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Small businesses are pulling ad dollars out of Facebook and Instagram in favor of TikTok with the holiday season underway, as the short-form video app’s organic reach is increasingly boosting their sales.
Constructive Eating, a small business in Ann Arbor, Michigan that makes plates and utensils to encourage picky eaters, noticed that if one of its TikToks gets over 1,000 views, at least one person makes a purchase.
Organic reach that generates sales is a huge win, especially when the company’s entire marketing budget is $2,000 for the year. Elise Wheelock, manager of marketing and online sales at Constructive Eating, said that the company has not paid to promote a single post on Facebook or Instagram this year, though it might for the holiday season. In previous years, it would boost anywhere from one to five posts a month for about $30 each boost.
The Wine Savant, which makes wine and whiskey decanters, also stopped all paid social efforts on Instagram and Facebook in February and March of this year, a few months after they began posting on TikTok. The company declined to give exact figures around its ad spend but did say that money budgeted for Facebook and Instagram started going to influencer collaborations.
“We tend to put all our energy into wherever the greatest ROI is,” said Brendan Cox, head of marketing at Cling Brands, the parent company of Wine Savant. “For us, leveraging short-form organic content on TikTok, Reels and YouTube Shorts have been the most effective vehicles in helping us generate revenue.”
Business owners say the Meta platforms have not shown the same return on ad spend they once did, citing effects from Apple’s iOS privacy updates, changing algorithms and the apps’ inability to reach new customers.
“It feels like in the last few years Instagram has lost its ability to reach new customers,” Wheelock said. “It was more about converting followers you already had, but you could post all day long and not convert.”
Amid economic headwinds, even large corporations are rethinking their ad strategies, and the impacts are being felt across the tech sector. Meta reported its second straight quarterly revenue decline in the third quarter and forecasts another drop in the fourth quarter. Meta recognizes that it is losing users to TikTok, which only compounds the feeling of small and midsize businesses (SMBs) that they should look elsewhere for new customers.
But TikTok isn’t immune to the iOS changes, either. Earlier this month, TikTok’s parent company ByteDance lowered its target for 2022 ad revenue from $12 billion to $10 billion.
“Overall, investment is down primarily because Facebook investment is down, and Google is relatively flat or slightly up,” said Maurice Rahmey, co-CEO and co-founder of Disruptive Digital, a digital marketing agency started by two former Facebook employees. “Ads just are not as effective after the Apple update.”
Related: Holiday marketing guide for brands
Rahmey said Disruptive Digital’s clients at the beginning of the year were spending zero dollars on TikTok, but now it is around 5% to 10% of budgets. Of course, that still pales in comparison to the 70% of client ad dollars going to Facebook, and as much as 25% going to Google.
After seeing success from viral TikToks last year, Elijah Morey, CEO and co-founder of hot sauce company Elijah’s Xtreme, was able to pull back ad spend from Facebook and Instagram.
“We were spending $30,000 to $40,000 per month on Facebook and Instagram ads in late 2021,” Morey said. “But it didn’t have a linear scale. When I looked at weekly analytics, things were not adding up—the attribution was off, making it look better than it was. I was spending weeks on creative ads, but now I can make a packaging order video on TikTok and reach way more people.”
Morey found that around half of his marketing costs on Meta platforms were generating just 8% of sales. He now spends a minimum on Facebook and Instagram and does few paid ads on TikTok, but mostly relies on influencer gifting and organic reach. He says that TikTok has led to 19% of sales for the year to date starting in May 2022.
Even larger brands have been happy with TikTok’s results. Peace Out Skincare, a direct-to-consumer skincare brand that also sells its products at beauty retailer Sephora, recently redirected almost all its Facebook advertising budget toward the brand’s TikTok marketing endeavors, according to Chief Marketing Officer Junior Pence. The brand was seeing little return despite its heavy investment in Facebook ads.
The brand began gradually upping its TikTok budget earlier this year and saw its sales via Sephora increase. Peace Out Skincare now devotes 80% of its social media budget to TikTok, but declined to share exact figures. The brand splits its remaining budget between Instagram and Google, Pence said. With an upcoming product launch ahead of the holidays, Pence plans to maintain the ratio for its social media budget for promoting the product, leaning on TikTok for influencer partnerships and both organic and paid video content.
Some brands say they have saved major sums after diverting efforts to TikTok. Mermaid Straw, which sells eco-friendly cups and straws, has moved to no paid advertising on any social media after finding that they were satisfied with TikTok’s organic impact on sales. In 2020, the company stopped all paid advertising on Facebook and Instagram, where it had been spending $20,000 to $25,000 a month.
“That was a huge change, to be saving hundreds of thousands of dollars a year in ads,” said Lisa Harrington, CEO and co-founder of Mermaid Straw. “We took those savings and used them to invest in new office space, hire more employees and make new products.”
TikTok’s incredible growth and ability to make regular content go viral have been a big draw to businesses both small and large. According to Forrester Research data from August 2022, 25% of U.S. TikTok users say they are on the app “constantly,” compared to 15% of U.S. Facebook and 18% of U.S. Instagram users.
For some brands, their TikTok content has actually helped fuel creative on Meta platforms. At Tinuiti, a digital performance marketing agency, Instagram is still a pillar for many of its SMB clients. Reels’ share of ad impressions increased from 3.9% in the second quarter of this year to 4.7% in the third quarter, according to Tinuiti’s Q3 2022 Meta Ads Benchmark report.
“SMBs who have taken advantage of the past couple years and tested early into TikTok have been able to get ahead of the curve and elevate their creative strategy into a content strategy across Instagram, leveraging user-generated content and trends,” said Roman Fitch, director of growth media at Tinuiti. “Advertisers testing creative on Reels have found that user-generated-style ads similar to TikTok perform best.”
This was the case with SheFly Apparel, a company that makes hiking pants with an extended zipper to let women relieve themselves outside without having to pull down their pants. The brand took a viral TikTok that had gotten almost 18 million views and reposted it to Reels, where it saw over 50 million views.
“You have to be purposeful with creative on TikTok,” said Adrian Tilley, co-CEO and co-founder at Disruptive. “So advertisers have to lean into TikTok, but it can be easier to get up and running on Facebook and Instagram.” He also noted that Facebook and Instagram have more scale with older demographics, and that both can be more consistent on returns, in contrast to the wild, unpredictable swings of virality on TikTok.
Additional reporting by Gillian Follett.
In this article:
Erika Wheless is a technology reporter covering social media platforms, influencers, and esports. She was previously the e-commerce reporter for Digiday, and is a graduate of the Craig Newmark Graduate School of Journalism.
