TikTok has over one billion monthly users, making it one of the most popular social media platforms on the planet. These numbers make it one of the top-grossing apps, with as much as $110 million per month in 2021.
The company has several methods for earning money, and as the app evolves and grows in popularity, they are consistently coming up with new ways to bring in revenue. Read on to learn more about each of these methods.
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How Does TikTok Make Money?
TikTok makes money through advertisements, predominantly ads shown within users’ feeds. Users see these ads as they swipe through their feeds, typically on their For You page. The app also offers coins, which are in-app currencies costing between $.99 and $99.99. Users purchase coins which they can then use to buy emojis or diamonds. They can use these to tip creators while TikTok takes a commission.
TikTok Ads
TikTok generates the majority of its money through various types of ads. These ads are presented in various ways and at different price points, and brands bid on ad space as with other social media and search engines.
The cost starts at $10 CPM ($10 per every 1000 users who view an ad). Brands can also opt to bid on CPC (costs pay click), in which they only pay if a user clicks on their ad. Brands must spend at least $500 on a campaign, but many companies spend between $50,000 and $100,000
Brand Takeover Ads
Brand takeover ads are one of TikTok’s newest ad styles. These ads are shown immediately when users open the app before they’re taken to their For You page. The ads are very short and are either a three-second still image or GIF.
Each brand takeover ad is exclusive to a particular category, and only one brand can take over a category each day. For example, a sporting goods company may put their takeover ad in the sports category. No other brand can take over that category for the day.
Brand takeover ads can be particularly effective since they are full-screen and are the first thing users see when opening the app. By taking over a particular category, you can get the ad in front of your target audience. The ads are full-screen, making them even more likely to garner attention. You can put links and CTAs in the ad to drive users to your page or site.
In-Feed Video Ads
In-feed video ads, also called native ads, are the most common type of TikTok ad. These ads are interspersed in users’ For You feed. As users scroll through their feed, they’ll see ads intermingled with TikTok videos. These ads are up to 15 seconds long.
Brands have a lot of opportunities with in-feed video ads. Since these ads are in the For You pages, users will get at least some exposure to the brand. Brands can create ads that are similar to posted content, making it more likely that users will watch. Users have a short attention span, so it’s important to grab their attention in the first few seconds.
You can include links and challenges within these ads. Users can also interact with your ad by adding comments and likes and sharing it with others. These interactions can give you powerful feedback.
Branded Hashtag Challenges
Branded hashtag challenges are a unique and interactive way for brands to advertise on TikTok. These challenges get users to perform a certain task. They may do a remix of the original video or video themselves doing a challenge, like dancing or performing a trick. As users post completed challenges, your brand spreads to other users’ feeds.
When creating hashtag challenges, you have the option of posting to your own page and hoping for the best, but there’s no guarantee that your challenge will go viral. You may opt to do a paid challenge. Then, your challenge will show up on the Discovery page for six days.
Branded hashtag challenges are an effective method of advertising because they can generate user involvement. Users aren’t passively viewing your brand but are interacting and sharing much as they would another post. With the right challenge, you can gain a lot of traction.
Top View Ads
Top view ads are similar to brand takeovers because they’re full-screen ads. While brand takeovers are the first thing users see upon opening the app, top view ads are shown within the first three seconds of a user opening their feed.
Top view ads give you much of the same exposure as a brand takeover but aren’t quite as dramatic since you aren’t the first thing a user sees. However, you may find those top view ads are more budget-friendly than doing a brand takeover.
In-App Purchases
TikTok offers a few options for in-app purchases. When brands launch a hashtag challenge, they can include in-app purchases for products related to the challenge. Brands then give a percentage of their profits back to TikTok.
Users can purchase coin packages ranging from $.99 to $99. These coins can be used to tip creators while they’re streaming live content. The cost of coins varies from country to country.
50% Commission From Content Creators
TikTok makes double off their in-app purchases. Whenever content creators receive tips from users, it goes into their TikTok earnings account in the form of diamonds. Whenever creators withdraw their funds, TikTok takes a 50% commission. They then divide that commission by 50% with either the App Store or Google Play.
TikTok’s Revenue
TikTok has seen huge financial growth in the past several years. In 2020, the app made $540 million, while its parent company, ByteDance, made $34.3 billion. ByteDance’s totals include revenue from TikTok and Douyin, the Chinese version of the app.
TikTok expects to see exponential growth in 2021. They’re expected to grow to $63 billion in revenue, and they’re expected to do even better in 2022.
TikTok’s Story & Top Influencers
The Chinese company ByteDance first launched TikTok in 2016. Almost two years later, the company purchased the app Musical.ly, which let users record videos of themselves lip-syncing to popular songs. The purchase was a boon for TikTok, as it quickly grew in downloads. While users initially used the app for recording lip-syncs and dances, it eventually expanded to videos on every topic imaginable.
The majority of TikTok’s users (69%) are members of Generation Z, and the top influencers reflect those demographics. Charli D’Amelio is the top influencer with over 129 million followers. Most of her posts involve her performing viral dances.
The next top influencers are Khabane Lame and Addison Rae. Lame is a Senegalese-Italian performer who is known for his silent comedy skits. Rae, like D’Amelio, mostly does viral dances. These influencers bring in a lot of money for the company as brands will pay top dollar to work with them.
TikTok’s Top Investors & Valuation
TikTok has shared ownership between Chinese and American companies. China’s ByteDance owns the app, but American companies like Walmart and Oracle make up 53% of TikTok’s ownership. The company has not yet gone public.
TikTok’s parent company was valued at $425 billion as of June 2021. TikTok is valued at over $50 billion.
How Do Influencers Make Money on TikTok?
TikTok influencers make money in a variety of ways. One of the main ways is through influencer marketing, which is also popular on platforms like Instagram, Facebook, and YouTube. When an influencer has enough of a following, brands will pay them to create advertisements for them. The amount of money they make depends on their number of followers and their category.
When streaming live videos, they can earn tips and emojis from their fans. They have to give a 50% commission back to TikTok when they cash in, but they can keep the rest. Influencers can also create their own merchandise to sell. This method is most successful for those who’ve created a popular, recognizable brand.
Finally, TikTok influencers can make money through partnerships with brands. In addition to creating ads for the brand, they may also be paid to attend certain events, such as a grand opening or a music festival.
Parting Thoughts
TikTok seems only to be growing in popularity. While the majority of users are in the younger demographic, older generations are joining as well, giving the company potential to make even more money.
Since the app is still in its early years, there’s a lot of opportunity for new revenue streams, especially as users get even more creative with their content. Many brands are jumping on board and upping their marketing game to reach their users on TikTok. TikTok stands to make quite a bit of money from all of these revenue streams.
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