A TikTok Phone Won't Be Coming To The U.S.

The company behind TikTok said Monday it plans to enter the smartphone business, but U.S. fans of the video-sharing app won’t get to buy one. The looming hardware launch has been misunderstood, a spokesperson for ByteDance, owner of the video-sharing app, told Forbes.

"Reports of our smartphone development strictly refer to a continuation of plans that were in place before ByteDance began working with Smartisan,” the Chinese smartphone maker that the company acquired earlier this year, a ByteDance spokesperson said in an email. “The focus is on meeting the needs of Smartisan's existing customer base in China."

There are no plans to compete directly with leading mobile devices such as Samsung’s Galaxy phones or Apple’s iPhone. Instead, the company wants to focus on its existing Chinese user base — as small as it may be.

Smartisan is one of an estimated 200 Chinese smartphone companies that compete over a small fraction of China’s vast smartphone market that is otherwise dominated by five companies: Huawei, Xiamoi, Oppo, Vivo, and Apple. Even with its tiny market share, Smartisan has successfully raised its profile in China by hosting over-the-top media events where consumers pay to hear the CEO’s sales pitch and see performances from popular local artists.

The decision to build a smartphone is just the latest in a string of announcements made by ByteDance as it moves to expand its offerings beyond entertainment and news apps. ByteDance has already entered the messaging foray with Flipchat, and the company is also mulling the launch of a new music-streaming service. 

ByteDance remains relatively unknown to most U.S. customers. The company produces several popular apps for the Chinese market including Toutiao, a news aggregator, and Duoshan, a popular Snapchat clone that launched in January. But the company’s biggest success by a large margin is its nearly ubiquitous short-video-sharing app TikTok, which currently has more than 500 million global monthly active users. 

TikTok, known as Douyin in mainland China, launched in 2016 and reported more than 300 million monthly active users in China in June 2018. The app launched in international markets in September 2017 and by July 2018, the app hit another important milestone: reaching more than 500 million global monthly active users.

American consumers have played a critical role in TikTok’s global success. ComScore data from March shows that TikTok’s U.S. unique visitors reached 14.3 million, a considerable increase from just 3.9 million a year earlier. Its growing American user base is part of a larger trend of growing popularity among apps developed by Chinese firms.

CNBC reports that apps developed by Chinese firms brought in revenues of $674.8 million from the U.S. in the first quarter according to mobile app researcher Sensor Tower. That number represents a 67% year-over-year increase and makes up for an estimated 22% of the top 100 apps’ total sales in the first quarter according to Sensor Tower.

But while TikTok’s growth has shocked many, its American user base still pales in comparison to many of the most popular apps in the U.S., particularly compared to Facebook and Twitter, which are used by huge swaths of the American population. About 69% of all U.S. adults use Facebook and 22% use Twitter, according to a recent Pew study. 

Experts say that the smartphone’s software would come preloaded onto the new device, encouraging users to stay within the family of entertainment and education apps being created by the company.

Larger service-based companies which tried to move into hardware met with failure. Amazon famously released its own mobile device in 2014 called the Fire Phone which received abysmal reviews and was discontinued one year after it was released. Similarly, Facebook produced a phone in collaboration with HTC called the HTC First that was often referred to as the pilot “Facebook Phone,” which was the first to ship with a special Android skin called Facebook Home. The phone flopped and was discontinued only one month after it launched.

Google, by comparison, succeeded in the hardware market, releasing its first company-branded smartphones in 2013, have generally receiving positive reviews. Still, the Google Pixel makes up only 2.31% of the smartphone market share in North America and doesn’t register in the top 5 of global market share, significantly trailing Samsung, Apple, Huawei, Oppo and Xiaomi. Whether ByteDance can repeat Google’s niche success remains to be seen, but for now, the company is adamant about tempering expectations and developing the strength of its relationship with existing customers — even if it is only a fraction of the size of top competitors.