasing, thus we left space for both fluctuations and set the limits at 1.6% and 4.0%. Promotion factor Promotion factor is crucial in determining the ad revenue as they share a proportional relationship. Right now, Douyin’s promotion factor is at 0.25 – giving a CPM of 60, which is at a higher end of the industry average, according to Figure 6. However, given Douyin’s large user base, industry-leading position, and the growing market, we believe that the promotion factor is likely to increase, leading to a higher CPM in the future. However, in order to remain competitive in the advertisement market, Douyin has to set the promotion factor within a reasonable rang, because too high of a promotion factor might not be beneficial as too high price would incentivize ad providers to switch platform. For revenue projection, we consider the actual CPM, after applying promotion factor to the listed price, to be in a range of 30 to 90 CNY – covering a wide spectrum around industry’s average CPM, as shown in Figure 6. This is after taking into account that the price increase and decrease ought to happen at a rather similar odds around industry standards. To conclude the discussion above, after studying all parameters in Table 3 in detail, we determined the two key parameters that would be the most critical to the future growth of Douyin’s in-feed ad revenue – in-feed ad load and promotion factor of CPM. They are thought to be the key revenue drivers for Douyin’s revenue in the foreseeable future. 𝐴𝑐𝑡𝑢𝑎𝑙 𝐶𝑃𝑀 = 𝑝𝑟𝑜𝑚𝑜𝑡𝑖𝑜𝑛 𝑓𝑎𝑐𝑡𝑜𝑟 ∗ 𝑜𝑓𝑓𝑖𝑐𝑖𝑎𝑙 𝑙𝑖𝑠𝑡𝑒𝑑 𝐶𝑃𝑀 (4.4) - 50 -PDF Image | Analysis of ByteDance with a close look on Douyin TikTok
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