Brief:

• Video-sharing app TikTok is dipping its toes into advertising with the introduction of an ad unit first spotted by several users who shared their observations on social media, Digiday reported. A five-second ad for food-delivery company GrubHub appeared on Jan. 26 after Chris Harihar, a TikTok user and partner at Crenshaw Communications, opened the TikTok app.
• The app showed a button at the top right of the screen that let viewers skip past it. However, TikTok is keeping mum about its plans, Digiday reported.
• TikTok, which has seen rapid growth after parent company ByteDance acquired lip-syncing app Musical.ly last year, added 75 million new users in December, a 275% surge from 20 million a year earlier, according to researcher Sensor Tower.

Insight:

TikTok's rapid growth and highly engaged user base was bound to lead to a more devoted effort to monetize the platform, which has become a global phenomenon among younger consumers. TikTok stands out as the only top five app ranked by downloads that isn't owned by Facebook (whose portfolio includes WhatsApp, Messenger, Instagram and its main social networking app), per Sensor Tower. TikTok has surpassed the popularity of rivals like Snapchat and Twitter, positioning it to possibly take on Facebook, Google and Amazon in the digital ad market. 

The social app has viral appeal with its user-driven challenges that urge people to collaborate on creating original mobile content. That kind of engagement, especially among younger audiences who are hard to reach on more traditional media platforms like TV, likely will appeal to advertisers targeting Gen Z. The key challenge for TikTok will be ensuring brand safety, which is an especially hot issue for any platform that thrives on user-generated content, such as Facebook, Twitter and Google's YouTube.

TikTok's popularity has compelled Facebook to start testing a similar feed called "LOL" of funny videos, GIF-like clips and memes to boost its popularity among younger audiences. ByteDance last year acquired the lip-syncing app Musical.ly, which had gained a big following among U.S. teens before leveling out, for $800 billion and merged it with TikTok. With a stunning valuation of more than $75 billion, ByteDance is the first Chinese internet company with a significant and engaged global following, The Verge reported.