Bloomberg

(Bloomberg) — Elon Musk said Twitter Inc. was on course for $3 billion of negative cash flow before he stepped in to stem losses by dismissing more than half the company’s staff.

“That is why I spent the last five weeks cutting costs like crazy,” Musk said during a Twitter Spaces event late Tuesday. “This company is like, basically, you are in a plane that is headed toward the ground at high speed with the engines on fire and the controls don’t work.”

Musk bought Twitter for $44 billion in October, partly financing the deal with almost $13 billion of debt with interest repayments of around $1.5 billion a year. He has since embarked on a frenzied mission to revamp the social-media platform, which he has said is at risk of going bankrupt and was losing $4 million a day as of early November. The mercurial entrepreneur has overseen the firings or departures of roughly 5,000 of Twitter’s 7,500 employees and instituted a “hardcore” work environment for those remaining. 

Over the weekend Musk conducted a straw poll on Twitter asking people if they wanted him to resign as the company’s top executive. About 58% of respondents said yes and Musk has since confirmed he’d step down once an appropriate replacement was found, for a job he’s said anyone would be “foolish” to take. 

In the Twitter Spaces event, Musk painted a dire picture of the company’s finances but suggested that he has managed to avert a total meltdown. 

Twitter’s costs in 2021 totaled almost $5.6 billion, according to the company’s last public annual report. Musk said the company was on track to spend about $5 billion next year. Taken with the debt payments required as a result of the acquisition, Twitter would be looking at about $6.5 billion in expenses in 2023, prompting Musk’s drastic moves to slash costs. 

Now, Musk said Twitter was on track to bring in revenue of about $3 billion in 2023, with around $1 billion in cash on its balance sheet. That’s about $2 billion less in revenue than the $5.1 billion reported at the end of 2021. Analysts had been forecasting about the same for 2022, according to estimates compiled by Bloomberg before to transaction’s close on Oct. 28. 

“I now think that Twitter will, in fact, be okay next year,” Musk said, adding that he expects the company to “roughly” hit cash flow break-even. Still, he conceded that “this will be difficult.” Musk added that advertisers, which account for the bulk of revenue, have been asking “sane” but “tough” questions about their return on investment .

Musk has also been making changes to the platform to increase and diversify its revenue, including charging $8 a month for a premium subscription called Twitter Blue. As of mid-November, there were about 140,000 paying subscribers, according to the New York Times. 

Twitter has always had a hard time converting conversation among its users into revenue, but with all his antics, Musk has managed to make the company as buzzy as it’s ever been.

Read more about how Musk Is Finally Running Out of Gas at Twitter

While Musk attempts to avert the plane crash he’s described at Twitter, shares of Tesla Inc., where he’s also chief executive officer, have been under sustained pressure. That’s partly on concerns the billionaire is distracted by Twitter and not focused enough on the electric-vehicle maker. Musk has also sold billions of dollars of Tesla stock in the last two months. Investors are parsing Musk’s willingness to support Twitter financially and service its debt burdens.

Read how Elon Musk Fans Feel Abandoned After Tesla’s $749 Billion Rout

Tesla shares pared a gain of as much as 2.5% to trade up almost 1% to $139 at 10:52 am in New York. The stock is down around 61% so far this year.

(Updates with details on finances in sixth paragraph.)

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©2022 Bloomberg L.P.

(Bloomberg) — Sam Bankman-Fried has paved the way to be in the US by Wednesday evening to face a litany of criminal charges.

The FTX co-founder arrived at the Magistrate’s Court in Nassau just before 11 a.m. local time flanked by Bahamian officers to sign a final set of documents. He’s expected next to be whisked off to a private air facility where US authorities will take custody of him. 

The developments cap a tumultuous week of machinations over when Bankman-Fried would be sent to New York, where federal prosecutors have accused him of crimes including fraud related to the collapse of the FTX crypto exchange. If convicted of all counts, he could face dozens of years behind bars.

