In the past year, TikTok has become a more lucrative advertising channel for smaller brands.
According to a recent survey published by Capterra, a division of Gartner, more than half of small businesses that use TikTok feel it has had a significant impact on their overall marketing performance. Among the 168 retail and restaurant brands surveyed, 78% of them reported that they have realized a positive ROI on their TikTok ads. And more than half of them reported that the positive ROI came within six months, according to Capterra.
Marketers and founders who spoke with Modern Retail agreed that they’ve been able to get more bang for their buck on TikTok compared to other platforms, for a variety of reasons. For some brands, that’s because they’ve been able to generate viral hits on TikTok that they’ve been able to repurpose into other videos, and are still driving millions of views months later. Others point to the app’s improved advertising tools and whitelisting functions. Other marketers report that TikTok video ads have a lower lift in terms of content creation compared to other social platforms.
In turn, TikTok has become a more reliable paid channel over time for these brands. Prebiotic soda brand Poppi estimates, for instance, that roughly 15% of its sales come from TikTok overall, after launching on the app nearly two years ago. The company said it spends four times more on paid ads on TikTok compared to rival Instagram.
However, that reliability is not guaranteed, particularly as scrutiny from government officials grows. At least 20 states have now banned the use of TikTok on government-issued devices. And for many direct-to-consumer startups, Facebook and Google still account for the lion’s share of advertising.
“We believe as a team there’s not just one lever that you can pull to make the entire program work or not work. But rather, we’re really focusing on that kind of integrated strategy,” said Zoee Silber, brand marketing director at Kindly. The Gelmart-owned intimates brand, which launched in 2021, launched its TikTok channel in mid-2022. Thus far, Kindly has mostly experimented with low-cost guerilla marketing tactics, like a campaign in which the brand gave $500 to creators to perform random acts of kindness for strangers.
“We’ve seen over the past few years — as it relates to Instagram and Facebook ads — that your dollar doesn’t go as far as you would like it to. And on TikTok, we find that your dollar goes a bit further,” Silber said.
And, some of the brands that have spent the past couple of years experimenting with TikTok ads say they continue to see dividends from some of their most early viral hits.
Poppi Founder and Chief Brand Officer Allison Ellsworth told Modern Retail TikTok has changed the way the prebiotic soda brand executes paid advertising. In 2021, Poppi posted a simple video introducing TikTok users to the brand. “It was just me sitting down, talking to the camera telling my story of why I started Poppi,” Ellsworth said.
Nearly two years later, the video has close to 60 million views thanks to a mix of organic and paid marketing efforts behind it behind it.
“It’s still our number one converting ad and we’ve been putting paid behind it for close to two years. Usually you don’t run an ad for two years. You wouldn’t do that on a lot of other platforms,” she recalled. “From a pure sales standpoint, we’ve seen incremental returns as much as 10 times,” she added.
Ellsworth added that the video hit was posted on a Friday night, and the next day Poppi had clocked over $100,000 sales overnight on Amazon. Still, Ellsworth said that Poppi’s overall goal on TikTok is to drive “overarching brand awareness, versus driving them to the bottom of the funnel, converting them to buy now.”
Poppi has also managed to build its email and SMS reach to almost 500,000 after two years on TikTok, Ellsworth said.
Another TikTok feature that has worked well for Poppi, Ellsworth said, is the platform’s Spark Ads, which allows brands to put paid spend behind organic posts from users that have been trending. “You don’t actually have to run the ads through your page — they can be separate, which makes this a fantastic platform to just run paid on,” Ellsworth said.
Arrae, which sells digestive health supplements, also started off on TikTok by posting organic content to tap into the high-growth frequency platform and went from zero to 30,000 followers in a couple of months in early 2021.
Arrae Founder Nish Samantray said that the wellness brand has found success in ads that most closely mimic a regular TikTok post. That entails everything from using “extremely native text, native fonts and the style of talking to the camera,” he said.
When Arrae first launched its TikTok account, there were “days where you could grow extremely [fast], get a lot of views and go viral extremely quickly.” But, he said that’s getting harder to do.
Still, in 2023, Samantray said Arrae has plans to spend close to a million dollars on the platform because of improvements TikTok has made in making its ad platform more sophisticated over time.
“The way they collect data, their algorithm, their AI and their overall structure for how to run and show ads has gotten better. It’s more interesting for people like us to run ads on the platform, because we just literally see it getting better in real time. And the better it gets, the more money you like to spend,” Samantray added. About 25% of the brand’s overall ad spend is on TikTok, Samantray told Modern Retail.
Poppi, as well, has also increased its TikTok ad spend over time. Last year, Poppi’s spending on TikTok increased by 100% compared to 2021. In 2023, the company plans to roughly increasing its advertising spend by roughly 40% over 2022.
“TikTok is a dynamic platform, so, if it returns even better than we’re used to, we won’t hesitate to double down at a moment’s notice,” added Ellsworth.