TikTok, the short video app created by Chinese start-up ByteDance, has emerged as a disruptive threat to traditional social networks since its launch three years ago. It was the most downloaded non-game iOS app in the world in 2018, according to Sensor Tower, and currently reaches over 500 million monthly active users (MAUs).

TikTok's meteoric rise prompted many tech giants to launch similar apps, including Facebook's (NASDAQ:FB) Lasso, Tencent's (OTC:TCEHY) Weishi and Hotpot Video, and Baidu's (NASDAQ:BIDU) Haokan. Yet none of those apps is gaining any meaningful ground against TikTok.

A young woman winks as she takes a selfie.

Image source: Getty Images.

Snap (NYSE:SNAP) also launched "Lens Challenges" last December, which offered short sing-along videos that resembled TikTok's lip-syncing videos. It also recently started letting Snapchat users add licensed music to their posts.

That's why it was surprising when Snap added TikTok as a partner for its Snap Kit platform and CEO Evan Spiegel referred to ByteDance as a "friend" during Snap's latest conference call. It makes sense for Snap to tether TikTok users to its platform, since both apps target Gen Z users, but could the company be getting too cozy with a major rival?

Why is ByteDance a dangerous rival?

ByteDance's ecosystem goes well beyond TikTok, with apps like the popular news aggregator Toutiao, the mobile messaging app Flipchat, the video chat service Duoshan, and the enterprise collaboration platform Lark. In July ByteDance disclosed that it had 1.5 billion MAUs and 700 million DAUs (daily active users) across all its platforms.

By comparison, Facebook's entire family of apps (Facebook, Messenger, Instagram, and WhatsApp) had 2.7 billion MAUs and 2.1 billion DAUs at the end of June. Snap finished last quarter with just 210 million DAUs.

ByteDance enjoys three key advantages against Facebook and Snap. First, it straddles both the Chinese and global markets, while Facebook and Snap remain locked out of China. Second, ByteDance is linking all of its apps together in a cohesive ecosystem and pushing users to buy branded smartphones with its pre-installed apps.

Lastly, ByteDance is mimicking Tencent's mini program strategy by adding in-app programs to TikTok in China (where it's known as Douyin). This strategy locks users into a walled garden and widens ByteDance's moat against other big ecosystem players like Tencent and Baidu. Facebook mimicked that strategy before with Messenger, but it hasn't gained much traction yet.

What is Snap letting TikTok do?

Last year, Snap introduced Snap Kit, which let developers integrate Snapchat logins, Bitmoji avatars, branded stickers, stories, and Snap Map content into their own apps. This was comparable to Facebook's single-sign-on system for third-party apps, which tethered them to its core network.

A young woman sings into her smartphone.

Image source: Getty Images.

ByteDance's decision to integrate Snapchat logins and features to TikTok makes sense, since it makes it easier to sign into its app. But it also offers streamlined logons for Facebook, Instagram, Twitter, and Google users -- so it probably doesn't consider Snap to be a "preferred" partner yet.

Spiegel also called TikTok an "advertising partner". However, many Snapchat users recently complained about TikTok's ads flooding the app's Discover tab, which indicates that ByteDance is ramping up its ad spending on Snapchat to poach the platform's core Gen Z users.

That ad blitz hasn't caused any serious damage to Snapchat, which grew its DAUs over the past three quarters, but it indicates that Spiegel shouldn't rush to embrace TikTok as a "friend" just yet.

ByteDance's ultimate goal isn't a friendly one

Earlier this year, Digiday reported that ByteDance had poached over a dozen Snap employees to work at TikTok. The report also noted that ad buyers who spoke to both Snapchat and TikTok were using "the same talking points" to sell Gen Z-oriented ads.

But that's not all. ByteDance also hired Vanessa Pappas, the former global head of creative insights at YouTube, as TikTok's first general manager in the U.S.; and Blake Chandlee, Facebook's VP of global partnerships, as TikTok's head of strategic partnerships.

Those actions clearly indicate that ByteDance has much bigger ambitions than being Snap's developer or advertising partner. Its endgame is the disruption of multiple tech giants with its ever-expanding family of apps, and its $78 billion valuation gives it plenty of financial firepower to reach that goal.

The key takeaways

Snapchat and TikTok might co-exist peacefully for now, but investors are right to question ByteDance's long-term plans.

Snap's investors shouldn't panic yet, since Snapchat and Instagram are still the two most popular social networking apps for U.S. teens by a wide margin, according to Piper Jaffray's latest "Taking Stock with Teen" survey. TikTok still hasn't cracked the top five.

However, Snap investors should scrutinize TikTok's growth just as closely as Instagram's latest moves. It wouldn't be surprising if the former eventually causes more headaches for Snapchat than the latter.