Since being denied bail at an initial court hearing last week, Bankman-Fried has been held in a correctional facility on the outskirts of Nassau known as Fox Hill. The notorious prison is a far cry from the luxury penthouse in the island nation that he’d lived at after setting up the Bahamas as FTX’s headquarters.

Although he initially said that he would fight extradition, Bankman-Fried has more recently indicated in private conversations that he was preparing to return to the US as soon as Monday, Bloomberg News has reported. The change in attitude was in part tied to the expectation that he’ll be able to get bail in the US.

A representative for Bankman-Fried declined to comment on conversations that his legal team is having with prosecutors. 

Once back in the US, he’s likely to be arraigned within hours and his lawyers may present a case for him being granted bail. It wasn’t immediately clear at which American airport Bankman-Fried would land. 

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©2022 Bloomberg L.P.

(Bloomberg) — The Russian exodus triggered by Vladimir Putin’s invasion of Ukraine has put the currencies of former Soviet republics at the top of global rankings this year. 

Georgia and Armenia in the Caucasus mountains, as well as Tajikistan in Central Asia, are among the best performers against the US dollar after tens of thousands of Russian citizens settled there since February, bringing the equivalent of billions of dollars in savings with them. 

The small countries make appealing boltholes because no travel visas are required, Russian is widely spoken, and there are no restrictions on moving savings to local banks. 

That’s driven Armenia’s dram up 22% against the dollar since the start of the year, the top gainer among currencies worldwide, data compiled by Bloomberg show. Georgia’s lari and the Tajik somoni are stronger by more than 16% and 10%, respectively, beating the gains for Russia’s ruble, which is no longer a freely traded currency since emergency capital controls put a floor under its collapse.  

“It’s Russians, moving to these countries for a long time due to geopolitical issues, who keep their money in such currencies and push up the exchange rate,” said Natalia Milchakova at Freedom Holding Corp.

More Russians Flee Than Join Putin’s Army After War Call-Up 

The war explains the fivefold increase in remittances entering Georgia from Russia so far this year, equivalent to more than 60% of all transfers and exceeding $1.75 billion, according to the National Bank of Georgia. Money transfers to Armenia amounted to $2.8 billion in the first ten months, a near-quadrupling compared with the same period of 2021. In October, they hit the highest level since at least 2004, the Armenian central bank said. 

At the same time, the currency impact from the waves of Russian arrivals is bigger in the smaller ex-republics. Kazakhstan, whose population of 19 million is around 6 times that of Armenia and Georgia, has also received Russian inflows — but the tenge is on track to end the year with a loss of more than 7% against the dollar. 

The economic gains weren’t a given at the start of the war, and Russia’s neighbors were expected to suffer as their biggest trading partner buckled under international sanctions. In reality, the enormous capital inflows have boosted their foreign exchange reserves and improved their current account balance. Armenia’s economy expanded in double digits in the second and third quarters, while Georgia’s economy posted almost 10% growth in the three months through September.   

For Tajikistan, money transfers surged at least 50% in the first half of the year, said Natalia Lavrova of BCS Financial Group, citing balance-of-payment data. That’s put the landlocked nation’s economy on track to expand 7% this year, compared with earlier predictions for 4-5%, she said.

The International Monetary Fund raised Georgia’s full-year economic growth forecast to 10%, pointing to “a surge in immigration and financial inflows triggered by the war.” Meanwhile, Armenia’s central bank lifted its GDP growth forecast to 13% from 4.9% due to the influx of Russians, local media reported, citing Governor Martin Galstyan. 

“The sharp increase in remittances certainly explains such rapid growth,” BCS’s Lavrova said. In both Armenia and Georgia, the money transfers fed through into increased consumer demand and housing construction, she said. 

(Updates currency moves.)

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©2022 Bloomberg L.P.

(Bloomberg) — A year ago, Tesla Inc. seemed unbeatable, with its shares near a record high amid soaring optimism for the global electric-vehicle market. Now investors are struggling to see a bottom.

