“An infinite loop of shoppertainment.” That might sound like the premise for a new Black Mirror episode. But it’s actually marketing blurb from TikTok. As part of its sales pitch to brands, the Chinese-owned platform tells its clients it is “at the forefront” of persuading online consumers to part with their cash. It boasts of a unique business model that endlessly entices people to not only discover and buy new stuff but also become repeat customers.
Of course, anyone who has spent any time on TikTok, which claims to have more than a billion active monthly users, will already know this. Its famously sophisticated algorithm creates hyper-relevant, personalised feeds that are designed to keep us consuming content. “The algorithm tries to get people addicted rather than giving them what they really want,” Guillaume Chaslot, the founder of Paris-based AlgoTransparency, a group that has studied YouTube’s recommendation system, told the New York Times.
Whether that addictive algorithm is contributing to a rising trend of young people finding themselves in debt is an important consideration. More than half of 18- to 24-year-olds in the UK have either taken on new or additional debt in the past 12 months or expect to do so in the next 12 months, according to a survey in December by TSB bank. They are about seven times more likely to do so than their grandparents’ generation. The proportion of TSB’s 18- to 24-year-old customers going overdrawn was 10% higher in October 2022 than a year earlier.
It’s also clear that young people’s spending is influenced by what they see on social media. They say so themselves – videos featuring the hashtag #TikTokMadeMeBuyIt have more than 40bn views. TikTok’s own research found 52% of millennial users in the UK bought a product because they saw it on the site in the last year, rising to 60% of Gen Z users. And a 2021 Adweek survey in the US found TikTok users were potentially “the most dedicated group of buyers from social media”, and were also more likely to buy items promoted on platforms including Pinterest, YouTube, Snapchat, Reddit, and LinkedIn.
In the UK, data on how TikTok is influencing consumer behaviour has been scarce. We know that children were early adopters of the social media site, and 25% of its users are aged between 10 and 19. What is clear is that spending inducements, including ultra-targeted advertisements based on user data and in-video shopping links, are at the heart of TikTok’s business model. The company’s global ad revenue soared from $4bn in 2021 to over $11.6bn last year and it made $205m more from in-app purchases than Facebook, Twitter and Instagram combined.
There are small signs of a backlash. One influencer on the site, Paige Pritchard, recently went viral for discussing how TikTok can fuel overspending: “The more time I spend on this app, the more I’m seeing these themes coming through about what your consumption habits should look like that actually aren’t very normal.”
Examples of “cash-stuffing”, where young people put physical money into envelopes to avoid mindless digital shopping, have also become increasingly popular on the site. But such active and often laborious attempts to break free from a compulsion to spend remind us of how powerful the structures at play can be.
The algorithm creates a scarcity mindset among its users. As a poster on Reddit’s MakeUpRehab forum recently put it: “I find myself having this ‘omg I need to buy this NOW before TikTok causes it to sell out’ urge.” A behavioural economist could hardly put it better.
Teenagers and twentysomethings have always been susceptible to peer pressure, fear of missing out and over-consumption as they find their way in the world. But this problem is being compounded by patchy financial education in schools, compulsive technology at our fingertips and an increasingly invasive, hazardous consumer environment in which one-click purchases and borrowing through “buy now, pay later” options have never been easier.
Young people are already weathering acute financial and psychological pressures caused by the cost of living crisis. A Sky News-Ipsos poll found young people are cutting back on socialising, taking on more work and moving back in with their parents as they struggle to pay their bills. Data from Deloitte’s 2022 global Gen Z and Millennial Survey shows that a third of Gen Z respondents worry about the cost of living above all other concerns; 45% live paycheck to paycheck, and just over a quarter doubt they’ll retire comfortably.
Regulators have already taken aim at buy now, pay later schemes, promising tougher regulations to protect consumers. But I suspect tighter legislation will be no match for the power of shoppertainment in getting young people to part with their cash. When it comes to achieving greater financial justice, younger generations urgently need access to better financial education, and greater support to practise more awareness around social media hygiene if they are to escape a culture of chronic overspending.
#TikTokmademebuyit is no badge of honour for a generation already fighting multiple attacks on their expected wealth. It’s time to kick that “infinite loop” – and the billions it generates off our backs – into touch. Perhaps #IDontBuyTikTok could be a start?
Iona Bain is a financial journalist, founder of the Young(ish) Money blog and author of Spare Change & Own It
• This article was amended on 18 March 2023 to add reference to the TSB survey of debt being conducted among young adults “in the UK”.
