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in actual estimation in Table 3). Following the discussion before, in-feed ad load and promotion factor of CPM, the two key revenue drivers for Douyin, demonstrate to be rather influential on Douyin’s end in-feed ad revenue. By increasing both ad load and actual CPM by 50% from the currently assumed value, Douyin would reach an in-feed ad revenue of 42,574 million CNY. All else constant, this would give rise to a total revenue of 43,716 million CNY per year, roughly 6.25 billion USD31. This may seem to give reasonable space for its current high valuation - both of the key parameters have a proportional relationship with the in-feed ad revenue and both share the potential for future increase from its current value. However, as discussed, it is important to bear in mind that in-feed ad load shares an inverse proportional relationship with Douyin’s customer experience and satisfaction – a higher ad load gives more advertisement thus more revenue but it also poses a risk of harming customer experience and satisfaction. promotion factor is also inversely related to Douyin’s own bargaining power with advertisement providers – a higher promotion factor gives higher actual CPM, meaning that ad providers have to pay more to get their ads displayed on Douyin, thus raising the ad revenue but the increasing cost is likely to cause them to switch to other platforms, thus lowering Douyin’s bargaining power. Therefore, to depict Douyin’s potential revenue growth with the influence of all parameters, we ran a simulation of all possible outcomes and plotted it in MATLAB. We set constraints on determinant variables based on prior discussions: 1. DAU is set be between 200 and 300 million, with 250 million as the most probable. As shown, it is unlikely that the average DAU would surpass 250 in the upcoming years, thus the distribution is positively skewed. 2. Dailyactiveusageperuserissetbetween30and60minutes.Probabilityofallvaluesare distributed normally around 50 minutes. 3. Number of video clips per minute is set to be in range of 1 to 6, with 4 being the most likely. 4. In-feed ad load is set to be in range of 1.6% to 4.0% under normally distributed probability. 5. Promotion factor is set between 30 and 90 CNY with normal distribution around the current value, which is 60. 31 In this thesis, the foreign exchange rate for USD/CNY is assumed to be fixed at 7(1 USD = 7 CNY, 1 CNY = 0.14 USD), long-term, unless otherwise stated. - 52 -PDF Image | Analysis of ByteDance with a close look on Douyin TikTok
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