Why TikTok Might Turn Out To Be Meta Platform's 'Formidable Foe'

Meta Platforms Inc.'s FB fourth-quarter disappointment was partly blamed on competition from short-video app TikTok.

An analyst at Ark Invest suggested TikTok would prove to be a "formidable foe" for the social media giant.

What Happened: Meta CEO Mark Zuckerberg mentioned the TikTok competition as one of the reasons for the company's disappointing guidance.

TikTok is taking a significant share of consumer mindshare and is posing a threat to Meta, Ark Invest analyst Nicholas Grous said in a note.

TikTok is the only non-Meta-owned app to reach 3 billion downloads globally, the analyst noted. Meta is attempting to take on TikTok with its Reels, a short-form video platform on its Instagram subsidiary, he added.

"Given its focus on The Metaverse, we are wondering if Meta has the DNA and time to compete on the short-form video front," Grous said.

TikTok's differentiation, the analyst said, is its superior suite of high-end video creation and editing tools, of which Reels has no match.

Related Link: Instagram Reels Vs. TikTok Vs. YouTube Shorts Vs. Snapchat Spotlight: How Social Video Apps Stack

Why It's Important: Meta and its smaller rival Snap Inc SNAP have both implied at their respective earnings calls that the future of social media will look like TikTok.

Zuckerberg shared at a company-wide virtual meeting that it is important to focus on growing Meta's short-video product as it faces an "unprecedented level of competition" from TikTok, Bloomberg reported, citing a person who attended the meeting.

For now, it appears TikTok has the upper hand, given Meta's divided focus amid multiple risks, including the impact from Apple Inc.'s AAPL privacy changes and an uncertain foray into Metaverse.

At last check, Meta shares were down 4.13% to $227.31 Monday afternoon at publication.