TikTok's Chinese parent is meddling in U.S. marketing, say agencies
TikTok, the Chinese-based social media app that soared to popularity with American consumers, appears to have embraced another U.S. custom: putting the squeeze on agencies.
The company has been expanding in the U.S. and hunting for nimble shops to turn around one-off creative projects quickly on a tight budget. However, four different executives familiar with the situation say that the company has been an unusually difficult client. Some charge TikTok has been demanding "unachievable" deliverables with lowball pricing and has abandoned projects midstream. These execs claim there has been huge turnover in TikTok's U.S. marketing team and that the company's Chinese parent steps in and overrules U.S. decisions or meddles with them.
TikTok did not respond to several requests for comment.
TikTok has worked with agencies RPA, Channel, Sid Lee and most recently Adam&EveNYC. One former TikTok executive says the company is no longer working with RPA, which the agency confirmed in a statement below.
A spokesperson for Sid Lee said in a statement: "We can confirm we’re among TikTok’s creative partners as their social AOR."
And RPA said in a statement, "TikTok is an amazing platform and it’s been an honor to work with them to help broaden and grow their user base. Our retainer was for six months and the marketing team that hired us are unfortunately no longer with the company."
Channel confirmed in a statement it is still working with the company but said it has "no comment regarding anything else."
Adam&EveNYC created the company's most-recent 30-second highlights reel for the end of the year, "You Made 2019 on TikTok." In a statement to Ad Age, a spokesperson for the shop said that the agency was "appointed by the U.S. team to work on a project-by-project basis starting with the end of year campaign."
One former TikTok executive acknowledges the strain with agencies and blames the issues on bigfooting from China and a high turnover rate within its own U.S. marketing department. The former executive says the U.S. marketing team is made up of 15 people, five of which work with agencies. Ad Age has learned that three of those five have departed since August.
While the former exec denies that the briefs were unrealistic, he does confirm that there have been several projects canceled, at times midway through the creative development process. Whether the agencies working on those projects were still compensated, the ex-exec says it was "handled on a case-by-case basis."
"If the agency was in the middle of creative development, yes there was compensation," the person says.
According to the former executive, the decisions to cancel most of these U.S. projects were made from the team based in Beijing. "Say you started planning a campaign with an agency, the U.S. team would send out a brief, decide on what agency to move forward with, creative development would begin," the person says. "At a certain point, any Chinese stakeholder or head of product or global comms person would step in and say 'No, we're not running this.' Did that hurt relationships with agencies? Yes."
On why a project would be halted by the team in China, the executive says only, "there are a lot of cultural differences."
Culture clashes between U.S. arms of foreign-owned parent companies are not uncommon in the industry; however, this executive says in the case of TikTok it has been extraordinary. He says when the company launched in the U.S.—and maintained that it was operating entirely independent of Chinese parent company ByteDance—the team in Beijing was "overstepping a lot of marketing decisions" in the U.S.
"On paper, we had a lot of independence," the person says. "In reality, that's not the case. When it comes to [U.S.] marketing, the line of reporting is with China."
More than just projects
According to agency executives close to the business and the former TikTok employee, the Beijing team would also reverse long-term contracts. For example, these people say that Interpublic Group of Cos.' Initiative had been hired as the media agency of record by the U.S. marketing team (it was reported by Ad Age in July that it was the lead media agency for the company). Then, without the U.S. marketing team's involvement, TikTok's procurement department in China ran a global media review that resulted in Omnicom's PHD winning the business a month later, taking the U.S. media away from Initiative.
Initiative and Omnicom declined to comment.
According to the ex-TikTok employee, its AOR agencies are hired on six-month retainers. In July, it was announced that RPA, Channel and Sid Lee had been tapped as TikTok's lead creative agencies in the U.S. The six-month contracts for those agencies are now up, according to the former TikTok executive. That executive and one other person close to the matter say TikTok's relationship with RPA in particular had begun to sour before the contract ended, with the independent agency receiving fewer projects and little communication from the team.
U.S. marketing team turnover
Stefan Heinrich Henriquez, head of global marketing for TikTok, worked directly with U.S. partners from his outpost in Los Angeles for nearly three years before leaving in August to become chief marketing officer and general manager of video-sharing startup Cameo. Several people close to the business, including the unnamed ex-TikTok executive quoted above, say Heinrich Henriquez was responsible for forging most of the recent agency partnerships in the U.S. including those with RPA, Channel, Sid Lee and Initiative.