The stock was never for the faint of heart, given its volatility and the mercurial style of its chief executive, Elon Musk. Still, the magnitude of this year’s rout is staggering: It’s lost more than 60% through Tuesday’s close, on pace for a record annual decline, and erasing about $626 billion of shareholder value.

Two years to the day after Tesla joined the S&P 500 Index, investors are confronting a new reality. Competition from established major automakers is intensifying, threatening Tesla’s dominant market share. Analysts also see little in the pipeline to reignite the sort of rabid demand for the shares seen back in 2020. Meanwhile, the stock is some 40% below the level at which it joined the benchmark. 

“This whole narrative about Tesla being a leader in everything they do is waning,” said Jeffrey Osborne, an analyst at Cowen & Co. who has the equivalent of a hold rating on the stock. “Tesla shares tend to work best when you can create a feverish narrative about something coming. It is unclear what is to be excited about it in the new year.”

The company’s highly anticipated driving software and its battery technology are both falling short of their timelines, the analyst noted. Meanwhile, the futuristic design of its Cybertruck can make it a tough sell as a mainstream vehicle. Tesla didn’t reply to an emailed request for comment. 

Analysts have been scrambling to reassess their outlook given the stock’s freefall, more modest earnings expectations and the overall reset in valuations of growth companies: Wall Street’s average price target for Tesla has now sunk to the lowest in more than a year. 

The stock fell 8.1% Tuesday to $137.80, its weakest since November 2020, after Evercore ISI and Mizuho Securities became the latest to slash projections. On Wednesday, it briefly dipped below $136.03, the level where the shares were trading in November 2020 when S&P Dow Jones Indices announced that the stock would be included in the S&P 500 Index.

Given the stock’s dive, the average analyst target of about $259 — which is a far cry from the record close of $409.97 touched in November last year — implies a roughly 90% gain over the next 12 months from Tuesday’s close, suggesting there may be room for that gap to narrow.  

It’s a stunning reversal from a year ago, when Tesla was valued at almost $1 trillion, earnings were consistently beating expectations and demand for EVs seemed poised to soar with more countries announcing green-energy policies.

“Investors are projecting a phenomenal increase in revenue numbers along with an expansion in manufacturing capacity,” said Bruce Kahn, a portfolio manager at Shelton Capital Management, which held about 236,000 Tesla shares as of the end of September. The expectation is that sales could go from 1 million cars to 3 million, but the “reality is, not yet.” 

Of course, tech shares have suffered broadly as the Federal Reserve hiked interest rates to tame inflation, sparking angst over a possible recession. 

But in part because of worries that a downturn could crimp demand for costly electric vehicles, Tesla shares have been among the weakest. Only Meta Platforms Inc. has posted a steeper decline among the 10 NYSE FANG+ Index members. 

Musk’s purchase of Twitter Inc. made matters worse as concern grew that his preoccupation with the social-media platform was reducing his focus on Tesla. He also sold off a chunk of his shares to help finance the deal.

Yet when it comes to valuation, Tesla is still the fourth-most expensive stock on the NYSE FANG+ Index, trading at a forward multiple of 33 times estimated 2022 earnings.

The company is worth almost $440 billion, far bigger than any other major global carmaker. Japan’s Toyota Motor Corp., the second-biggest, is valued at about half that. Toyota is estimated to sell 8.9 million cars in fiscal 2023, ending March 31, while Tesla deliveries for calendar 2022 are expected to be around 1.3 million vehicles, data compiled by Bloomberg show. Granted, the bulls point to Tesla’s much fatter margins.

“Tesla is still trading like a tech company, as a high-growth company, whereas other auto manufacturers are not,” said Shelton’s Kahn. “The valuation still looks rich, because people think the EV complex will grow exponentially and Tesla will be one of the major players in it.”

