How does tiktok make money

TikTok Business Model:How Does TIkTok Make Money In 2022

Social media is no longer just about changing profile pictures or sliding into DMs; it has evolved into a platform where people can share their most treasured memories and showcase their talent.

And how can we talk about showcasing talent without mentioning TikTok?

You’ve probably heard of TikTok unless you’re extremely anti-social media, avoid the internet, or don’t see memes.

In a nutshell, TikTok is a short video social platform that allows users to unleash their creativity and create videos that showcase their talent. This app is available for download on Google Play Store and Apple Store for both Android and iOS devices. Let’s learn in detail about how does tiktok make money:

How Does TikTok Make Money?

TikTok makes money from 3 money making streams — Ads, Commission, and In-app purchases. TikTok holds the record for being the fastest growing social media platform in terms of revenue and engagement so when it comes to developing the right business model, TikTok has done an excellent job.

With a variety of revenue strategies, it has successfully established itself as one of the top 5 social media apps on the planet.

But how exactly does it accomplish this? Let’s dive deeper into each of its revenue streams to see how they work and mint money!

TikTok ads

A TikTok Ad holds a lot of value for a brand.

With an average time-spend-on-app of 75 minutes per day (among teens), beating YouTube’s 64 minutes per day, TikTok is clearly the right place for brands to captivate and catch the attention of the majority of the audience.

TikTok entered the advertising game league in 2019, and it has been breaking records in terms of total ad revenue ever since.

Also Read: How does Google Make Money

Last year, TikTok’s ad revenue was roughly $2.10 billion, and it is expected to gross a hefty $11 billion in total ad revenue by 2024!

Behind such an effective cash-printing business model are the company’s masterminds, who have created numerous revenue streams for this, including:

#1 — Brand Takeover Ads

You’ve probably seen the ads that appear right when you open TikTok — these are the Brand Takeover Ads.

These advertisements consist of 3 to 5-second videos/GIFs or 3-second images that redirect viewers to a Hashtag Challenge or to a brand’s landing page, depending on the goal of their campaign.

Because these are unique to their category, TikTok ensures that users do not see more than one Brand Takeover per day which makes it an excellent way for brands to capture their customers’ attention.

This type of advertisement is ideal for increasing exposure and reach — thereby justifying its exceptionally high starting cost, which is estimated to be around $50,000 per day!

#2 — In-feed Video Ads

You’ve probably seen the ads that appear when you scroll through an Instagram story or a Facebook story; TikTok also has this option — these are called the In-feed ads.

These in-feed ads can be used to achieve a variety of campaign goals. Brands can add a clickable CTA button that can be used to direct visitors to a specific goal which can be a landing page, some app downloads, or to the brand’s TikTok account.

Also Read: How much does TikTok pay you for 1 million views

In-feed ads can be up to 60 seconds long, but it is highly recommended that these ads be no longer than 15 seconds (they work the best!).

These ads cost $10 per CPM, which is quite low in comparison to brand takeover ads. So, if you’re looking for a low-cost advertising platform for your ads, you can swipe this right!

#3 — Branded Hashtag Challenges

If you use social media, you are aware of how important hashtags are, and how virality is now somewhat directly proportional to the use of appropriate hashtags.

TikTok, being TikTok, added its own creative element to this and devised a unique revenue strategy around it!

They offer this unique setup in which brands can create their own hashtags and create some challenges around it.  Along with the fun factor, it greatly helps in boosting brand awareness!

For these branded hashtags, TikTok charges a hefty fee which accounts for one of its major revenue streams!

Going by the report released by Boosted, TikTok charges a $150,000 flat fee for the first six days of hosting a challenge, with an additional cost of $100,000 – $200,000 for promotion!

#4 — Top View Ads

Top view ads are in the same family as brand-takeover ads, with the exception that they do not pop up right away when a user first opens the app; instead, top-view ads appear after a user has already begun scrolling through the app.

These ads can last up to 60 seconds and are excellent for increasing brand awareness, and brand reach.

These ads are also priced higher due to the great value they provide to brands, costing nearly $65,000 per day!

Commission From Content Creators

TikTok has a pretty unique way by which its users can show their appreciation to the content creators they like — that is through live gifting (more about this in the next point).

When a content creator goes Live on the platform, other users can send virtual gifts to them as a token of appreciation and love.

These virtual gifts are converted into diamonds, which are distributed to creators as funds, with TikTok taking a 50% commission.

One diamond is worth about 5 cents. So, for every 1000 diamonds, a TikTok creator can earn about $25 (after TikTok’s cuts its commission of $25).

In-app Purchases

A TikTok user can use real money to buy virtual TikTok coins in the app. These can be exchanged for buying a variety of unique virtual gifts that users can send to their favorite content creator/creators on the platform during a live stream or in their comment section.

These coins are available in bundles of 100 to 10,000 coins, with prices ranging from 99 cents to $99.99. When you purchase these coins they are added to your TikTok account which are not refundable or cannot be exchanged for cash.

A user can also use these coins for TikTok Promote, a feature that allows you to boost a TikTok video over a set amount of days.

According to reports, the app collected a total of $5.5 million in global coin revenue in just one month!

Also Read: How Does Affirm Make Money?

TikTok’s Revenue

While other Chinese apps haven’t made that strong impact outside of their home country, TikTok is the fair-haired boy of the family.

TikTok entered the billion-dollar revenue club in 2020, generating over $2 billion from $350 the previous year — all thanks to its several revenue-generating streams and robust business model.

