TikTok is an app that was launched in China and later made its way to the US and other countries. It is a short video and social media app that lets users create short video clips of themselves lip syncing along to popular songs. But have you pondered about how this video-based social media platform generates revenue? In this article, we explain how TikTok makes money and its business model.
What is TikTok?
TikTok is the world’s most popular social media app. It allows users to create 15-second videos with sound effects, filters, and custom stickers. The app is noted for its high level of engagement – addictive short videos with background music.
From short videos with catchy music and sound effects to filters and stickers, this app is all about engagement. It doesn’t end there: duets with strangers in other locations are also possible.
Launched in 2016, TikTok quickly joined the ranks of social media giants, including Instagram, Snapchat, and Facebook. The Chinese-owned app is now available in 150 markets and has over 315 million installs across Google Play and the App Store.
|Initial release date:||September 2016|
|Available in:||40 languages|
|Platform:||Free iOS and Android app|
How does TikTok make money?
TikTok makes money through advertisements. The app allows brands to promote their products on the platform and offers a variety of different ads.
- TikTok Ads: TikTok For Business is TikTok’s latest marketing solution, which was launched in June 2020. The platform provides brands with paid marketing opportunities just like YouTube does. TikTok For Business offers in-feed videos, brand takeovers, hashtag challenges, and branded effects for brands to enhance their marketing efforts.
- Brand takeover ads- A new way for brands to get instant attention is by using a “brand takeover” ad. These are spots where the brand takes over the full screen for an instant message.
- Top-View ads- Top-view ads are different from brand takeover ads in that they appear once a user has already used the app for up to 60 seconds.
- In-feed video ads- In-feed ads are short-form videos that pop up between your Instagram feeds. They are the same as those in Instagram stories.
- Branded Effects- TikTok offers brands a way to create personalized stickers, filters, and lenses for users to enjoy. The branded features can last up to 10 days, allowing consumers to experience the brand.
- Branded Hashtags Challenges- Brands can promote their brand awareness in a branded hashtag challenge. A company creates its own hashtag and pays TikTok so it shows up on the discovery page. Participants in the challenge use the tag and post with it. The best part is that it’s fun and people get to participate in the challenge, not just watch. When brands purchase these ads, TikTok is able to make money.
- In-App Purchases: TikTok generates revenue in a variety of ways. One way is through in-app purchases. The app provides 100 to 10,000 coins, which range in price from $0.99 to $99.99. TikTok is a mobile application that offers monthly subscriptions and in-app purchases for users 18 and up. For $1.99 a month, customers can purchase TikTok coins, which they can use to buy virtual gifts to show appreciation for other customers’ content.
What is the Business Model of TikTok?
The ByteDance company just closed a $3 billion funding round. The company is now valued at $75 billion. This is the most successful unicorn of the modern era, according to CB Insights. Tik Tok curates and celebrates creativity. It’s a home for people around the world to post and share their creativity and knowledge with one another.
Tik Tok is an easy-to-use mobile app that lets people become content creators. They offer a space for people to easily turn their passions into engaging video clips with just a few clicks. The app has also been hailed as the next platform to take over social media marketing.
It’s clear that video content has disrupted the way people share their lives. With its ease of use, Facebook quickly took notice of this mobile application. And that is precisely what happened. Tik Tok made a big impact on the population.
How much is TikTok worth? (Valuation and Revenue)
As per 2020 reports, TikTok generated $965 million in the year. In 2019, TikTok generated $176.9 million, with $88.5 million in the final quarter. In the past, TikTok generated revenue through in-app purchases. That all changed in 2019 when it introduced ads to its platform. As of October 2018, TikTok has been earning $3.5 million from overseas users, a shocking 275 percent increase from last October.
Bloomberg reports that TikTok is now worth $250 billion. TikTok owns several social networking apps in China and launched FlipChat and Duoshan in 2019.
What is the history of TikTok?
It all started in 2016 when Beijing-based company ByteDance introduced a new app for the Chinese market called Douyin, which people quickly adopted.
ByteDance, a Chinese company founded in 2012, is similar to Facebook. ByteDance’s CEO Zhang Yiming, a former Microsoft engineer and serial entrepreneur, started the company with the intention of creating an app that would connect people to each other.
Douyin, a subsidiary of ByteDance, a Chinese media, and technology company, reached 100 million users just a year after its launch. Since then, Douyin has been rebranded as TikTok and it now has 500 million global active users. The app is most popular in Asia.
In 2018, TikTok was among the most downloaded non-gaming app in Thailand. In the United States, Musical.ly ranked No. 1 among free app downloads on app stores. Shortly after launching in 2014, it allowed users to create 15-second lip-syncing music videos. In 2018, TikTok and Musical.ly merged to expand their reach and enter the US market as one. Musical.ly was shut down as TikTok absorbed all of its user data and profiles.
TikTok has skyrocketed in popularity across the globe, but its popularity specifically in India is what may be the key to its success. India accounts for 188 million of TikTok’s total downloads, surpassing even Facebook’s 176 million. The Financial Times reported that after ByteDance shares were sold on secondary markets, investors have implied that the company is now valued at $400 billion.
TikTok is so popular, it raised $3 billion in a round led by SoftBank Group Corporation. After SoftBank and KKR & Company, General Atlantic (and Tiger Global Management!) all also invested.
The app TikTok has surpassed all others in the US and in India in terms of popularity. The only difference between TikTok and Douyin is that TikTok operates on a different server in order to comply with Chinese censorship restrictions.
What are the growth plans of TikTok?
The developers at Tik Tok have been successful at combating the rapid growth of their applications. In 2018, a little more than two years after its official launch, Tik Tok had surpassed 500 million users. Facebook has taken note and is developing a similar app in order to compete.
Given the current level of popularity of Tik Tok, it’s natural to believe that it will not be stopped. Even if Facebook develops and releases its own closely-related application, Tik Tok will not be replaced. Of course, this new app will be included in certain quotas but won’t completely represent the popularity of Tik Tok.
We’ve noticed that Tik Tok is concentrating its efforts on luring more teenagers to the app. They appear to be targeting youth through various popular channels. The firm spreads its expertise across different platforms, including YouTube, Facebook, and Google.
In today’s social landscape, it can be tricky to gain a foothold. For Tik Tok, this is the case – they have a lot more going on with growth and penetration than with revenue.
For them, this is a pragmatic decision – a few huge players dominate the world of social media. As a result of this, Tik Tok wants to secure its place at the top before any competitors gain any power from influencers.
The lack of attack from reputable influencers has only strengthened their position at the top. Facebook has spoken out against them, but this has only empowered their determination to gain control of the population before things get worse.
Not any more. Tik Tok’s research lab is called the “AI Lab” and they make some lofty claims. They say they specialize in contemporary technological advances like Natural Language Processing (NLP), Machine Learning, and even Computer Vision.
What’s next for TikTok?
TikTok is no longer just for kids. The app is now the most popular social media network in the country. Individuals cannot seem to avoid using TikTok. The app is a mashup of Instagram, Facebook, and YouTube, and businesses are taking advantage by generating revenue and promoting their brands.
TikTok is a successful, sustainable platform with many revenue streams, including in-app purchases, commercials, paid subscription plans, and fundraising. This is great news for content creators. TikTok makes it possible for top-level creatives to be paid for their work.
If you liked reading this article, make sure to check out our article on how Venmo makes money!