To some, it all suggests there’s room for the stock to fall further. Momentum certainly isn’t on Tesla’s side. No development has managed to buoy the shares for long in 2022, from the decision to split the stock or dangling the possibility of a share buyback. Musk’s Twitter poll about stepping down as CEO of that company also failed to stem the slide. And his subsequent confirmation on Tuesday that he will indeed resign from the position hasn’t sparked any major relief rally.

It’s a time of reckoning for Tesla investors, many of whom see Musk’s ability to drive the company to success as forming the foundation for its potential. That partly explains why in a year when Tesla’s earnings are expected to grow more than 80% and revenue to expand nearly 55%, the dive in the shares has been so deep. 

“From a brand perspective, Elon Musk is Tesla and Tesla is Elon Musk,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management, which owns Tesla shares. “The more Elon uses Twitter in a political manner, the more he is potentially tarnishing the Tesla brand.”

Schein, who expects the company to be a leading EV player in the long-term, is waiting for the stock to fall further to add shares. 

“If Tesla falls 15% to 20% from here, we are buying,” he said.

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©2022 Bloomberg L.P.

(Bloomberg) — The Guardian news outlet said Wednesday it was hit with a suspected ransomware hack, leading it to tell its staff to work from home for the rest of the week.

The British daily newspaper said a “serious” IT incident began late Tuesday that has affected parts of its digital infrastructure, although it is continuing to publish news stories on its website and app. 

“We believe this to be a ransomware attack but are continuing to consider all possibilities,” Anna Bateson, the Guardian Media Group’s chief executive, said in a statement online. She said the paper expects to publish the Thursday print edition. 

Ransomware gangs typically breach or render victims’ networks inoperable, demanding a payment to free the systems. The pace and sophistication of such hackers is increasing faster than officials’ ability to keep up, the Biden administration warned in October.

The identity of the hackers behind the Guardian incident wasn’t immediately clear.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Core Scientific Inc., one of the largest miners of Bitcoin, became the latest crypto company to file for bankruptcy as the industry reckons with a plunge in digital-asset prices. 

The Austin, Texas-based company listed $1.4 billion of assets against $1.33 billion of liabilities in its Chapter 11 petition, which was filed in the Southern District of Texas. The company’s shares, already down 98% this year to trade at a fraction of a dollar, lost a further 40% on Wednesday morning.  

Chapter 11 bankruptcy allows a company to continue operating while it works out a plan to repay creditors. Core Scientific said in a statement that it intends to reach a restructuring agreement with a group of convertible bondholders and continue operating its mining and hosting business. 

The company contributes about 10% of the computing power to secure the entire Bitcoin network. It had 243,000 servers for Bitcoin mining with 143,000 for self-mining. It has provided hosting services to the largest miners in the industry. 

In court filings, the company attributed its bankruptcy to falling Bitcoin prices, soaring energy costs and the July bankruptcy of Celsius, one of its largest hosting customers. 

The company also over-committed on construction costs to build out its mining operations and owed around $275 million on equipment financing debts that it wasn’t paying significant amounts on before the filing. 

Core Scientific is among a handful of Bitcoin mining companies that went public in 2021 through special-purpose acquisition companies before crypto prices fell. However, the “crypto winter” and energy cost hikes have wrecked havoc on the industry, and many major miners now face liquidity crunches.

A slew of crypto companies have sought bankruptcy protection this year as slumping token prices continue to weigh on the sector. Compute North Holdings Inc., a provider of data services for miners and blockchain companies, filed for bankruptcy in September, while Voyager Digital Ltd. sought court protection in July. Sam Bankman-Fried’s FTX exchange filed for bankruptcy in November under a cloud of alleged mismanagement, a move that forced lender BlockFi Inc. to follow suit soon after.

Among Bitcoin miners, Greenidge Generation Holdings Inc., once one of the largest public Bitcoin miners in the US, warned Tuesday that it may seek bankruptcy protection while entering into debt restructuring talks with lender New York Digital Investment Group. 

(Updates with additional details throughout.)

