TikTok's user base, which skews strongly toward younger demographics, continues to soar. The short-form music and karaoke app has emerged as a viable challenger to Facebook's (META 1.47%) dominance. TikTok parent ByteDance has been expanding its presence in Silicon Valley, actively poaching employees from the social networking giant, among other tech companies.

In leaked audio of an internal meeting obtained by The Verge from earlier this month, Facebook CEO Mark Zuckerberg acknowledged TikTok's growing popularity among teenagers and Generation Z, conceding that the upstart app is larger than even Instagram in certain markets like India. However, he added a little jab as a caveat: "It is growing, but they're spending a huge amount of money promoting it. What we've found is that their retention is actually not that strong after they stop advertising."

TikTok logo

Image source: TikTok.

TikTok ad spending slows, downloads follow

TikTok is now starting to see its user growth decelerate, according to new data from mobile analytics specialist Sensor Tower (via Bloomberg). Downloads of TikTok fell 4% to 177 million in the third quarter, marking the first such drop since the app's launch in September 2017. That decline just so happens to line up with a notable decrease in ad spending -- at Facebook, no less -- essentially confirming Zuck's assessment.

TikTok had been the biggest buyer of app install ads on Facebook in the U.S. for four consecutive quarters before falling out of the top 10 app-install advertisers in Q2, according to the report. That apparent correlation between promotional spending and user growth is why Zuckerberg feels confident that Facebook has "time for us to kind of figure out what we want to do here," although he also said Facebook would first try to enter markets where TikTok had not already become popular before trying to invade regions where it has already blown up.

Still, even with the decline in the third quarter, TikTok was the top social media app by downloads in September, Sensor Tower said earlier this month, with Facebook and Instagram trailing at No. 2 and No. 3, respectively. TikTok had nearly 60 million installs last month, with 44% of downloads coming from India; Facebook had just over 50 million installs.

Facebook might know even more

Beyond the fact that TikTok is an advertising customer of Facebook's, we also can't rule out the possibility of Facebook gleaning sensitive competitive data in more surreptitious ways. The company has a history of spying on users with a VPN app called Onavo that ostensibly strengthened privacy, precisely to see what competing social media apps they may be using. Those insights shaped monumental strategic decisions.

That's how Facebook already knew that upstart Snap's user growth was decelerating ahead of its 2017 IPO and related disclosures. Facebook had seemingly curtailed those shady practices, but in fact the company rebranded it as "Facebook Research" and started paying people to install it -- effectively buying people's data from them. That program was also killed earlier this year, but the social titan launched a similar "Study from Facebook" app over the summer.

There's a decent chance that beyond TikTok's ad spending and third-party estimates, Facebook knows even more about its newest rival.