How does TikTok make money?

I’m a savage,

Classy, Bougie, ratchet……..

Come on sing all long, aren’t you familiar with this song? You must have heard it on your TikTok or your Instagram feed. People have been coming up with stunning moves for this song. This is one of the many songs that TikTok has introduced to the world. What are you doing for fun in this pandemic? Binging on your favorite series, watching TikTok videos, or planning to make a TikTok video of your own.

You must have already been familiar with TikTok, you or someone you know must be using the TikTok app. There is not a single person who doesn’t know about TikTok. But if you’re someone who has no idea about this app. Then let us help you, TikTok is a video sharing app, where users create 15 second-long videos and share them. Since its launch, Tiktok has been the talk of the town. 

Every new social media app brings in a different culture and vibe. Maybe in the future, the Gen-Z kids will talk about TikTok as how people above 35 are talking about Facebook, Myspace, etc. One common thing among all these applications is they have offered users with more unique ways to interact. Even if people above 25 or 30 are more reluctant to use this app, if you do join, you will come across some really talented folks, who will amaze you with their skills.

It has brought something different to the table compared to the other social media platforms like Facebook and Instagram. On these platforms, people share their pictures and videos. On the other hand on a platform like Twitter people share their opinions. So this is the reason why TikTok has swiftly taken over the people. You can lip-sync to the existing audios or create interesting craft, comedy videos. People have been dancing, singing, and creating interesting videos since 2017. It has given you many of your favorite influencers too. People have been showing their talent and are gaining a huge following.

But, wait for a second

Have you ever wondered how TikTok makes money?

With around 800 million users across the globe, successfully operating in over 150 countries, are you not curious how this video-sharing app actually makes money?

But before we dive into the specifics of its money-making. Don’t you think we must understand when, where, and how it all started?

The company behind TikTok

TikTok’s homeland is China. It was first introduced by ByteDance in 2016. 36-year old Zhang Yiming was the founder of this viral wonder. After a year it has been launched internationally. Since then there is no looking back for this app. The main reason behind the success of this application is that it has short videos, encourages people to be creative, and provides them with a platform to showcase their talent. 

Recently, Bytedance (the company that owns TikTok) has become the world’s most valuable start-up surpassing Uber. It is valued at around $78 billion. Quite frankly it is not at all shocking. TikTok has around 800 million users, only in the United States around 123 million people have downloaded this app. By 2020 it is estimated that TikTok will reach around billion users. You can see the impact it has on Gen Z. 

The average amount of time people spend on this application is 52 minutes per day. And around 41% of the users are kids between 16-24 age. Almost 90% of users check the application daily. But TikTok is not the only application that is owned by Bytedance. It has other products such as Toutiao, TopBuzz, Buzz Video, and Xigua Video. In December 2017, Bytedance acquired Musical.ly a similar application for $1 billion

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The secret of money-making!!!

You also must be curious about how this billion-dollar company is making money. Tiktok is an interesting business model. Although it is providing people with entertainment, not many understand how they are making money. Let’s discuss it here.

In-app Purchases

In-app purchases are one of the ways for its income source. As you know most applications on Google and Apple stores come with in-app purchases. Usually, in-app purchases prompt users to subscribe to a game or buy a product. TikTok is also using a similar strategy. They are offering users coins for an in-app purchase. These coins are starting from 100 to 10000. The users can buy these coins and gift them to their favorite creators and the interesting part is that they can be exchanged into digital gifts too. By October 2018, every month they brought a minimum of $3.5 million. Before introducing TikTok ads this was the major source of income. 

Ads

TikTok advertising was introduced back in 2019. Many small and big brands are using TikTok to promote their products and with its 800 million users, it is no brainer why many brands are using this app to promote. The ads are displayed in between the videos. Not only that but TikTok is also offering brand takeovers too. It is offering different pricing models such as Cost per click, Cost per view, and cost per action. However, it is pretty expensive for brands to run ads on TikTok to receive more engagement. TikTok doesn’t provide much based on Audience segmentation compared to the other applications. Ads have been running for longer in China and the major source of revenue for TikTok is coming from their homeland. 

Fundings

The Bytedance is backed by huge-investors. In October 2018, the soft bank invested around $3 billion, and back in April 2019, Bytedance syndicated a loan of $1.3 billion. For growing companies like TikTok funding is a great source as it will help them in improving the app. 

Bottom Line

Although most may argue that the content that is put out on this platform is Cringey. But one thing we all can agree on is that it is providing all the creators with a chance to reach their audience and shine. Most people over 30 may consider this application as a waste of time. But the kids between 16-25 are using this application with vigor and they’re the targeted audience of this application. With its viewer base and the no. of countries it is operating in, you can see whatever strategy they’re using it is quite successful. 

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