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©2022 Bloomberg L.P.

(Bloomberg) — Google’s YouTube is nearing a multiyear deal for the rights to stream the National Football League’s Sunday Ticket, according to a person familiar with the matter, in another sign of major sports moving from traditional TV to online video.

Sunday Ticket is a subscription package that lets fans watch afternoon games that aren’t on their local TV channels. The current package is carried by the DirecTV satellite service under a deal that expires this season. YouTube, owned by Alphabet Inc., has been bidding against other tech and media giants including Amazon.com Inc., Apple Inc. and Walt Disney Co. 

Google has discussed paying about $2.5 billion a year to the league, or $1 billion more than what DirecTV pays, according to the New York Times.

The NFL declined to comment. Representatives for YouTube didn’t respond to requests for comment.

It would be the second big NFL package to move to streaming after Amazon gained exclusive rights to the league’s Thursday night games this season. It underscores the growing challenge to traditional TV, which is losing viewers to deep-pocketed online players. Live sports are among the most-watched programming on broadcast and cable TV, led by the NFL.

The deal moves Sunday Ticket from one of the largest US pay-TV services to an online world where it could potentially reach an even bigger audience. DirecTV launched Sunday Ticket in 1994 and used the games to attract new subscribers. DirecTV had about 13.3 million subscribers at the end of the third quarter, according to Fitch ratings.

But the satellite service, owned by AT&T Inc. and TPG Inc., limited the offering largely to its own pay-TV subscribers, charging about $300 for the 2022 season. 

Because Sunday Ticket offers games not carried by local TV channels, it’s been especially popular in sports bars and restaurants, where fans can see the full slate of Sunday afternoon games.

Executives of DirecTV have suggested they’d like to continue to provide the service in those locations. Amazon struck a deal with DirecTV so that Thursday games would still be available in bars and restaurants.

NFL Commissioner Roger Goodell has long said he wants to deliver Sunday Ticket on different platforms to appeal to a larger audience. In a 2019 interview with Bloomberg, Goodell said the league was “looking to see how we can change the delivery.”

The NFL has tried to strike a tricky balance with its broadcast rights, reaching agreements with traditional networks while also doing deals with streaming services to reach TV cord-cutters.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — Buying a plot of land in rural America has never been so expensive. And that’s even with soaring interest rates.

Rising commodity prices mean farmers made record amounts of money this year, spurring a rush for space to plant in 2023. More demand comes just as people fled to the countryside during the pandemic — with non-metropolitan areas growing faster than urban ones — and investors turned to fields as a hedge against inflation.

Farmland prices in the Midwest, the nation’s breadbasket, jumped 20% just in the third quarter from a year earlier — bucking a downturn in the residential real estate market, according to data from the Federal Reserve Bank of Chicago and the National Association of Realtors. That was the eleventh consecutive quarter of gains, the longest streak since 2014.

Jim Schultz, who runs Open Prairie, a private-equity investment firm in central Illinois, believes farmland prices could double in the next 10 years. That’s after the 13,000 acres he bought between 1987 and 1992 for $750 an acres are now worth 16 times more.

“I believe we’re at the start of a decade-long trend,” said Schultz, who says he has no interest in selling. “We sit in a very good position.”

Growers across the US are making more money as Russia’s invasion of Ukraine chokes off supplies from a key producer of everything from corn to wheat and sunflower oil. Higher prices have boosted farmer profits to almost $161 billion this year, a 14% increase from 2021, the US Department of Agriculture estimates. 

Broadband Expansion

More demand for farmland coincides with pandemic-induced shifts in population. The number of people living in non-metro counties rose 0.3% in the 12 months ended in July 2021, the first time the growth in rural population outpaced that of urban areas since the mid-1990s, according to USDA. 

Tom Halverson, chief executive officer of CoBank, a cooperative lender serving rural America, said the expansion of broadband and the ability to work from home helped fuel that shift.