(It is perhaps worth noting that Heinrich Henriquez departed the same month that it's been said the procurement team in China appointed PHD as media AOR over his choice, Initiative.)
Following Heinrich Henriquez's departure, TikTok Brand Marketing Manager Sergio Peralta took over responsibilities of those relationships and then left last month for Cameo as well.
One agency executive who had been working most recently with Peralta says TikTok Head of Marketing Edward Chou was his new point of contact, until he discovered from Chou's LinkedIn page—while on the phone with Ad Age—that Chou, too, had left in November.
"We really haven't heard much in the last month or two," the agency executive says, adding that there are "people on our side who are sort of concerned about what [the brand] is doing in the world" anyway, so they let the relationship go without much protest.
Heinrich Henriquez, Peralta and Chou did not return requests for comment.
One executive at an agency who requested anonymity says he pitched for a few projects for TikTok, one with an "unreasonable timeline" for a campaign that would only run for two weeks. After pitching and not hearing back from TikTok after a few weeks, the company eventually "told us they went another way via email. ... Is email the most honorable way, after an agency has done free work? No, it's not."
"The previous reach-outs from them," the person claims, included "insane budgets and deliverables" (a $20,000 budget for several fully produced videos to be translated into various languages, for example), and were run "by a lower-level marketer who couldn't really talk about the brief with any insight."
The agency executive noted that the larger issue he sees here is "around pitching for projects—it's just not sustainable for agencies and these rare situations don't help." (The industry has seen an influx of what some describe as "bad reviews," where brands are being accused of not compensating agencies fairly, claiming ownership over their IP.)
Another agency executive, who also requested anonymity, says his shop worked with TikTok on various projects, many of them also with similar budgets. In one case, the executive says his agency told the U.S. marketing team at TikTok that the deliverables in one of the briefs were "mathematically impossible," although he notes that he has experienced similar situations with "a lot of startups."
"They're a tricky brand," the agency executive says. "They're growing so fast. They have connections to China. They would get frustrated with us because we operated like a real agency."
The former TikTok executive, however, argues that the company's deliverables "were in line with the industry" and the U.S. marketing team was just "very aggressive with their timing, operating at a very specific pace" which, he said, is not how agencies traditionally "like to operate." The former executive notes that TikTok sent RFPs to agencies like Wieden & Kennedy, Droga5 in London and R/GA but they declined to participate. W+K and R/GA did not return requests for comment. Droga5 declined comment.
According to the former executive, the company allots anywhere from "below $100,000 to $1 million" for a creative project, which might span traditional or digital media. (Creative is typically made for social.) The person says between November and December, the company focuses on more "high-level campaigns." Overall, the former exec claims TikTok's marketing spend for two months (it is determined on an every-other-month basis) ranged from $2 million to $9 million.
The former TikTok executive says the budget for the year-end campaign from Adam&EveNYC was $1.5 million.
TikTok's rise in popularity has U.S. regulators on alert
TikTok has surged in popularity in the U.S. social media landscape, and is now a destination for brands looking to make a splash with its audience of young, enthusiastic users. Brands like Guess, Walmart, Disney and Chipotle have run hashtag challenges—trends that encourage users to contribute videos that mention the brands. There also are more traditional video ads that take over the screen, and TikTok farms out its most popular creators to brands through an influencer program. Influencers are popular social media stars who brands tap for marketing campaigns.
TikTok has more than 800 million monthly users, and more than 30 million of them are in the U.S., according to internal documents obtained by Ad Age in October.
"Brands are still a little bit slow to adopt TikTok," says Lili Meng, senior specialist at Gartner. "But they see the benefit to investing in TikTok especially as a majority of the primary social networks become more crowded and too competitive."
TikTok's higher profile among brands and users in the U.S. has come with more attention from regulators and lawmakers. In October, U.S. senators asked the national intelligence director to investigate the Chinese-based social media company to see if it poses any dangers over how it collects data. There have been concerns that such an active platform could compile large sets of information on U.S. consumers and officials.
For its part, TikTok has sought to mitigate those fears by saying it is cooperating with U.S. authorities to show the safeguards it has in place. TikTok claims to run independently from the Chinese parent company ByteDance.
There might be some brands that are concerned by TikTok's position as a Chinese company under scrutiny in the U.S., Meng says, but it hasn't stopped brands and major media companies like The Washington Post from signing up for accounts on the service.
"We saw quite a number of brands and media companies working with TikTok over the past year," Meng says. "There is still a lot of excitement about the platform, but I wouldn't be surprised if some brands were being a little bit more cautious right now."