According to recent reports, TikTok clocked nearly $4 billion in revenue in 2021, a 142% year-on-year increase. And this money-making machine is expected to hit a $12 billion revenue count this year!!

TikTok has made steady progress and a significant move up the charts in terms of overall revenue generation. From $63 million in 2017 to dominating the billion-dollar market, it has seen a staggering 7355% increase in revenue since 2017!!

With more than 1.2 billion monthly active users, TikTok is undoubtedly on the verge of challenging Facebook and Instagram, after surpassing Snapchat and Twitter in total revenue!

TikTok’s story & Top Influencers

TikTok was started by a China-based company named ByteDance back in 2016. In its early days, it was known in its home market as A.me, which was later changed to Douyin in December 2016.

Within a year of its launch, it had become one of the most popular apps in the Chinese market, prompting the company to decide to go global. It entered the international market in September 2017 and since then has been dominating the social media industry.

TikTok had a major competitor in the international market when it first entered it — Musical.ly, which was a platform similar to it where people could make a 15-second short video showcasing their talent.

By acquiring Musical.ly in 2017, TikTok’s parent company, ByteDance, effectively eliminated competition from the market. It bought Musical.ly. on November 10, 2017, and merged it with TikTok on August 2, 2018, greatly expanding its user base.

Ever since then TikTok has been on a record-breaking spree, smashing all revenue records, user base records, active user records, and whatnot!

This teen-dominated platform was also reported to be the most downloaded app globally (850 million downloads), followed by WhatsApp, Facebook, and Instagram.

When we talk about the platform’s success, we cannot forget about the influencers who make it happen. The people who make TikTok a fun platform for everyone, the people who make TikTok, TikTok!

Here is a list of the top three TikTok stars who have millions of followers and have captured the attention of billions:

Dixie and Charli D’Amelio

Dixie DAmelio and her younger sister Charli DAmelio rose to prominence on the platform in 2019 and currently rule the platform with over 57.4 million and 144.6 million TikTok followers, as well as 3.2 billion and 11 billion likes, respectively.

On the platform, this 18-year-old and the 21-year-old dynamic-sister-duo have reportedly earned over $4 million and $2.9 million, respectively!

Also, this duo’s influence isn’t limited to TikTok; they have their own reality show, The D’Amelio Show — which positions them to win even more hearts and popularity!

Addison Rae

Addison Rae Easterling first drew attention to the platform for her dancing videos with her mother, Sheri Easterling. Since then, she has been vying to become a top star on the platform, with 88.5 million followers and 5.8 billion likes!

This 22-year-old American TikToker is reported to be one of the platform’s top earners, raking in over $8.5 million from TikTok just in the year 2021!

Source: Forbes

Michael Le

Michael Le, aka “justmaiko,” is one of TikTok’s most popular stars, with over 51.5 million followers and 1.4 billion likes.

According to Forbes, this highly influential TikTok star earned a record-breaking $1.2 million in 2020, making him one of the wealthiest and most successful TikTokers in the United States!

How do TikTok influencers make money online?

So now the question arises — how does a TikTok influencer monetize their TikTok profile?

Apart from the brand partnership (or brand deals), a sponsored post, sponsored content, and influencer marketing, there are two solid income opportunities for a TikTok influencer — TikTok Creator Fund and TikTok Creator Marketplace.

Firstly, by joining the TikTok Creator Fund, an influencer can earn money directly from Tik Tok video view count.

It’s not like anyone can join; there are a few prerequisites for joining TikToks creator fund:

  • You must be over 18 years of age
  • Have more than 10,000 followers
  • Have at least 100,000 views over the last 30 days.
  • Lastly, have an upgraded Pro account

Once these conditions are checked, a TikTok app user can apply to the TikTok Creator Fund in the app (or join TikTok Creator Next) and can earn 2 to 4 cents for every thousand views which sums up to around, $20 to $40 for every 1 million views.

Secondly, they can find excellent opportunities to collaborate with brands in the TikToks Creator Marketplace.

Here, a brand can find its ideal influencer and an influencer can connect with the right brands, making it a great place for an influencer to earn money.

There are a few requirements for this, which are as follows:

  1. You must have more than 10,000 followers
  2. Have posted at least 3 videos in the last 28 days
  3. You need to be over 18 years of age
  4. Have more than 100,000 video likes in the last 28 days

TikTok’s history, valuation, and top investors

TikTok, known as Douyin in its home market of China, was first released in September 2016 and became available globally in 2017.

Today, TikTok is one of the world’s most popular social media apps, available in over 150 markets and 35 languages!

With over 2.5 billion downloads, TikTok has already established itself as the social media platform of the decade and a company with such a large fan base will almost certainly have a sky-high valuation!

TikTok, according to experts, has a valuation of $75 billion, which is 50% higher than the valuation in 2020.

The platform is still privately held which means its shares are not yet available on the stock market and according to reports, ByteDance plans to go public in the near future, allowing users to invest in TikTok.

Currently, TikTok’s top shareholders include:

  • CMB Wing Lung Bank
  • Morgan Stanley
  • Goldman Sachs
  • Bank of China
  • K3 Investors
  • Primavera Capital Group
  • Kohlberk Kravis Roberts
  • Tiger Global Management
  • GGV Capital

Source: Forex

Once the company goes public, its valuation will almost certainly increase, and we can make a better prediction of how big it can become in the future.

Wrap Up

Even though capturing all of these large numbers, impressions, and values must be exhausting, Tik Tok does not appear to be tired at all! With its ever-expanding market size and growing popularity among the Gen-Z crowd, it is bound to break more such records and set new market standards.

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