“The reality is that for the first time in several decades, rural America is picking up population,” he said on Bloomberg TV this month. “It’s our hope and our expectation that this will be somehow structural, but it will be unevenly distributed across the country.”

Farmland has also become more attractive as owners seek to make money from the shift to clean energy. Demand for renewable diesel — made from vegetable oils but with identical chemical properties to the petroleum-based fuel — is expected to triple in the next five years, according to BloombergNEF. 

Growers also have space for solar panels and wind turbines, with the number of farms with photovoltaic installations doubling in the five years to 2017, according to the most recent USDA census of agriculture. Still, farmland with renewables assets accounted only for 6.5% of the total, highlighting untapped potential. 

Producers can also now gain from sequestering carbon, with the price Indigo Ag pays farmers for carbon doubling in the past two years. 

US Recession

To be sure, rising rates and a potential US recession next year could still hit the farmland market. Prices for grade-A plots in Illinois could decline between 2% and 5% next year, according to Luke Worrell, a farmland broker in the state’s town of Jacksonville. 

“Between decreasing returns and higher interest rates, you’re hitting your top two buyers of farmland. It’s a one-two punch,” Worrell said in an interview. “We’ve had a wild ride, but we’d be naive to think it will last forever. We have to prepare for a little softening.”

Matthew Fitzgerald, who grows organic corn and soybeans with his family in McLeod County, Minnesota, said the biggest challenge for young farmers is the cost of land. He tapped a USDA program to expand his family’s 200 acres to about 2,500 acres, and is partnering with agriculture-land investment platform AcreTrader, which purchases land that he then manages and co-invests in. 

“With farmland prices at these levels, it’s a total puzzle to figure out how to be competitive and how to acquire land,” Fitzgerald, 31, said by phone. “Midwest commodity farming is a lot like the mafia — you have to know someone or have a lot of money.”

Real Asset

In the long term, a growing global population coupled with a changing climate makes productive land in the Midwest integral to global food production. 

Interest from outside investors is also on the rise. Farmland is considered a great hedge against inflation because the commodities it produces usually gain in value when overall prices rise.

“Land is a real asset,” Gary Schnitkey, professor at the University of Illinois, said at a conference in Champaign. “Do you want to own a piece of dirt or cryptocurrency? It’s a good way to diversify your asset pool.”

–With assistance from Tarso Veloso.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — In August 2020 professional dancer Brian Esperon posted a 15-second video to TikTok of choreography set to WAP, an explicit new song from Cardi B and Megan Thee Stallion, which was viewed more than 100 million times. Today he can struggle to reach even 1% of that audience.

Esperon was one of the TikTok creators that helped ignite a dance-video craze on the app that turned it into a staple of US digital life. But like all trends, it’s now losing steam.

That’s shaken the network of advertisers, music labels and influencers that organized their time and spending power around the video trend. While that’s not necessarily bad for TikTok, it marks a new phase of its commercial life — one that is less reliant on smaller, unknown creators and more on big names and companies with deep pockets.

“Nothing stays the same on the internet,” said Jamie Cohen, an assistant professor of media studies at CUNY Queens College. “For better or worse.”

TikTok, a unit of China’s Bytedance Ltd., was already popular in Asia when the Covid-19 pandemic hit. The circumstances of the virus helped it gain traction in the US. Creators already on the platform, including dancers Charli D’Amelio and Addison Rae, saw their follower counts soar as the newly homebound devoted more time to social media.

@charlidamelio

dc @karaleighcannella @jaedengomezz

♬ His & Hers – Internet Money & Gunna

However, the success of TikTok, which says it has more than 1 billion monthly users, has created new hurdles. The algorithm embedded in the app, which delivers new content to users in a tailored “For You” page, is designed to pinpoint the niche interests of TikTokers as it gathers data on them. Users are now viewing a wider breadth of videos from more people.

