Bank of America analyst Justin Post has reflected on the online ads market amid the rapid ascendance of China’s social media network TikTok.

The social media company is a market leader with “>90mins of daily time spent per active user,” clearly ahead of its US peers. An analyst noted other metrics which show TikTok as the world’s fastest growing large-scale social media network.

“Various press reports estimate TikTok’s ad revenues will grow >170% y/y in 2022 to over $12bn, which we estimate could represent a 210bps growth headwind for Western market competitors. We see TikTok’s traction as most challenging for Snap (NYSE:), Instagram, and YouTube, where the platform competes head-to-head for younger users and ad dollars, though FB, Pinterest (NYSE:) and even streaming companies could see an impact,” Post said in a client note.

Post thinks that US TikTok user growth may slow down, which could be a positive sign.

The US social media firms continue to invest heavily in short-form video. Meta Platforms, NASDAQ: Post predicts a 2% revenue loss in 2022 which will turn to a 1.3% tailwind in 2024.

“For YouTube Shorts, we estimate a $1.3bn revenue headwind in 2022, but opportunity to generate $9bn in Shorts revenue in 2024. Snap has held off on monetization, but if the company starts to monetize Spotlight by the Fall, we estimate it could generate around $89mn in revenue by year-end, representing a 1.5% revenue tailwind that could grow to 4% in 2023.”

The analyst also expects that the ramp of ads in the short-form video will act as potential 2H catalysts for both Meta & Snap.

By Senad Karaahmetovic