TikTok joins the AI-powered ad pack to compete with Meta for ad dollars

Officially launching today (Oct. 7), Smart+ automates everything from creative development to targeting and optimization, making the entire ad buying process in-app.

In effect, marketers can let TikTok’s AI do the heavy lifting — crafting and serving ads to drive conversions, leads or app downloads. However, they also have the ability to take control at critical levels, with Smart+ offering the flexibility to use its features selectively.

For example, marketers can use the tool to create and optimize ads and then choose whether to manage the campaigns themselves or hand the control over to artificial intelligence. This modular approach allows marketers to pick and choose which functionality to leverage, differentiating it from competing solutions that often require full commitment to the entire suite.

This flexibility could alleviate concerns that tools like Smart+ require marketers to hand over too much control to unfathomable algorithms.

However, it also highlights a more important problem with tools like Smart+: while these “black box” models promise increased performance with advanced machine learning, they require a lot of trust from marketers, often lacking the insight and control they’re used to.

Still, many people seem willing to trade a little control for faster results and better ad performance.

That’s exactly what TikTok is counting on with Smart+. The show is all about simplicity and speed — no more weeks of guesswork and endless A/B testing, according to TikTok CEO Adolfo Fernandez, global head of product strategy and operations, business.

Since TikTok’s AI is already trained in what drives successful ad campaigns on the platform, advertisers can expect quick wins with less effort, he added. The same goes for creatives; Smart+ is connected to TikTok’s other AI tool, Symphony, designed to help marketers create and refine ad concepts.

“Advertisers who optimize for value with Smart+ web campaigns achieve a 53% increase in ROAS on average [compared to without it]Fernandez said.

Ray-Ban is one example. Over the summer, the brand ran a beta Smart+ campaign that reduced cost per purchase by 50% compared to previous campaigns without the device. Conversion rate increased by 47% and increased profitability for the eyewear brand by 42%.

Results like these are meant to appeal to a certain type of marketer — the kind that have avoided TikTok until now, unsure if the platform can deliver faster results or who aren’t willing to spend the time and money to find out. Smart+ is TikTok’s way of drawing them in. And if it works, it could reshape TikTok’s ad business, making smaller advertisers the bedrock of its growth — just like Meta and Google have done.

“In my mind, with the introduction of Smart+, the gap will almost completely close with Meta,” Blake Chandlee, TikTok’s president of global business solutions, told Digiday. “That [Meta’s Advantage+] has really been the benchmark in the industry. Historically, we have been very strong in brands, to the extent that our branded products are superior to any on the market. But our performance products [especially including Smart+]I think, can be equal.”

However, closing that gap won’t be easy – TikTok’s ad business still has something to do with Meta.

TikTok’s worldwide ad revenue is expected to reach $22.32 billion by the end of the year and increase by 27.3% to $28.42 billion by the end of 2025, according to eMarketer’s March 2024 forecast. In comparison, it is expected that Meta’s worldwide ad revenue will total $154.16 billion by the end of this year and increase by 23.2% to $173.92 billion by the end of 2025, per network marketer.

“Automation is a key step for us as we enable advertisers to further invest in TikTok and achieve even greater ROI,” said David Kaufman, TikTok’s global head of monetization products and solutions, on TikTok.

Commerce continues to be an important cog in these plans—so much so that it has rolled out its own AI tool to boost merchant sales. Called GMV (Gross Merchandise Value) Max, the AI ​​tool automatically tests and selects the best performing creative assets for sellers. It optimizes traffic, organic content, paid ads and related posts to reach buyers across all of TikTok’s shoppable real estate – from the For You page to the Shop tab and even search results. However, it cannot optimize for ROI, only overall ROI within TikTok. But TikTok executives don’t see that as a bug — in fact, they think it’s a feature, not a bug.

“If you put it in perspective – moving from ROAS to total ROI – is a big step forward in our vision to move from being a media partner to becoming a true business partner for our clients,” Fernandez said.

Put another way: TikTok wants to focus on broader business outcomes — like long-term growth and market efficiency in its ecosystem — rather than simply driving immediate sales through advertising. And the initial test results suggest there may be something to it: merchants using GMV Max saw an average 30% increase in total product value, according to Fernandez.

Taken together, all signs point to a shift in TikTok’s pitch to marketers. The company wants to be seen as more than just an entertainment app where users kill time watching viral videos. It’s becoming a platform where people choose to spend their time – and with that mindset shift, they’re increasingly seeking, discovering and buying what they see.

To prove it, TikTok’s head of solutions and operations measurement products pointed to some convincing numbers. “Research shows that 79% of TikTok-driven purchases are not attributed to the platform, and transactions are undervalued by 73%,” said Ann Nguyen, TikTok’s head of product measurement solutions and operations.

According to the executive, this trend has been building for a while – current metrics just couldn’t catch it. So, instead of waiting for third-party metrics to catch on, TikTok built its own.

When external data didn’t tell the story it wanted, TikTok created its own narrative—backed by its own tools, including conversion rate research. These studies measure sales that would not have occurred without TikTok advertising and use a randomized controlled trial method similar to what is done in scientific research. TikTok executives are encouraging Smart+ advertisers to take advantage of this research, though marketers will also have the option of using their own tools.

“They consistently demonstrate that TiKTok is a highly incremental platform that creates demand with results far beyond the last click,” said Nguyen. “For example, advertisers are seeing an average increase in conversions of at least 25%.”

This isn’t a new strategy – Google and Meta have both used similar tactics for years to build an “undervalued, underinvested” narrative. But TikTok is trying to differentiate itself with its focus on privacy-enhancing technologies, such as data clean rooms and trusted execution environments, to keep marketers’ data safe while proving its value.

And as TikTok repositions itself as a serious player in advertising, the pressure is on to show it can deliver where it matters most: the bottom line.