Esperon said it’s harder to get noticed in this crowded environment. He regularly achieved viral success when he joined in late 2019, but has only rarely been able to reach 1 million people with his videos this year. In June, D’Amelio lost her place as the most popular account on TikTok to a creator named Khaby Lame, who posts comedic reactions to how-to videos.

It’s also tougher to successfully allocate marketing money, with dance videos no longer surefire hits.

“In TikTok’s early days, in particular, what drew creators, especially smaller creators, is this idea that they could reach TikTok fame and go viral by one piece of content,” said Jasmine Enberg, principal analyst at marketing research firm Insider Intelligence. Now, “TikTok is much more saturated.”

Many companies are navigating the change by seeking out creators who are already famous. A dance video to Lizzo’s About Damn Time became one of app’s most popular of the year, with a clip of Lizzo performing it herself viewed almost 60 million times. (The dance itself was created by a choreographer named Jaeden Gomez.) Other chart-topping hits of 2022, such as Sam Smith’s Unholy, have had similar artist involvement.

@lizzo

DC @jaedenraegomez ????

♬ About Damn Time – Lizzo

Some have dramatically simplified the dances to capture the increasingly divided attention of audiences. The pandemic dance videos included intricate routines made by professional choreographers. This year, a dance set to Taylor Swift’s Bejeweled went viral with only three moves: a walk, turn and a finger wiggle.

Against The Grain, a digital marketing agency that runs around 3,000 campaigns per year, began facilitating dance challenges in 2020. That type of work, which usually consists of paying TikTok creators to create dances to certain songs, has decreased about 90% in two years, according to Omid Noori, who co-founded the company with Ramzi Najdawi. Their team now focuses more on working with music curators and other influencers to capitalize on trends of the moment.

@kathleen.post

#duet with @mikael.arellano my favorite dance on this app right now ✨???????????????????????? #bejeweled #swifttok #swiftie

♬ Bejeweled – Taylor Swift

Others are spending money on other platforms that copied TikTok’s dance trends, such Meta’s Instagram Reels and YouTube Shorts, and are still adding users attracted to the short-form video genre. They are typically either paying influencers to make songs to certain dances, or for the platforms to increase the visibility of individual videos or hashtags. Esperon said he was paid thousands of dollars to participate in a dance challenge for K-pop group Blackpink on YouTube Shorts.

To be sure, TikTok is still extremely popular. The platform received almost $10 billion in global revenue from marketers this year, according to an October report from Insider Intelligence and eMarketer. That number is expected to rise to more than $14 billion in 2023. But the nature of spending remains in flux.

TikTok has added tools to attract new advertisers, including smaller ones without major marketing departments. For example, it built a database of 800,000 creators and created search functions that will connect them to advertisers. The platform also highlighted trends it thinks will take off in 2023, including videos where people demonstrate a new product in an entertaining way or content that highlights self-care and societal values. 

Johnny Cloherty, co-founder and chief executive officer of Songfluencer, a music marketing agency that’s produced work on behalf of artists such as Bruno Mars and Gayle, said companies are always seeking to find the platform where ads have the greatest chance of success.

The platforms have “a firehose of money to spend,” he said. “I think we’re going to have another streaming war on our hands.”

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.

(Bloomberg) — In August 2020 professional dancer Brian Esperon posted a 15-second video to TikTok of choreography set to WAP, an explicit new song from Cardi B and Megan Thee Stallion, which was viewed more than 100 million times. Today he can struggle to reach even 1% of that audience.

Esperon was one of the TikTok creators that helped ignite a dance-video craze on the app that turned it into a staple of US digital life. But like all trends, it’s now losing steam.

That’s shaken the network of advertisers, music labels and influencers that organized their time and spending power around the video trend. While that’s not necessarily bad for TikTok, it marks a new phase of its commercial life — one that is less reliant on smaller, unknown creators and more on big names and companies with deep pockets.

“Nothing stays the same on the internet,” said Jamie Cohen, an assistant professor of media studies at CUNY Queens College. “For better or worse.”

TikTok, a unit of China’s Bytedance Ltd., was already popular in Asia when the Covid-19 pandemic hit. The circumstances of the virus helped it gain traction in the US. Creators already on the platform, including dancers Charli D’Amelio and Addison Rae, saw their follower counts soar as the newly homebound devoted more time to social media.

@charlidamelio

dc @karaleighcannella @jaedengomezz

♬ His & Hers – Internet Money & Gunna

However, the success of TikTok, which says it has more than 1 billion monthly users, has created new hurdles. The algorithm embedded in the app, which delivers new content to users in a tailored “For You” page, is designed to pinpoint the niche interests of TikTokers as it gathers data on them. Users are now viewing a wider breadth of videos from more people.

Esperon said it’s harder to get noticed in this crowded environment. He regularly achieved viral success when he joined in late 2019, but has only rarely been able to reach 1 million people with his videos this year. In June, D’Amelio lost her place as the most popular account on TikTok to a creator named Khaby Lame, who posts comedic reactions to how-to videos.

It’s also tougher to successfully allocate marketing money, with dance videos no longer surefire hits.

“In TikTok’s early days, in particular, what drew creators, especially smaller creators, is this idea that they could reach TikTok fame and go viral by one piece of content,” said Jasmine Enberg, principal analyst at marketing research firm Insider Intelligence. Now, “TikTok is much more saturated.”

Many companies are navigating the change by seeking out creators who are already famous. A dance video to Lizzo’s About Damn Time became one of app’s most popular of the year, with a clip of Lizzo performing it herself viewed almost 60 million times. (The dance itself was created by a choreographer named Jaeden Gomez.) Other chart-topping hits of 2022, such as Sam Smith’s Unholy, have had similar artist involvement.

@lizzo

DC @jaedenraegomez ????

♬ About Damn Time – Lizzo

Some have dramatically simplified the dances to capture the increasingly divided attention of audiences. The pandemic dance videos included intricate routines made by professional choreographers. This year, a dance set to Taylor Swift’s Bejeweled went viral with only three moves: a walk, turn and a finger wiggle.

Against The Grain, a digital marketing agency that runs around 3,000 campaigns per year, began facilitating dance challenges in 2020. That type of work, which usually consists of paying TikTok creators to create dances to certain songs, has decreased about 90% in two years, according to Omid Noori, who co-founded the company with Ramzi Najdawi. Their team now focuses more on working with music curators and other influencers to capitalize on trends of the moment.

@kathleen.post

#duet with @mikael.arellano my favorite dance on this app right now ✨???????????????????????? #bejeweled #swifttok #swiftie

♬ Bejeweled – Taylor Swift

Others are spending money on other platforms that copied TikTok’s dance trends, such Meta’s Instagram Reels and YouTube Shorts, and are still adding users attracted to the short-form video genre. They are typically either paying influencers to make songs to certain dances, or for the platforms to increase the visibility of individual videos or hashtags. Esperon said he was paid thousands of dollars to participate in a dance challenge for K-pop group Blackpink on YouTube Shorts.

To be sure, TikTok is still extremely popular. The platform received almost $10 billion in global revenue from marketers this year, according to an October report from Insider Intelligence and eMarketer. That number is expected to rise to more than $14 billion in 2023. But the nature of spending remains in flux.

TikTok has added tools to attract new advertisers, including smaller ones without major marketing departments. For example, it built a database of 800,000 creators and created search functions that will connect them to advertisers. The platform also highlighted trends it thinks will take off in 2023, including videos where people demonstrate a new product in an entertaining way or content that highlights self-care and societal values. 

Johnny Cloherty, co-founder and chief executive officer of Songfluencer, a music marketing agency that’s produced work on behalf of artists such as Bruno Mars and Gayle, said companies are always seeking to find the platform where ads have the greatest chance of success.

The platforms have “a firehose of money to spend,” he said. “I think we’re going to have another streaming war on our hands.”

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